By Gerard Pemberton
“Are markets just? No one who answers does so with only a view to markets themselves. They always include an assessment of other features of society, both institutional and cultural, separate from markets, which play an important part in everyone’s judgement about the morality of economic life. The proper question is: Under what conditions are market processes and outcomes just?” —Daniel K Finn (‘Making markets moral’, The Tablet, February 11, 2012).
We all know that ‘adjustment’ means reducing the living standards we desire to have. What is right and just? What about the morality of economic life? Those questions gave birth to the science of economics. Today, many people believe that because it is a science it cannot deal with those questions. If it cannot, there is no need in society for economics.
Together, the IMF and the World Bank cover the spectrum that produces a practical framework for reality economics, for the common good. The Social Doctrine of the Catholic Church provides an explicit framework that has stood the tests of time over 100 years.
As Catholics, we have not used our own doctrine to work out situations in our countries. Venezuela tried but Señor Chavez went down the slippery slope, which is unforgivable.
Our social doctrine has the same focus as Socialism, but not the same methods—the end does not justify the means. We trust in God, not in the pride and weaknesses of overbearing, arrogant leaders.
Let us ask the Holy Spirit to help us understand what economics is just and right for us. We need that wisdom because our history clouds our minds with past hurts that most of us never personally experienced.
Yet we feel those unknowns deeply and it causes anxiety and fear—which is the opposite of a Christian response if we live to be “made worthy of the promises of our Lord Jesus Christ”. Fear not.
One of the main features of our independence was the creation of a Central Bank. Overnight, responsibility for our currency shifted from the colonial powers. That liberation is still treasured in the psychology of many. It is deeply emotional but misplaced as in the worship of idols, in this case the exchange rate.
What matters is not the idol, but what is right and just for the common good. That means we must preserve, at all costs, full faith and confidence in our currency. Central banks do that by preserving the value of their assets. Central banks must invest in the safest, most reliable assets to support their main liabilities, that is, the issue of local currency.
The exchange rate is a tool that allows a dynamic balancing of that equation. If a central bank over-lends to a government which has weak or poor credit quality, it will jeopardise full faith and confidence. Regardless of the exchange rate, the local currency will become worthless, the ultimate social injustice. We have seen that misery in many countries, including some in the region. That is a reality in the morality of economic life.
Many people are against devaluing the currency because they feel “it would hurt the poor”. What hurts the poor are the conditions that make the devaluation necessary. To see that from a developmental perspective, we need a deep sense of humility.
There is no redemption without a firm resolve to do what is right and just in the best interests of all. Not devaluing benefits those who are ‘better off’; those who have the wealth to use and accumulate foreign currency.
No user of Amazon wants to see a devaluation, or anyone who wants to buy a car or send their children abroad. The rest suffer quietly in ignorance and must eventually bear the brunt of inevitable adjustment.
Today, everyone knows we need adjustment to preserve faith in our currency, which in common language means ‘reserves’. We know that will involve price increases. It is called ‘adjustment inflation’.
With proper management, that one-time inflation will be temporary. Once the adjustment is properly executed, with alacrity, prices should not continue to rise. That was our experience in Trinidad and Tobago after each of our three official devaluations in December 1985, mid-1988 and mid-1993. However, there must be proper control of public expenditure. In other words, the GORTT must also adjust, if we want a stable exchange rate after devaluation.
Governments do not willingly adjust because they underestimate the resilience of people and their own political acumen. Leaders must do what is just and right in the best interests of all, especially when the right road is the Via Dolorosa. We want to be charitable to everyone. We want equitable treatment for the poor, for the disadvantaged. We want to assist those dispossessed by natural, family and community disasters.
None of them will have better lives if we fight, resist and subvert adjustment by tormenting Prime Ministers to water-down, postpone and mess up adjustment with half-ripe and half-baked measures. That is ‘political correctness’.
We need ‘moral correctness’ for the good of all. That requires openness, sincerity and faith. We must learn to be open to receiving wisdom and faith from God. This ‘simplicity’ is a strong and beautiful strength of a good Christian. This is what brings us closer to truth, closer to the reality of God and closer to living in trust and in hope.
Gerard Pemberton, a retired chief executive of a licensed financial institution, is a parishioner of Our Lady of Lourdes RC Church, Maraval.