Thursday, November 03, 2011

The Vatican can't bring morality to the money markets (Comment)

For all the passion of the Vatican's call to arms against international capitalism, those at the helm of big business will barely bat an eyelid at the brickbats hurled their way. 

That the Catholic church demands a more ethical approach to institutional investing is neither here nor there in the grander scheme of the money markets, the Vatican's influence having centuries ago waned into insignificance in the world of high finance.

Though noble in spirit, the attack on everything from computerised high-frequency trading systems to speculative bubbles in property prices is too toothless and vague to have any chance of delivering a hammer blow to a system badly in need of shaking up. 

Preaching from the pulpit only reaches those who have bothered to turn up for services; those too busy glued to their Bloomberg screens have neither the time nor inclination for morality lessons from the pope's acolytes.

By taking such a stance, the Vatican is throwing in its lot with the "99%" camp currently occupying financial centres across the globe. A neatly populist manoeuvre, but ultimately no more coherent than the protesters themselves.

By definition, market players' only desire is to wring every last penny of profit out of their investments, and appealing to their better nature is only doomed to fail. 

By all means throw the money changers out of the temple, but don't think that half-hearted calls for better regulation are the answer. 

And don't be surprised when they carry on their trading with as scant regard for religion – and as much lust for lucre – as ever before.

All of the world's major faiths are predicated on love for one's fellow man, and – as such – the strain of venal self-interest currently dominating the global economy makes religion an uncomfortable bedfellow with unfettered capitalism.

Islam, Christianity and Judaism all have strict laws in place to prevent the exploitation of the weak, and make demands on their followers to exercise charitable discretion in their business dealings.

Yet even religious investment bodies find themselves motivated by profit when faced with ethical dilemmas, such as the Church of England's recent retraction of its threat to dispense with its NewsCorp/BSkyB holding, after deciding that they could make more money by retaining their stake rather than voting with their conscience.

Similarly, the Vatican's calls for a "world authority" to enforce tighter regulation of the markets in the interest of equality is a thorny, and ultimately utterly unworkable, prospect. 

One man's ethics is another man's politics, and expecting global co-operation over which countries, companies and financial institutions are deemed to be acting unethically is an impossible task to carry out. 

The rash of church groups' divestments in Israeli stocks and shares in recent years, and the ensuing two-way uproar, is a prime example of the minefield awaiting anyone hoping for a worldwide united front on declaring which investment strategies are, or aren't, morally acceptable.

For a fabulously wealthy institution such as the Vatican, whose own investment strategy is famously opaque, there is a constant danger of being accused of not practising what it preaches when the issue of ethical investment is raised by the church itself. 

At the same time, there even appears a divergence between vox populi and vox dei on such an issue, as evidenced in statistics made public for this year's National Ethical Investment Week.

Despite the current global crisis and the consequent collective soul-searching, well over half of British investors still aren't bothered about anything but profit when it comes to their investments, with only 42% wanting to "make a difference" as well as make money. 

Such an attitude might put them at odds with the Pontifical Council for Justice and Peace, but to fund managers and bank executives alike, investors' actions speak far louder than cardinals' words, and as long as money keeps flowing into institutional coffers, it'll be business as usual in the City.