Ten years after the beginning of the financial crisis: Reasons from the Catholic point of view

Before 2008 several studies provided empirical evidence of the theoretically proven positive correlation between the financial system and economic growth (by reduction of transaction costs and information asymmetry, effective allocation of capital, increasing liquidity and adaptability of the economy, diversification of risks, delegated monitoring, etc.) Ten years ago the financial crisis shook trust in this correlation between the financial system and the economy. Finding the reasons for it is still the focus of economic investigations. Some researchers found technical and individual reasons in the background of the crisis and searched for solutions within the system. Other studies suggested that the problem was comprehensive at the system level and required fundamental changes and new approaches to the whole financial system and market economy. All of these explanations have a common element, which is the lack of morality. Different approaches agreed that without a moral attitude in personal or institutional practices the whole system necessarily runs into crisis.

A number of papal encyclicals draw attention to the inseparability between morals and the economy. Catholic social teaching does not aim at elaborating a new economic model, but emphasizes the centrality of morality in all human activity involving economic activity as well. The whole economy has to reflect the four basic principles of catholic teaching: human dignity, solidarity, subsidiarity and common good. The final target of all economic activity has to be the integral human development.

In my study, I present and compare the most important statements and conclusions of different studies regarding reasons for the financial crisis after 2008 to the thoughts of catholic economic and social teaching. I point out the correspondences and contrasts between economic and catholic statements - which economic explanation is valid or legitimate from a catholic point of view, and I highlight the contribution of catholic teaching to this economic discourse by filling the gaps of the economic arguments on the background of the financial crisis.