Catholic Metanarrative

Wednesday, May 30, 2007

Wednesday Liturgy: Benediction by a Bishop

ROME, MAY 29, 2007 (Zenit.org).- Answered by Father Edward McNamara, professor of liturgy at the Regina Apostolorum university.

Q: When a bishop gives Benediction with the monstrance, does he use one great sign of the cross like a priest, or does he use the triple sign of the cross like at Mass without the monstrance? I've seen it done both ways by bishops. -- D.Z., Marquette, Michigan

A: The norms in force before the present rite did foresee the triple sign of the cross when a bishop gave Benediction.

The present norms found in the Ceremonial of Bishops, No. 1114, simply describe the bishop who, after taking the monstrance, "then turns towards the people and makes the sign of the cross over them with the monstrance in silence."

The accompanying footnote refers to No. 99 of the ritual of Worship of the Eucharist Outside Mass. As this ritual makes no distinction between Benedictions imparted by a bishop or a priest, it may thus be presumed that a particular form of Eucharistic Benediction is no longer foreseen for a bishop even though some prelates may have continued the earlier practice out of force of habit.

On the other hand the Ceremonial of Bishops, No. 169, does specify the triple sign of the cross at the end of Mass.

Wednesday Liturgy: Follow-up: Blessings Without a Stole

ROME, MAY 29, 2007 (Zenit.org).- Answered by Father Edward McNamara, professor of liturgy at the Regina Apostolorum university.

In line with our column on blessings without a stole (May 15), several readers have asked a similar question: "Is it proper for lay extraordinary ministers of Holy Communion to give a 'blessing' to young children or people who cannot (or choose not to) receive the Eucharist?"

There are many ways of distinguishing kinds of blessings and sacramentals. One such distinction is between constituent and invocative sacramental.

The effect of a constituent sacramental is to transform the person or object being blessed in such a way that it is separated from profane use. Examples would include the blessing of an abbot and the blessing of holy water. Practically all of these blessings are reserved to an ordained minister and sometimes are the exclusive preserve of the bishop.

Invocative blessings call down God's blessing and protection upon a person or thing without sacralizing them in any way. Some of these blessings are reserved to the ordained, such as the blessing of the assembly at the end of a liturgical celebration.

Some blessings may also be imparted by lay people by delegation or by reason of some special liturgical ministry, above all when an ordained minister is absent or impeded (see general introduction to the Shorter Book of Blessings, No. 18). In these cases lay people use the appropriate formulas designated for lay ministers.

This latter situation is probably the case of the extraordinary ministers of holy Communion who ask that God's blessing may come upon those who for some good reason approach the altar but do not receive Communion.

Finally, some simple blessings may be given by lay people in virtue of their office, for example, parents on behalf of their children.

Tuesday, May 29, 2007

Contribution to Social Science Academy Meeting

VATICAN CITY, MAY 26, 2007 (Zenit.org).- Here is the contribution from Edmond Malinvaud to the round table "International Justice and Aid" in the 13th plenary session of the Pontifical Academy of Social Sciences. The session was held from April 27 - May 1.

* * *

Justice, aid and poverty: a short survey of the literature
E. Malinvaud[1]

In this session, dedicated to "Charity and justice in the relations among peoples and nations," we accept the idea that international justice calls for an increase in aid to the poorest countries. This round table is meant to study how the increase should be patterned so as to implement as well as possible a just reduction in poverty. That is a wide-ranging matter to the clarification of which a short survey of the literature may contribute, even though it will leave aside how the increase in aid will be financed, an issue that other members of the round table will better tackle than I could do.

The first two parts of this paper will essentially consider a literature that existed before the millennium goals were chosen. Their title will respectively be: "What Would International Justice Require?" "Poverty, Aid and Economic Growth." The literature of the last decade, which was particularly rich, will be the subject of the last part.

What would international justice require?

Philosophy often closely examined what justice should be. But our concern in this round table is to reach operative proposals. Attempting to survey fundamental debates between philosophers would be misplaced.[2] We shall rather consider, directly and in turn, justice according to the humanist philosopher Paul Ricoeur, the application of justice in law, and the application of justice in international relations.

Justice according to Paul Ricoeur[3]

This philosopher takes a strong position against the idea that principles of justice could be derived from rational reasoning only. He points instead to the relevance of a teleological perspective inspired by the sense of justice rooted in the mind of men and women who yearn for meaningful lives, with and for others within just institutions.

What matters is first to appeal to practical wisdom in judging each context in itself. It is also the emergence of an ethic in the process by which argumentations and convictions are exchanged between persons, are progressively improved, up to the point where considered convictions might have a fair degree of universality. Ricoeur then concludes: "The skill of conversation in which the ethics of argumentation is put to the test of the conflict of convictions makes up one of the faces of practical wisdom."

Social scientists have a natural role to play in Ricoeur scheme. They seldom claim to dictate what institutions and social policies ought to be. Their role is rather to reflect on social realities and to present evidence showing what the positive or negative effects of institutions and policies are likely to be. The argumentations in which they are involved, in relation with the demands addressed to them, help to the formation of considered convictions in the citizenry.

Application of justice in law

All social scientists may now benefit from occasionally referring to the three volumes of the Palgrave Dictionary of Economics and the Law (Macmillan, 1998, London). These volumes are relevant in particular for the discussion in our round table, because they lead readers to reflect on the application of justice.

In entry "justice," A. de Jasay begins with: "The concept of justice informs our sense of justice." The first part is entitled "findings and judgments," the second "donstituent principles" with the subheadings "responsibility," "presumption," "convention." We perceive continuity with the thinking of Ricoeur and a distance from the two principles stated by Rawls (1971).

The dictionary well exhibits three important distinctions in the constituting of law: (i) common law and written law; (ii) legal justice and social justice; (iii) render unto each "his own" or "according to his needs." I shall say no more about the first distinction. But the second leads us to refer to the entry "social justice" where we find the two relevant definitions. For legal justice: "exercise of impartiality in enforcing the system of rights and duties by which a basic level of order in society is achieved"; for social justice: "ensuring that each individual is given his due, not in terms of a claim to just conduct on the part of others, but as an assigned share of society wealth." This induces us to refer to entry "equity," but it turns out that the entry is focused on the "jurisdiction of equity," which I understand to be a historical distinctive feature of some English courts.

There is no doubt in my mind that the drive for fighting against poverty belongs to social justice applied to those most suffering from destitution. But the above third distinction brings into conflict two sensitivities which clearly appear in philosophical literature. The second one goes back to Roman law and to the principle Suum cuique heading the fourth part of the entry "justice." The principle in question literally translates from Latin as: "to each his own."

It states the existence of a private property right, understood as one form of personal liberty. Now, various authors maintain that the latter has prime importance. Rawls (1971) in particular gave primacy to his first principle of justice requiring "the most extensive basic liberties." The second principle, presented as subsidiary, states that justice must also ensure "the most restricted social and economic inequalities." Among those who strongly argued for the primacy of liberty I may mention the philosopher Robert Nozick and the Nobel prize economist Friedrick Hayek.

I may also recall to the mind of academicians that, in our second plenary session, labor and employment law was examined by the contribution of Thomas Kohler, who compared the German model, as a continental European prototype, to the U.S. model. The German law was meant to protect the weaker party to the employment contract. The American law took its inspiration from liberal anthropology. So, concerning collective bargaining, the legal schemes entail minimal state intervention in the ordering of relationship because they rely on market mechanisms to shape the results.

Application of justice in international relations

International justice appears as a major theme in the program of this session. I am therefore dedicating to it just a short section, which might however overlap other written texts submitted to this session.

Over much of the 20th century, there has been an important widening and deepening in the scope of the international legal order. However, it would be hard to argue that justice was the predominant concern.[4]

Historically, the main mode to put order was through bilateral treaties: Equally sovereign states pursuing their respective national interest would bargain and in principle come to some form of transaction. But actually the interest of the strong was often imposed to the weak. Appearance in the 20th century of multilateral agreements rooted, in each case, on a certain world view somewhat mitigated the risk of imbalance. But major states of North America and Europe still frequently imposed their rule on lesser states, leaving the latter with little or no margin of negotiation.

The development of international organizations led to search for an orderly international community, although through many setbacks. More or less constraining international norms progressively replaced some of the national norms. This was by and large beneficial. But we could not accept without reservation today the claim that international normality would meet the requirement of justice.

One often hears about a "global governance." But it is undertaken only in a tentative incomplete way, and it has to put up with a high degree of national disharmonies. Elements of a civil society spread beyond national borders, but they poorly interact with national governments and international organizations. Behind such lacks of mutual adaptability transpires the frequent disagreement between value systems, each one claiming universality.

Who, such being the case, can define the content of international justice?

3. Poverty, aid and economic growth

2.1. What is poverty of the human person? How can it be measured?

Introducing his article on the subject A. Atkinson (1987) writes: "Concern for poverty has been expressed over the centuries, even if its priority on the agenda for political action has not always been high. Its different meanings and manifestations have been the subject of study by historians, sociologists and economists. Its causes have been identified in a wide variety of sources, ranging from deficiencies in the administration of income support to the injustice of the economic and social system. The relief, or abolition, of poverty has been sought in the reform of social security, in intervention in the labor market, and in major changes in the form of economic organization."

In the context of this round table, attention is naturally confined to countries of the Third World where poverty is acute and seems to be more easily identified than in developed countries, in which such notions as "conditions of living" permit wide ranges of interpretations.[5]

However we must keep in mind the distinction made by Atkinson between a minimum level of consumption or income, a kind of subsistence level, and a right to have at least a given share of the total amount of resources available in the society. This second concept refers to a statistical distribution of the levels of consumption or income in that society. We then say the first measure is "absolute" and the second is "relative."

Referring to the proportion of people living below one 1990 dollar a day, the particular millennium goal which most concerns us here has chosen an absolute measure of poverty, whereas poverty indicators quoted for developed countries were often chosen as relative. Let us still note at this point that, in section 3.1, other millennium goals will be mentioned, which may also enter into the numerical description of poverty.

2.2. Why should we talk about growth?

There are two reasons for doing so: facts and history of ideas. On the one hand, economic growth usually goes hand in hand with the gradual reduction in poverty. Since growth factors have been much studied in economics, what is known about them in such or such country already, although imperfectly, gives information about poverty.

On the other hand, a large literature was published since the end of the 50s dealing with the effects of foreign aid on the growth of little developed countries. This literature fostered a long debate and so makes up a useful background for appraising the relevance of recent contributions.

It had emerged at the very time when was appearing an increasing disillusion in relation to the slowness of the take-off in some assisted countries, the absence of any take-off in others, and what was perceived about the utilization of aids. A parallel was drawn with the luxurious life of some ruling leaders, with the spread of corruption along the channels which distributed aids without caring about their best use. Or still allocation of aids turned out to benefit only an elite or to go into poorly worked-out projects, the materialization of which could even reveal to be useless in practice.

Some economists explained that aid had pernicious effects because it could prevent the natural development of entrepreneurship and could have the harmful effect of leading to overvaluation of the currency, thus handicapping exporters of home products. What was happening in the Netherlands since the tapping of natural gas reserves (the "Dutch disease") was presented as illustrative.

Of course, such pessimistic diagnoses were not unanimously accepted. They were not accepted for instance by H. Chenery and A. Strout (1966) who, in their modeling of aid effects, believed to be building on a solid theoretical basis. The latter had indeed been widely distributed by well reputed development economists like Arthur Lewis (1954).

However neither factual data nor analytical principles to process them were still well established, whereas they would progressively emerge later with time. In fact we shall have occasions to see that such data and principles do not remove all difficulties. Nevertheless a methodology would be worked out for testing the various forms of aid.

We must also recognize that something still stands today to be remembered out of the early criticism. W. Easterly (2003) in his pages 36 to 38 quotes aberrations to which some institutions in charge of distributing international aid still recently succumbed.

2.3. Impact of aid on growth through investment

Published in 1960 a book by W. Rostow was for a time very popular among economists. According to the author economic development began with a period of take-off, following stagnation, when society began to build up capital. Once under way growth would go on almost automatically. Many then accepted the thesis that foreign aid would serve as a release mechanism.

In their model, Chenery and Stout accepted the idea, moreover assuming that aid would fully go to investment. Domestic saving would be proportional to the growth rate. International trade would sooner or later generate a surplus, which would progressively substitute for aid. Notwithstanding the restrictive character of the assumptions so made, the model proposed a reasonable framework for thoughts. It could even lend itself to computations, at the time when economic planning was fashionable and investment was made mainly of industrial equipments and transport infrastructures.

2.4. A larger vision of growth factors

During the three following decades, the concept of factors of growth was enlarged in two successive stages. First, great importance was recognized to "human capital," hence to education and health. The goal was no longer only to finance imports, but also to train teachers and doctors.

There would be little reason to stress this point, except for a blame often addressed to the structural adjustment programs imposed by IMF or the World Bank: Particularly in the poorest countries, these programs often turned out to mean drastic cuts in the budgets allocated to education and public health. There may be a lesson for us to draw today: We should not neglect to think about humanitarian aid, which also directly concerns human capital.

Starting in the decade of the 1980s a number of economists took the habit to include, among possible growth factors of a country, its institutions, which may either stimulate or hinder growth. I need not dwell on the fact that, since that time, market economies were recognized as definitely more favorable to growth than tightly controlled economies. On the other hand, within the category of market economies, performances widely differ and depend on the forms of regulations ruling the various markets, as well as on the quality of the governance applied by private and public agents.

Claiming to present all the economic literature dealing with the various aspects quickly alluded to above would be misplaced in this commentary. It will be better to now draw attention to what was published recently.

3. Literature of the last decade

Dedicated to our subject, this literature is rich. It takes advantage of a quickly increasing collection of data in poor countries, of the progress of methods for data analysis and of the multiplicity of research projects, which could be led with a good level of objectivity. Nevertheless debates did not vanish, as applied econometrics faced difficulties, the diagnosis of which remains somewhat uncertain.

Section 3.1 will outline the recent trends in absolute poverty compared with the millennium goals. Section 3.2 will explain how enrichment of data bases and deepening of the econometric methodology to analyze them opened new fields for research. Section 3.3 will examine how income redistribution may contribute to the reduction in poverty. Section 3.4 will single out a category made of those aids which may be assumed to stimulate growth in the short run. Section 3.5 will bring to the fore the fundamental difficulty of the evaluation of long run effects of aid policies. Section 3.6 will deal with the agenda for reducing poverty.

3.1. Trends in absolute poverty compared with the main Millennium goal

For good reason, T. Besley and B. Burgess (2003) wrote: "Obtaining reliable measures of poverty requires household surveys about the distribution of income or consumption that are comparable across countries" (p. 4).

They pointed out that, over the last twenty years, the World Bank Research Department conducted a systematic operation with that purpose, covering in 2000 about 88 countries which, out of a total of 158 low and middle-income countries, represented about 89% of the total population of the developing world. That data source led to evaluate at 29% in 1990 and 24% in 1998 the proportion of people who, in those countries, were living with a purchasing power below one dollar a day (at a constant real parity of the dollar).

These two proportions much varied from one region of the Third World to another. They amounted to 48% and 46% for sub-Saharan Africa, to 44% and 40% for South Asia, as against, for instance, 17% and 16% for Latin America, 15% and 10% for East Asia and Pacific (excluding China).

It so appeared that the last one of the large regions here quoted was on the right track to meet the millennium goal of cutting in half between 1990 and 2015 the proportion of those living below one dollar a day. On the other hand, a strong acceleration after the period 1990-98 was required for the same goal to be met by sub-Saharan Africa or Latin America. Urgency of such an acceleration is one of the reasons which motivated organizers of this session, notably for this round table.

Moreover we should not limit our discussion to just one of the millennium goals. Hence, I must quote three other neighboring goals. Concerning education: achieving by 2015 universal primary education. Concerning health: from 1990 to 2015 reducing by half the proportion of people without access to safe drinking water, by two-third under-age-five mortality, by three-quarters maternal mortality; also reversing the spread of the HIV/AIDS. For environment: ensuring environmental sustainability.

3.2. Enrichment of data and analytical methods

In order to reply to those economists who had stood as detractors of foreign aid (see 2.2 above), other economists more recently chose an opposite stand, while recognizing some part of truth in the formers arguments. They claimed and sometimes proved that the strength of these arguments had been overstated. International aid would have sustained poverty reduction and growth in some countries and have avoided worse outcomes in others. Some supporters also believe that many failings of aid have more to do with donors than recipients, especially since much aid is given to political allies rather than to sustain development.

It is not surprising that, after 50 years of experience, it became possible to now issue a more qualified assessment and to more meticulously analyze the impact of aid, depending on the various motivations and contexts surrounding it. Indeed, the means now at the disposal of research on aid are much more extensive and appropriate than those available in older days.

In the first place, factual information was much enriched. Today research has access to large data banks, the content of which has admittedly a variable reliability from one country to another, but a reliability that overall keeps improving.

Various typologies were set up, for instance about the quality of public, or even private, governance in aid receiving countries. This is how G. Burnside and D. Dollar (2000) were led to the conclusion that foreign aid had a positive impact in those developing countries which were well managed, with sound fiscal, monetary and trade policies, but that aid had no significant impact in countries applying loose policies (the conclusion was however disputed subsequently, as we shall see in section 3.5).

In another example, the idea according to which donor organizations would well know what is going to be useful for recipient countries does not seem to stand, given the testimonies of those who are operating on the spot and reporting little apparent relation between political statements and what they observe.

Some particular aid programs were closely analyzed as such: notably those responsible for the "Green Revolution," or for the campaign against river blindness, or still for the fight against some epidemics and some local practices detrimental to health.

In the statistical studies applying econometric methods and aiming at giving global diagnoses, it is now common to make some relevant distinctions. For instance a separate treatment is applied to humanitarian aid after natural disasters, which simultaneously cause growth to fall and aid to increase, hence generate a negative correlation between aid and growth.

In the same studies models are refined so as to better accord to some characteristics of reality. For instance, when aid is found to have on average a positive impact on growth, it may also have decreasing return, that is: Aid may be less and less beneficial on average as its volume increases, a fact which does not appear if a linear model is used.

It would be misplaced for me here to display the various categories of econometric techniques used today in order to take the full advantage of the available data. Each category has its proper field of application, because of the nature of both the data and the models suited to the investigated phenomena. The reader has just to know that econometrics became a demanding craft and to rely on those econometricians who draw the conclusions reached by them.

It so happens that in each one of the two following sections the message will be fairly clear. It will be more difficult to formulate in the long section 3.5.

3.3 Redistribution and poverty

Everything else being equal, in particular the mean purchasing power, a redistribution policy which would decrease inequality of individual incomes in a country would lessen the poverty indicator defined in section 3.1. Besley and Burgess measured the phenomenon, choosing as inequality indicator the standard deviation of the statistical distribution defined for the logarithm of individual real income.

They first noted that their inequality indicator had higher values in Latin America (around 1.0) than, say, in South Asia (around 0.6). They next evaluated how much a redistribution policy would lessen the poverty indicator in their regions of the Third World. For instance they noted that a reduction of one standard deviation in their inequality indicator in sub-Saharan Africa would cut more than half in the poverty indicator of that region.

From their computations these authors drew two conclusions. "First, finding feasible means of achieving redistribution must be a priority. … Second, attention must be paid to the distributional impact of growth. Growth that reduces inequality will have a larger impact on poverty. This in turn leads to a focus on specific drivers of growth that can directly benefit the poor."

3.4. Short-run effects of some types of aid

In their systematic study of impacts of foreign aid on growth M. Clemens, S. Radelet and R. Bhavnani (2004) considered the aid flows into 67 countries between 1974 and 2004.

They at first divided aids into three categories: (1) Aid for disasters, emergencies and humanitarian relief efforts (including food aid); (2) Aid that might affect growth but indirectly and over a long period of time, if at all (such as aid to support democracy, the environment, health or education); (3) Aid that plausibly could stimulate growth in four years (including budget and balance of payments support, investments in infrastructure, and aid for productive sectors such as agriculture and industry).

Their focus is only on the third group, which accounts for about 53% of all aid flows.

Presenting their results concerning the effect of aid after four years, the authors state that they do not mean that even aid of the third group is always beneficial everywhere. In the wrong circumstances it can for instance help centralize the power of autocratic despots. Aid does not work equally in all countries, far from that. Some aid has been wasted and aid quality could be much improved.[5] "The big story, however, is that donors' collective, overall aid portfolio has had positive returns."

"Even at a conservatively high discount rate, at the mean, a one dollar increase in short-impact aid raises output (and income) by 1.64 dollars in present value in the typical country. … We find that higher-than-average short-impact aid to sub-Saharan Africa raises per capita growth rates there by about half a percentage point over the growth that would have been achieved by average aid flows."

3.5. Measuring long term effects: a challenge for econometrics, but perhaps also a relevant lesson

Speaking of development is to take the stand of a long-run perspective: say 20 years rather than four. Hence, we cannot be relieved by an assertion about short-run effects, however valuable it may be. But neither can we ignore possible delusions: many factors are capable of interfering in the long run, and in principle they should be all considered simultaneously in order to reach fully convincing results. In other words, econometricians were facing a serious challenge, which did not prevent them from trying. Now, since the year 2000, signs accumulated showing that, on average, long-run effects of policies and institutions, of foreign aid in particular, might be more perverse than beneficial.

In order to appraise the difficulty we may first refer to a comment made by Easterly et al. (2004) on the article by Burnside and Dollar (2000). Their comment just amounted to show the weakness of the empirical evidence about the idea that aid would stimulate growth in countries applying good fiscal, monetary and trade policies: As a matter of fact, shifting four years ahead the period on which Burnside and Dollar had established their conclusion (no longer 1970-93 but 1974-97) was sufficient to reverse the sign of the dependence of the growth rate on the variable characterizing the conjunction of foreign aid and quality of policies.

Still more disturbing are the results reached by R. Rajan and A. Subramanian (2005.b) who, after other econometricians, made a systematic investigation about the association between foreign aid and growth after ten, twenty or thirty years, and reached the conclusion that no robust relation emerged. Indeed, the dominant result was rather in the direction of aid slowing down growth. Similarly, for the category of aids identified by Clemens, Radelet and Bhavnani (2004) as having short run beneficial effect, no such effect was discerned in the long run.

Facing these econometric results two main standpoints seem to emerge, which I shall impute, for shortness, to respectively Rodrick and Rajan-Subramanian.

Since the end of the 1990s, Dani Rodrick insists on the idea that no useful conclusion can be drawn from econometric analyses of data covering a large sample of developing countries. Such analyses aim at finding a general model, complex if necessary, that would give a good account of the factors of development. In Rodrick (2006), where he speaks highly of a recent book (Work Bank-2005), this economist makes a plea for a different approach motivated by the concern for development policy advising.

Prudence and an empirical spirit would be required for finding the proper development strategy, adapted to each country at each stage of its history. Three steps should come into play: first analytical diagnostics about the most important constraints blocking economic growth; then a creative and imaginative policy design focusing on the market failures and distortions associated with the constraints; finally an appropriate set of institutional reforms. The four countries with which Rodrick illustrates such an approach gives an idea of the diversity of the means that could have to be used. Call for foreign aid is not particularly stressed.

The standpoint in Rajan-Subramanian (2005.a) is quite different, namely to aim at explaining why econometric analysis may uncover perverse effects of foreign aid and why countries should adapt their policies accordingly.

To reflect about what may be obtained from this standpoint we must first realize how serious was the econometric approach used by the authors in their paper (2005.b). The latter aimed not only at presenting important new results but also at comparing them with what was obtained earlier by other econometricians. The data cover all developing countries which received foreign aid since the last world war and for which data are available (209 countries in total).

Most results concern comparisons of performances achieved by the various countries, then analyzed with various sets of explanatory variables (between 61 and 81 countries). Comparisons were made between an initial and a terminal year (a span of 40 years between 1960 and 2000; 30 years between 1970 and 2000, 20 years between 1960 and 1980, or between 1980 and 2000).

Some results come from the analysis of panel data (with jointly various countries and various periods, each one made of five successive years; 581 observations in total). The most commented findings bear on growth achieved between the beginning and end year, as a function of the amount of aid received, of the quality of institutions, of the geographical location, of changes in terms of trade, of political stability, as well as of a number of characteristics of the condition of the country at the beginning of the period. Some results distinguish various aid categories: social, economic or food; supposed to have short- or long-run impact; multilateral or bilateral.

Which conclusions follow from this bulky investigation and some earlier made on the same issues? There are many. Given our present interest, the most important conclusions are set forth as follows: there is hardly any proof of a robust relation according to which the amount of aid would have an impact on growth; on the longest period (the 40 years between 1960 and 2000) such a relation would rather imply that aid harmed growth; there is virtually no evidence that aid works better in better institutional or geographic environments, or that certain kinds of aid work better than others. After recognizing that their results were rather disappointing, the authors write: "One explanation may simply be that the effects that even the theory would predict are too small to detect against the background noise, at least using the standard cross-sectional technique."

But they do not want to stop at that.

In their (2005.a) paper they ask two questions: "What offsets the undoubted benefits of additional resource flows to a resource-poor country? … Why do countries with better policies or governance not seem to use aid any better?" A priori one can hardly help thinking that aid should have favorable long-run effects. The authors, however, propose two explanations.

(1) "Even though aid resources are initially additional to the budget, eventually the country becomes more lax on raising tax revenues, and more aid is necessary just to keep the country on even keel. If that aid is not forthcoming, and if the country's tax raising mechanisms have atrophied, all the short-term beneficial effects may dissipate over the long run as it creates a culture of dependency." Rajan and Subramanian report their intent to write another paper providing econometric tests of this first explanation. Hence they limit their (2005.a) paper to the second explanation.

(2) The large windfalls coming from aid and their associated spending have an insidious effect, not directly discernible on any single aid project. It is a macroeconomic effect deteriorating the country competitiveness, for instance because of an increase in the exchange rate of the country currency. That is the famous "Dutch disease" already mentioned above in section 2.2. The authors validate this thesis with two complementary empirical observations. They show that labor-intensive industries, those that should have the higher competitiveness, grow relatively slower in countries with high aid inflows. They also show that overvaluation of the real exchange rate and aid are positively correlated across industries, with the relationship becoming stronger over time.

The authors do not want, however, to be misunderstood and interpreted as dissuading donor and recipient countries from practicing foreign aid. They rather say that economists should know the existence of channels through which aid can have effects that offset possible benefits. They should pay careful attention to how much aid can be handled to begin with, to how the aid should be delivered and spent, finally to how macroeconomic management should be conducted in receiving countries. By the way, a question naturally comes to mind: why is it that we do not speak of a Norwegian disease? Norway did receive large windfalls with the extraction of energy resources from the North See.

3.6. What could be expected from microeconomics in the preparation of the agenda for reducing poverty?

The macroeconomic results, which were just surveyed, are too recent for claiming to close the debate on aid efficiency. All the more so as cynicism is already too much surrounding the thesis according to which nothing could be done for efficiently fighting against poverty in the Third World. Well then, how far did responsible economists get when facing this quite real challenge?

Let us first refer to the closing section, titled "A Realistic Vision for Foreign Aid," in Easterly (2003). Here are some quotes.

How to achieve a beneficial aggregate impact of foreign aid remains a puzzle. Aid agencies should set more modest objectives than expecting aid to "launch the takeoff into self-sustained growth." Aid agencies have misspent much effort looking for the "next big idea" that would enable aid to buy growth. … There is no "next big idea" that will make the small amount of foreign aid the catalyst for economic growth of the world's poor nations. … The goal is simply to benefit some poor people some of the time."

Easterly ends his paper describing how a trip to Ethiopia had given him the opportunity to visit a project led by a British NGO called Water Aid and run entirely by Ethiopians. He was glad to see that some aid dollars could reach some very needy people some of the time.

The recommendation expressed by Besley and Burgess (2003), summarizing their examination of various aspects of an agenda for reducing poverty, is not so different.

They worry about the possibility that bald assertion, intuition and ideology dominate the debate, whereas a more directly empirical approach, specific for each case, ought to prevail. They write: "It is unlikely that cross-country data will be the main vehicle for progress on" issues of liberalization, privatization or education. … "There is need to square macro and micro facts that may sometimes be at variance with one another." "Empirical approaches based on sub national data provide the most credible base for economists to influence the debate about global poverty reduction. The evidence-based approach to policy has proven effective in industrial countries, and its expansion to the developing world is long overdue." This recommendation may be made precise in various fields.

So investment in education can be used to attack poverty both by encouraging economic growth and as a method of redistribution to the poor. But it is critical to understanding how education expansion can be achieved, with the proper incentives faced by different providers. From which appears the relevance of a large recent literature filled with evidence borrowed from micro-social and -economic observation.

Similarly, another literature, particularly developed for the Indian continent, tackles the issues of understanding the difficulty of the poor to have access to credit and of going round that difficulty in practice. There remains a gulf between the broad macro results that link credit and output, and those results that look at the micro level.

It is also critical for the developing world to find the means for an enterprising spirit to prosper. Increasing evidence shows that land rights are, for the poor farmers, an important element that may promote both equity and efficiency.

Obtaining property rights over land in urban areas can also help poor households to gain access to credit, increase labor supply and improve productivity. But unintended negative consequences can also be identified. Emphasis is then put on the role of social and business networks where contractual enforcement through formal means is imperfect.

All these considerations and others are exposed in the second half of the paper by Besley and Burgess, with important references to the literature.

--- --- ---

References

P. Aghion and S. Durlauf, ed. (2005), Handbook of Economic Growth, North-Holland, Amsterdam.

A. Atkinson (1987), "Poverty," The New Palgrave Dictionary of Economics, Macmillan Press, London.

T. Besley and R. Burgess (2003), "Halving global poverty," Journal of Economic Perspectives, vol. 17, No. 3, p. 3-22.

G. Burnside and D. Dollar (2000), "Aid, policies, and growth," American Economic Review, vol. 90, p. 847-68.

H. Chenery and A. Stout (1966), "Foreign assistance and economic development," American Economic Review, vol. 56, p. 679-733.

M. Clemens, S. Radelet and R. Bhavnani (2004), "Counting chickens when they hatch: the short-term effect of aid on growth," Center for Global Development, Washington.

W. Easterly (2003), "Can foreign aid buy growth?," Journal of Economic Perspectives, vol. 17, No. 3, p. 23-48.

W. Easterly et al. (2004), "Aid, policies, and growth: comment," American Economic Review, vol 94, No. 3, p. 774-80.

M. Friedman (1958), "Foreign economic aid," Yale Review, vol. 47, p. 501-516.

T. Kohler (1998), "Labor law and labor relations: comparative and historical perspectives," dans M. Archer and E. Malinvaud, The Future of Labour and Labour in the Future, Vatican City.

A. Lewis (1954), "Economic development with unlimited supplies of labor," Manchester School, May 22, p. 139-92.

E. Malinvaud (2004), "International justice in global economic development - Lessons from experience," Colloquium "Globalization and International Justice," Mexico City, 3-5 June 2004.

B. Nohan and C.-T. Whelan (1996), Resources, Deprivation and Poverty, Clarendon Press, Oxford.

R. Nozick (1974), Anarchy, State and Utopia, Basic Books, New York. S. Ponthieux (2002), "La pauvreté en termes de conditions de vie," Données sociales 2002-2003, INSEE, Paris.

R. Rajan and A. Subramanian (2005.a), "What undermines aid's impact on growth?" IMF working paper 126, Washington.

R. Rajan and A. Subramanian (2005.b), "Aid and growth: what does the cross-country evidence really show?" IMF working paper 127, Washington.

J. Rawls (1971), A Theory of Justice, Harvard University Press.

P. Ricoeur (1992), Oneself as Another, The University of Chicago Press.

D. Rodrik (2005), "Growth strategies," in P. Aghion and S. Durlauf, ed. (2005).

D. Rodrik (2006), "Goodbye Washington consensus, hello Washington confusion? A review of World Bank (2005)," Journal of Economic Literature, vol. XLIV, n° 4, p. 973-87.

W. Rostow (1960), The Stages of Economic Growth, Cambridge University Press.

U.N. Millennium Project (2005), Investing in Development: A Practical Plan to Achieve the Millenium Development Goals, New York. J. Weiler (2004), "Governance without government: the normative challenge to the global legal order," in E. Malinvaud and L. Sabourin, The Governance of Globalization, Pontifical Academy of Social Sciences, Acta 9, p. 49-76.

World Bank (2005), Economic Growth in the 1990s: Learning from a Decade of Reform, Washington.

H. Zacher (2005), "The contribution of the Pontifical Academy of Social Sciences," in Democracy in Debate, Miscellanca 5, Vatican City, p. 238-309.

--- --- ---

Endnotes

[1] Contribution to the round table "International justice and aid" in the XIII plenary session of the Pontifical Academy of Social Sciences, 28 April 2007.

[2] On other occasions, notably in E. Malinvaud (2004), I approached fundamental philosophical issues. For that matter we should not overlook that philosophy contains important elements fostering the social doctrine of the Church. This was asserted many times by Pope John-Paul II, particularly in the long section entitled "The Church's interest in philosophy" (nn. 57-63) in the Encyclical "Fides et Ratio." He there recalled that Pope Leo XIII had devoted entirely to philosophy his Enclyclical Letter "Aeterni Patris" (1879) and that, as a result, the studies of the thought of St. Thomas and other scholastic writers had received new impetus. John Paul II also stressed "the intimate bond which ties theological work to the philosophical search for truth" (n. 63).

[3] I am referring here particularly to P. Ricoeur (1992) and to Study 9 which follows Study 7, on the inner reflection of each person on his or her aims, duties, obligations and rights, and Study 8, on the interpersonal relations inspired by solicitude and norms of reciprocity. Study 9 deals with the institutions which mediate such relations within a society, aim at justice and enforce legal obligations.

[4] See J. Weiler (2004) and H. Zacher (2005).

[5] See B. Nohan and C.-T. Whelan (1996) and for France S. Ponthieux (2003).

[6] W. Easterly, who is known as a skeptic economist about the utility of foreign aid and the (2003) article of whom deserves mentioning, went some steps in the direction of the three authors when he wrote in his conclusion: "Improving the quality of aid should come before quantity. This step is difficult but not impossible."

[Text adapted]

Sunday, May 27, 2007

Father Cantalamessa on Pentecost

ROME, MAY 25, 2007 (Zenit.org).- Here is a translation of a commentary by the Pontifical Household preacher, Capuchin Father Raniero Cantalamessa, on the readings from this Sunday's liturgy.

* * *

Send Forth Your Spirit and They Shall be Created

Pentecost Sunday
Acts 2:1-11; 1 Corinthians 12:3b-7, 12-13; John 20:19-23

The Gospel presents Jesus, who in the cenacle on Easter evening, "breathed on them and said: 'Receive the Holy Spirit.'" This breathing of Jesus recalls God's action who, in the creation, "formed man out of the clay of the ground and blew into his nostrils the breath of life, and so man became a living being" (cf. Genesis 2:7). With his gesture Jesus indicates that the Holy Spirit is the divine breath that gives life to the new creation as he gave life to the first creation. The responsorial psalm highlights this theme: "Send forth your Spirit, and they shall be created, and you shall renew the face of the earth."

Proclaiming that the Holy Spirit is Creator means saying that his sphere of action is not restricted to the Church, but extends to the entire creation. No place and no time is without his active presence. He acts in and out of the Bible; he acts before Christ, during the time of Christ, and after Christ, even if he never acts apart from Christ. "All truth, by whomever it is spoken," Thomas Aquinas has written, "comes from the Holy Spirit." The action of the Spirit of Christ outside the Church is not the same as his action in the Church and in the sacraments. Outside he acts by his power; in the Church he acts by his presence, in person.

The most important thing about the creative power of the Holy Spirit is not, however, to understand it and explain its implications, but to experience it. But what does it mean to experience the Spirit as Creator? To understand it, let us take the creation account as our point of departure. "In the beginning, when God created the heavens and the earth, the earth was a formless wasteland, and darkness covered the abyss, and the Spirit of the Lord brooded over the waters" (Genesis 1:1-2). We conclude from this that the universe already existed in the moment when the Spirit intervened, but it was formless and dark, chaos. It is after his action that the creation assumes precise contours; light is separated from darkness, dry land from the sea, and everything takes on a definite shape.

Thus, it is the Holy Spirit who transforms the creation from chaos into cosmos, who makes it something beautiful, ordered, polished ("cosmos" comes from the same root as "cosmetic" and it means beautiful!), he makes a "world," in the double sense of this word. Science teaches us today that this process went on for billions of years, but the Bible -- with its simple and image-filled language -- wants to tell us that the slow evolution toward life and the present order of the world did not happen by chance, following blind material impulses. It followed, rather, a project that the Creator inserted in it from the beginning.

God's creative action is not limited to the initial instant; he is always in the act of creating. Applied to the Holy Spirit, this means that he is always the one who transforms chaos into cosmos, that is, he makes order out of disorder, harmony out of confusion, beauty out of deformity, youth out of age. This occurs on all levels: in the macrocosm as in the microcosm, that is, in the whole universe as in the individual person.

We must believe that, despite appearances, the Holy Spirit is working in the world and makes it progress. How many new discoveries, not only in the study of nature but also in the field of morality and social life! A text of Vatican II says that the Holy Spirit is at work in the evolution of the social order of the world ("Gaudium et Spes," 26). It is not only evil that grows but good does too, with the difference being that evil eliminates itself, ends with itself, while the good accumulates itself, remains. Certainly there is much chaos around us: moral, political, and social chaos. The world still has great need of the Spirit of God. For this reason we must not tire in invoking him with the words of the Psalm: "Send forth your Spirit, Lord, and renew the face of the earth!"

Thursday, May 24, 2007

Interview: Beauty, Faith … and Weddings

OTTAWA, MAY 23, 2007 (Zenit.org).- It is said you are what you eat, and according to a Catholic wedding dress designer, you're also what you wear.

Justina McCaffrey, a haute couture designer, is a vocal promoter of the Catholic idea of the feminine genius in the fashion industry, and insists that the clothes a woman wears can reflect or deflect her dignity, especially on her wedding day.

In this interview with ZENIT, McCaffrey spoke about what she thinks is wrong with the wedding industry and the understanding of the role of faith and feminine dignity in the celebration of marriage.

Q: What do you consider to be the core values of your company, Justina McCaffrey Haute Couture? Have time and experience changed these?

McCaffrey: In the early days, I certainly saw in our work the importance of beauty and contributing to true everlasting love, while also recognizing that my little company was preparing a woman to enter into a sacrament.

Beyond this, however, it used to be that the focus was just "go, go, go, and get it done fast." We were so plagued with wedding dates and fabric delays that we didn't really have time to consider other values.

As our company has matured, other values are coming into focus.

A few months ago […] there were a number of issues confronting our growing company. We needed a new place to house our manufacturing, we were unhappy with the current administrative work force wishing to work for our company, namely, very inexperienced youth with a strong sense of entitlement; and our current seamstresses were getting older.

The answer […] was to open a facility that celebrates womanhood.

This facility would house pregnant, abused and other victimized young girls between the ages of 14 and 25, living in a simple format like religious life, including poverty, chastity and obedience, to break away from the manipulations of pop culture.

These young girls would participate in light sewing and assist the more mature seamstresses.

This has become my dream, and presently we are looking for an abandoned convent in Quebec to house this kind of factory.

Q: A quick look at your Web site reveals a hint of your Catholic faith, with names of dress collections such as Stabat Mater, Revelations, Luminous, Transfigured, etc. How has your faith affected your work?

McCaffrey: My faith has given me the opportunity to not get caught up with the glamour of fashion.

My goal is not to dress every Paris Hilton, nor is it to put my name on everything that we see. My goal is to enhance the dignity of women.

I am very vocal about this difference between me and other fashion designers; I still believe that people need continual education about the dignity of being a woman and how this plays out in the clothes we wear.

Q: What kind of woman is drawn to your dresses?

McCaffrey: Traditionally, I design for the woman in love, embodying the idea of love without counting the cost.

I tend to a more romantic approach of draping fabric and choosing lace. As a result, people find in my designs something that is beautiful, that uplifts them, delights them and appeals to something that is forgotten -- the beauty of womanhood.

People are shocked that they love the beauty without the sexuality. This beauty takes them into another world. The rest of the world needs sexuality to sell anything. With my dresses there are no gimmicks, just beautiful dresses.

I think the vanity of the industry enters in when a bride is drawn in by all of the commercial ideals.

It is very important for a bride to be beautiful, but my idea of beauty is a natural idea of beauty, rather than the typical bridal beauty of scary makeup, fake nails, and lots and lots of jewels.

I don't think all that is necessary. It is, in fact, distracting from the true beauty of a woman.

Q: If you could change one thing about the fashion or wedding industry, what would it be?

McCaffrey: I would change the ultraconsumerism that is usually associated with the wedding industry. Cheesy DJ and limo guys, all of the really bad accessories that some people think are required. These types of things, put simply, make young men and women embarrassed to get married.

It is easy for people to get distracted about what a wedding actually is -- a man and woman giving themselves entirely to each other. And for a woman, this event is a new way to live out her femininity.

A woman's body is designed to be in relationship to others, seen most clearly in her ability to have children, but also in smaller details, like the way her arms are shaped.

If you look at a man's arms held out with palms up, they are straight, but a woman's arms have a curve to them at the elbow. This curve allows her to embrace others, particularly her husband and children. A wedding is the beginning of bringing feminine gifts into their fullness.

Q: What recommendations do you make to brides planning weddings?

McCaffrey: I like beautiful weddings but there is a disturbing trend that everybody is trying to "out-sophisticate" each other.

It is sad to be at a wedding of a friend who is usually lighthearted and even funny and see her transformed into "ice queen bride."

Brides can become paranoid, planning their whole wedding with the idea of impressing their boss who is going to attend.

I think there needs to be a return to naturalness and to the importance of family in weddings. I hate when the invitations say "no" to children.

A well-planned wedding will always be beautiful if it includes grace and dignity. There is no need to include pretensions.

Q: Are there insights you have learned from your work about what it means to be a woman?

McCaffrey: Every bride I meet teaches me a little something about being a woman. Some experiences are positive and some are not.

I think the attention that I give to my retail boutiques helps me to formulate the true essence of a lady. Our motto is: Ladies Serving Ladies.

Through this statement I am able to take young girls and give them formation. I can make a place where women can serve other ladies with dignity, while also coming to the understanding of what it means to be one.

One young girl who visited my boutique said, "This store changes the way I think about everything." I think she represents many girls and women who feel that in order to get what society or her parents say is necessary, she must compromise herself as a woman because of the pressure to pursue a career and become professional, but following masculine rules.

Few women have the opportunity to understand and live what it truly means to be a feminine woman.

Wednesday, May 23, 2007

Wednesday Liturgy: Follow-up: Divine Mercy Sunday

ROME, MAY 22, 2007 (Zenit.org).- Answered by Father Edward McNamara, professor of liturgy at the Regina Apostolorum university.

Another reader asked for further clarification regarding the indulgence for Divine Mercy Sunday (see April 17): "I heard on a recent EWTN program that there is a difference, namely, that one of the conditions for gaining a plenary indulgence is not required, namely, the need for total detachment to venial sins. Elsewhere I have read that such detachment may be so difficult to attain as to make the gaining of a plenary indulgence a rare exception. Clearly, if this is all true, then the Divine Mercy plenary indulgence -- wouldn't this be a more generous grant by the Church?"

The decree instituting the indulgence stated that it was granted subject to the usual conditions, which includes detachment to any sin, even venial sin. This is a sine qua non condition and no indulgence may be obtained without it.

It is not, however, an impossible condition to meet, as we explained in our columns on this topic on Feb.

Wednesday Liturgy: Follow-up: Blessings at First Masses

ROME, MAY 22, 2007 (Zenit.org).- Answered by Father Edward McNamara, professor of liturgy at the Regina Apostolorum university.

Regarding our piece on blessings by a newly ordained priest (May 8), a Durban, South Africa, reader asked: "There are parishes where the priest blesses ministers of the Word and Eucharistic ministers prior to their performing their respective duties at Mass. Are these blessings appropriate and liturgically correct?"

The short answer is no. The only such blessings foreseen in the present liturgical books are those of the priest who blesses the deacon, or the bishop who blesses the deacon or priest who is about to read the Gospel.

Some Oriental rites do have a blessing of the reader, who is almost always a cleric. The Latin rite, before the present reform, foresaw that the subdeacon received a blessing after chanting the epistle at solemn Mass.

In the present Roman rite the reason for this blessing is to both prepare the minister to carry out his task and to emphasize the special role of the Gospel with respect to the other readings. This is why the Gospel is the only text reserved to an ordained minister, carried in procession, laid upon the altar, and incensed before being proclaimed.

Thus, while the idea of blessing the other readers is not totally foreign to liturgical tradition, its introduction into the present rite is an unauthorized novelty and tends to detract from the special role that the liturgy assigns to the Gospel.

Wednesday Liturgy: Head Coverings for Women

ROME, MAY 22, 2007 (Zenit.org).- Answered by Father Edward McNamara, professor of liturgy at the Regina Apostolorum university.

Q: A friend of mine told me that according to the Scriptures a woman should cover her head in the presence of Our Lord (holy Eucharist/during Mass). In our churches this is not practiced. Can you please write and tell me as to how and when the practice of women covering their heads came to an end, or is it that we are doing something which is not proper? -- J.M., Doha, Qatar

A: The Scripture text referred to is probably 1 Corinthians 11:4-16:

"Any man who prays or prophesies with his head covered brings shame upon his head. But any woman who prays or prophesies with her head unveiled brings shame upon her head, for it is one and the same thing as if she had had her head shaved. For if a woman does not have her head veiled, she may as well have her hair cut off. But if it is shameful for a woman to have her hair cut off or her head shaved, then she should wear a veil. A man, on the other hand, should not cover his head, because he is the image and glory of God, but woman is the glory of man. For man did not come from woman, but woman from man; nor was man created for woman, but woman for man; for this reason a woman should have a sign of authority on her head, because of the angels. Woman is not independent of man or man of woman in the Lord. For just as woman came from man, so man is born of woman; but all things are from God.

"Judge for yourselves: is it proper for a woman to pray to God with her head unveiled? Does not nature itself teach you that if a man wears his hair long it is a disgrace to him, whereas if a woman has long hair it is her glory, because long hair has been given (her) for a covering? But if anyone is inclined to be argumentative, we do not have such a custom, nor do the churches of God."

A full treatment of this text is beyond the scope of this column. But we may say that this passage contains some elements that have perennial theological value and others which reflect transitory social mores which apply only to the specific time and place of the Corinthians.

For example, during the course of history there were times when it was common for men, and even clerics, to wear their hair long; and none felt that St. Paul's words considering the practice a disgrace applied to them.

Likewise, liturgical norms tell bishops to keep their skullcaps on during some of the prayers during Mass, and they may use the mitre while preaching, without falling under St. Paul's injunction that this practice brings shame upon his head. The norms, however, do ask him to remove his head covering for the Eucharistic Prayer and when the Blessed Sacrament is exposed.

Apart from bishops, and some canons, custom still dictates that all other men should uncover their heads in church except for outdoor Masses.

During St. Paul's time it was considered modest for a woman to cover her head, and he was underscoring this point for their presence in the liturgical assembly.

This custom was considered normative and was enshrined in Canon 1262.2 of the 1917 Code of Canon Law alongside the recommendation that men and women be separated in Church and that men go bareheaded. This canon was dropped from the new Code of Canon Law promulgated in 1983, but the practice had already begun to fall into disuse from about the beginning of the 1970s. Even though no longer legally binding, the custom is still widely practiced in some countries, especially in Asia. It has been generally abandoned in most Western countries even though women, unlike men, may still wear hats and veils to Mass if they choose.

Sociological factors might also have been involved. The greater emphasis on the equality of man and woman tended to downplay elements that stressed their differences.

Likewise, for the first time in centuries, not donning a hat outdoors, especially for men, ceased being considered as bad manners, whereas up to a few years beforehand it was deemed unseemly to go around hatless.

This general dropping of head covering by both sexes may also have influenced the disappearance of the religious custom.

Monday, May 21, 2007

Speech: Address of Former Mexican Minister to Social Science Academy

VATICAN CITY, MAY 19, 2007 (Zenit.org).- Here is the address Luis Ernesto Derbez Bautista, former foreign minister of Mexico, gave at the plenary session of the Pontifical Academy of Social Sciences in Rome. The meetings were held from April 27 - May 1.

* * *

When speaking of fairness in financial markets, one has to be aware of the many aspects this implies.

Because I framed my thoughts in terms of the capital markets of the world, I would like to start my presentation with the following quote that appeared in the March 31 issue of the magazine the Economist, as it referred to the current situation of the world's financial markets:

"The next wave of distress will be unlike the last in two respects. First, commercial banks no longer dominate the process. Non-banks such as hedge funds now make roughly half of all high-yielding leveraged loans and hold the lion's share in the secondary market. Secondly, borrowers' capital structures -- the various layers of debt and equity, each with different rights in the event of default -- are now more complex."

Fairness and unfairness of the financial markets

What does this mean? It means that globalization, and the appearance of new actors in the market has modified the rules in such a way that fairness in international flows of capital is difficult to evaluate. The explosion of financial instruments based on derivatives make it extremely difficult to understand even by experts in the field, why the access that many developing nations should have to required capital, either as foreign aid, or foreign direct investment, is not occurring.

Indeed, unlike the expectations that globalization of the markets brought in the last part of the past century, the many financial instruments now available to the world and the fact that speculation has taken hold of the markets, has led the world to a financial system with greater vulnerability to accidents than it ever was before. As a result, time and again we have observed that the possibility that through no fault of its own, a developing nation suddenly finds itself without access to capital in a very quick period of time occurs.

Today, as a result of this globalization process, we are facing two major financial risks which throw initial light on the unfairness of the current system to developing nations. The first one has to do with the proliferation of derivative instruments; the second with an excess appetite for dollar denominated debt to finance current account deficits in large nations. I would like to talk about both today, as I believe they are the source of the great inequality and unfairness in today's world that developing nations face when looking for financial support to their economic programs.

First, proliferation and profusion of financial instruments have increased the potential risks to the international financial system. The instability that they produce, translates into fewer opportunities for financing projects in developing nations. The nominal (face) value of derivative instruments amounts to multiples of global gross domestic product. Based on this massive number, it is easy to tell stories about how a financial crisis can occur, as a chain of interlocking derivative contracts unravels due to a failure to settle one contract, which is hedging another contract, which in turn is a hedge to something else. Pretty soon, as in stories in which the payments system grinds to a halt due to a relatively small payments failure, a small event can be made to have frightening consequences.

Scenarios involving the unraveling of a chain of derivative transactions may be unrealistic, because there are netting arrangements among most institutions which mean that it should generally be possible to offset obligations that have not been settled. Nevertheless, it may be equally possible that the risks that are passed on through derivative contracts may be inappropriately placed and not adequately recognized. For instance, when banks securitize or hedge a risk, the risk migrates to other places -- frequently, it is believed, to insurance companies. The concern is that the risks move from people who understand them to those who do not. If that is the case, the world may soon be facing a major financial collapse; one where poor and disadvantaged nations may end up with the worst part of the cost.

On the other hand, superfluous consumption in developed nations has created an excess demand for funds to finance their current account deficits. The ease with which a country as the United States of America manages to attract funds is remarkable, leading to question a system which provides large amounts to finance consumption, and few resources to finance projects in developing nations which could help them to reach higher levels of growth and employment, thus to lower levels of poverty. Moreover, the consequences of this mismatch between demand and supply of financial flows could lead to consequences that would hit in a stronger negative way to developing nations, once again, through no fault of their own.

Let me explain this last point.

We are all aware of the devastating effects that excess international debt had in the economies of nations who found it easy to finance a consumption period in their histories. The Mexican crisis of 1994, the Asian crisis of 1997, and the Argentine crisis of 2001 are examples of currency mismatches and their aftermaths. However, in those cases the size of the economies involved and the nature of the foreign exchange risks taken by them are different from what could happen today. The punishment brought about by the solution to those crises was bore mostly by the borrowing countries which had indebted themselves in foreign currency. Devaluation punished the debtors, but we all know the effect on growth caused by the ensuing financial crises, I will refer to them later on.

Bad as they were these episodes of financial world crises, we have today a more dangerous situation. It is no longer small economies that are at risk; it is the United States of America, the world's largest economy. The United States has borrowed heavily abroad to finance ever larger current account deficits derived from an insatiable appetite for consumption goods. But whereas in the past those countries indebted did so in currencies other than their own, the US has done it almost entirely using dollar- denominated liabilities. This implies that, just at the time that creditor countries could be facing the challenge of appreciating currencies and more competitive trade markets, they would also be facing the "headwinds" of sharp wealth losses on dollar-denominated assets.

The negative effect would be a double negative impact on developing nations: first, a loss to financial access product of a reduction in financial official aid from many developed nations, as well as a fall in foreign direct investment arriving to their economies. Secondly, the heavy losses which such a crisis could bring to the world undoubtedly would translate in a more protective trade environment, affecting the developing nation's access to the very markets they would need to receive income needed for their development.

The evolution of the market

How this unfairness in financial flows for development came to be?

Fifty years ago, foreign direct investment and capital market flows were negligible Official financial aid was the dominant factor in financial flows arriving to developing nations. Thus, an orderly manner of transferring capital was in place. This was possible because first, foreign direct investment was strongly curtailed by limitations imposed by many developing nations. Sectors of national interest were the recipients of such flows, the result was productive investments and growth which helped create jobs and welfare in the economies when the funds arrived. No speculative flows arrived, which was a major difference from where we are today.

Indeed, investing in foreign securities was practically impossible for most investors. Typically, nationals were forbidden to take their money away from the country, or foreign currency restrictions made it impossible for them to obtain foreign currency to pay for foreign securities. In addition, the countries in which they would have wanted to invest almost always did not allow them do so. As a result, capital markets in most countries were completely segmented. As financial liberalization took hold of the world, explicit barriers to international investment were brought down and, for the largest and most developed countries, largely eliminated. To use the analogy of the best seller author Friedman, when one focuses on explicit barriers, the financial world has become lat when one looks at developed countries, and has become flatter when one considers emerging markets.

Unfortunately, the financial world is much flatter "de jure" than "de facto." The results we have observed from this new arrangement in the international financial system have limited the sharing of risks internationally and prevented capital from flowing to where neo-classical models suggested it would have the highest return: developing nations in need of it.

Leading trade and financial theorists now know that capital mobility is different to goods mobility, and that there is something about trade in financial instruments that is different than trade in goods. This is due to the failure to recognize that while regulation is almost certainly more necessary in financial markets than in goods markets, the need is not for regulation of international capital flows, it is for regulation of financial markets, domestic and/or foreign -- a distinction that may not have been drawn sufficiently when recommendations to liberalize financial markets was pushed by multilateral institutions like the World Bank and International Monetary Fund.

The proposed liberalization of financial markets pushed by the multilateral financial institutions was based on the neoclassical model of portfolio choice which predicted that, under liberalized markets investors would hold portfolios that are well-diversified internationally, so that risk is shared across countries efficiently and capital flows where it can be used most profitably. Unfortunately experience has showed us that instead of this result capital does not appear to flow to where neoclassical models predicted it would. Today, investors hold portfolios that are overweighed in the securities of emerging countries which are approved by international financial agencies. And foreign investment funds follow the same approach, reducing substantially the offer of capital to those nations not considered safe by the international rating agencies. Furthermore, as the governments of developed nations consider that a sufficient amount of financing exists in the world, they have reduced their official aid flows, a situation that clearly has created a more unfair financial system than the one we had in the second half of the 20th century. In other words, an inherent bias is very much with us, one which unfairly discriminates against many of the countries where the financial flows would do the most good, both in terms of return to productive investments, as well as, more importantly, to the return of investment in people, a fact which is leading to today's migration processes: migration of people instead of trade of goods, a doubly unfair result.

We should have expected this bias when pushing for financial liberalization in the world. While experts were emphasizing financial liberalization, the Asian crisis intervened, and the countries most affected by the crisis were those of developing nature. As an example take the Brazilian crisis of 2002. If a country was following the experts advice on implementing the so called "Washington Consensus" measures it was Brazil. The crisis thus, was the result not of poor economic management of the country; it was caused by the fear of international investors that Brazil might not service its debt if Lula were elected president. Clearly such a response to good management was an unfair outcome.

The unfairness derived from: a) the short-term nature of many of today's financial flows, b) the high turnover in financial markets and the multiplicity of agents who decide about a country's prospects, c) the speed with which market participants react to new information in negative ways, and quite importantly, d) the global reach of financial institutions with monopolistic power in the sector, commercial banks and financial rating agencies. These complexities of the new financial markets and the dominance by a few global financial institutions have a number of implications which affect the fairness on the way that capital is allocated in today's world.

Let me briefly consider a few of these, before turning to how they can significantly complicate the lives of policymakers.

The first implication to note has been the growing integration of financial markets, including those in emerging market countries, with subsequent impact on the covariance (perhaps even "excessive covariance") of asset prices. Over the last year or two, equity prices in virtually every emerging market economy (EME) have risen strongly while sovereign spreads have dipped to record lows. Even more astonishing, the sharp increase in house prices in most industrial countries has also been reflected by similar sharp increases in many EMEs. While arguments can be put forward to explain these developments in terms of "pull" factors (better policies) in EMEs, there seems a reasonable chance that "push" factors are also in play. The sharp increase in competition in the financial services industry in the industrial world, together with high hurdle rates and very low policy rates, has fostered a search for yield that has affected markets everywhere.

In what way does the international dimension complicate the lives of policymakers in developing nations? Consider first the conduct of monetary policy in tightening mode, with price stability as the ultimate objective of policy. As interest rates begin to rise, the currency will tend to strengthen. This will have a downward influence on inflation, implying that interest rates have to rise less than otherwise. This can have two dangerous effects. To start with, if the combined effect on the price of tradeables is greater than on non-tradeables, the trade account may deteriorate. Then, with domestic interest rates relatively low, asset prices could rise and even take on "bubble"-like dimensions. With spending further supported by this phenomenon, there would likely be further deleterious effects on the trade account. In the end, the markets could lose patience and a crisis might follow for the country involved.

This sounds very much like the dynamics of the Mexican and Southeast Asian crises. And while it would be tempting to say that the international complication is really only material for small open economies, what has been going on in the United States, seems qualitatively similar. The rate at which the United States is becoming externally indebted is, in itself, a cause for concern. Moreover, such concerns must be heightened by the recognition that the money lent by foreigners has been spent on bigger houses and higher oil prices, rather than investment in the tradable goods sector. As I mentioned before, the US deficit also has the potential to unleash a bout of global protectionism, which is not the case when small economies run into similar problems.

A second implication has to do with the management of monetary policy to help reduce cyclical effects in the emerging economies. Monetary policy in a financially integrated world is more complicated than it was in the past. The danger here is that an orderly management of the monetary mass could turn into a disorderly one, necessitating a sharp increase in policy rates to stabilize the situation. We saw this on a number of occasions in Canada in the 1980s, and we have had a more recent example in Turkey. The end result of such policies could be a tightening of monetary policy which affects growth and investment in the host country, rather than an intended easing which would help increase investment possibilities in the nation concerned. As we in Mexico know, it is not a pleasant experience to find you going in the opposite direction from that originally intended.

The third problem arises from the globalization of commercial banks, and the presence of hedge funds as the major suppliers of financial flows in today's domestic and international markets. Banking supervision in a globalized world poses huge challenges for the relationship between home and host supervisors as they collectively seek to prevent crises from happening. The oversight of international payment and settlement systems is another important cross-border issue, one that affects the fairness of the international financial system.

Should the global financial system be subject to a sharp shock somewhere, the issue of how large, complex financial institutions might be wound down remains unresolved. The question of who might bear the costs of an adjustment under such shock still remains undecided. But we have then to ask ourselves the following, in a domestic financial crisis provoked by lax supervision of large dominant international banks in our economies, when emergency liquidity assistance is required, who is to provide it? In what currency?

There are a lot of issues to think about here, particularly since the absence of clarity about the limited role of the public sector brought about by liberalization policies positively encourages moral hazard behavior of the large financial institutions that control the domestic markets of many emerging nations. Thus the globalization of financial markets may provide enormous opportunities, but what we know is that it does create enormous concerns on their effect in providing a fair and just financial world system.

What may seem to the parent organization to be marginal decisions in a global business strategy may have major consequences for the availability of credit and liquidity in the host country when the local financial institution is large relative to local markets. While competitive forces, relatively free entry, and a global market for corporate control should replenish any gap in capital or risk tolerance over time, in practice, frictions, entry restrictions and information asymmetries can slow that process. The process could become more disorderly in periods of individual institution or general financial distress.

To resolve this situation which clearly is a major factor in the unfairness of the current international financial system, home and host country supervisors need to coordinate their supervision of large, multinational financial institutions. Where foreign-owned institutions make up a large proportion of the financial sector of an emerging market country, the health and wellbeing of the country's financial system may depend greatly on the financial strength and managerial effectiveness of the parent organization, as well as the local subsidiary or branch. In turn, host country supervisors would like to benefit from that comprehensive overview of the parent as they carry out their supervisory responsibilities. In particular, host country authorities want to receive information that is material to the operation of banking and financial markets within that country, recognizing that some constraints exist, especially for public parent companies.

After all above is taken into consideration, it is difficult not to be skeptical of the fairness of the present financial international system of allocation of capital. The more we look at it, the more we feel concerned about its current structure. The skeptics now claim that the costs of financial opening in emerging markets are likely to outweigh its uncertain benefits. However beneficial the globalization trends may be in terms of economic efficiency, the implied changes, increased cross-border competition and pressure to adjust have provoked negative economic results and calls for protection, and not only in emerging markets.

The Mexican and Asian crises, in particular, were of a systemic nature, reminding us that financial markets have a growing capacity to transmit shocks, both across borders and across markets. The list of financial shocks in recent decades also includes the global stock market crash of 1987, the bursting of real estate bubbles in the late 1980s, and credit and asset price booms and busts. Experience has shown that in a number of instances the bust phase of the cycle has been accompanied by a crisis in the financial system. In many emerging market economies, domestic tendencies toward credit, asset price and investment booms have been reinforced by capital flows. Their abrupt reversals have deepened the bust phase. Moreover, emerging market economies - unlike developed ones - as a rule have not been able to borrow in their own currency. The resulting costs to the real economy have thus been greatest when, due to currency mismatch problems, banking crises and foreign exchange crises have coincided.

As if all this were not enough, even though international capital markets have become deeper and more capable of taking on risk, they have become more sensitive to fads and fashion. Changes in perceptions or attitudes toward risks can abruptly alter the funds that a country can expect to receive (sudden stops). These changes can prove costly, in terms of sharp price variations, pressure on the exchange rate, projects having to be abandoned for lack of funding, and so on. In such a scenario, what can small countries do?

Thus, the new financial order of integrated markets comes as a mixed blessing for developing nations. Certainly, integration does bring great benefits to these economies: external funds begin flowing in; countries can enjoy lower costs of capital and take advantage of greater opportunities for risk diversification. In addition to cost reduction, through increased competition, it pushes local industry to increase efficiency and adopt best practices. In a more open environment, competition and market discipline are enhanced.

However, financial integration also entails the danger of amplifying the costly distortions and imperfections of domestic financial markets, as they are internationalized through financial flows between countries. It may also uncover the incompatibilities that arise between countries with inconsistent macroeconomic policies. But what is probably even more important, financial integration creates an additional source of domestic volatility, as irrational exuberance, bubbles and crashes in international markets are imported and contagion effects and sudden stop dynamics make it almost impossible to remain isolated from shocks elsewhere in the world. When financial imbalances grow too far and/or for too long, they do have the potential to trigger financial instability, especially if financial institutions' balance sheets are exposed to such risks.

Financial instability implies that due to some shock the financial markets are not properly performing their standard functions, i.e., effective mediation between creditors and debtors, spreading of risks and efficient allocation of resources to particular activities and over time. Such a situation, with its serious implications for payment and other systems, can be quite disruptive to economic activity. Although the advanced countries have also gone through episodes of boom and bust in credit and asset prices, experience has shown that the probability of a full-blown financial crisis is higher in emerging market economies. The latter are constrained by their institutional and structural weaknesses. Unlike developed countries, they cannot borrow in their own currency. By their nature these economies are susceptible, in particular, to foreign exchange and currency crises, which are rare in advanced countries.

All of this suggests that a continuation of past policies that seemed appropriate when initiated is now desirable. In particular, because it is hard to say when, where, and how future shocks will hit, developing countries have to start thinking about weaning themselves off reliance on global savings and look for a more stable source of funds, while surplus countries have to find ways to depend less on external demand. Since adjustment is inevitable, would it not be better to commit ourselves to a medium-term policy framework? One that should be agreed by all governments and international financial institutions involved, so that public policy can support the needed private sector adjustment and ensure the process is smooth? One that would define a sufficient level of official aid funds as promised under the Millennium goals?

There are many interesting questions when analyzing the fairness of today´s financial systems in the world. But we do not have the time to go over all of them, so please let me conclude my remarks.

Conclusions

First, under the impact of financial globalization, a gradual shift
from the government-dominated official aid/multilateral aid system of the Bretton Woods tradition to a market-led system has evolved. Exchange rates, liquidity conditions and adjustment to shocks are increasingly determined by decentralized market forces. In the changed environment, a gradual shift from bank-centered to market-based financing is taking place, albeit at a different pace in individual countries and regions. The resulting decline in banks' core business areas has forced them to search for other opportunities both at home and abroad. They have found a niche in emerging economies, an action that has its positive and negative aspects, but above all that defines the unfairness of the current system with its bias against small and less developed nations.

Second changing rules in the financial markets have meant a changing structure of power on who makes the decisions to provide financial flows to developing nations. Whereas the Bretton Woods system had a clear mandate to create a fair system of aid to developing nations, a system like the one we have now where private agents and speculative investments dominate, is a system where the governance structure is biased against fairness. It is a system that does not care for the need to give each country the possibility of reaching growth and eliminating poverty. It is therefore, a system without the legitimacy or the appearance of impartiality necessary to undertake the sometimes intrusive tasks entailed in facilitating international policy dialogue or international lending.

A financial system that can finance the running current account deficit of 6.5 percent of its GDP in the USA - in the process absorbing nearly 70 percent of world external savings- while denying funds to countries in dire need of them to rescue their population from poverty and hunger seems hardly a fair system.

A system that can impose in small emerging economies the mood of foreign investors at their will, not so much because foreign investors will inflict a "sudden stop" but because they are likely, at some point, to start demanding a much higher premium for continuing to finance, is not a fair system.

This system thus, requires to be changed to operate in a different more just manner.

First, it should recognize that trade imbalances are a shared responsibility and help prevent concerns about imbalances degenerating into protectionism, or into calls for one country alone to narrow its deficits or another to appreciate its exchange rate, measures that will be ineffective by themselves.

Second, it should reassure financial markets that a policy framework for supporting adjustment without undue pain is in place, thus limiting the risk of an abrupt and costly market-induced adjustment.

Third, it should create conditions to otain a sufficient amount of donor aid to ameliorate the poverty conditions of extremely poor nations.

Unfortunately, even if the politicians in a country are far-sighted, only domestic benefits enter their calculus: the effects of their actions on reducing risks for everyone else is heavily discounted. As a result, policies that have large external spillover effects may not be undertaken because:

1. Politicians don't think the risks of an abrupt adjustment are high or that the recommended policies will do anything to narrow imbalance; or

2. They think the risks are high but they care more about the high cost to their own political futures if they undertake corrective policies; or

3. They think the risks are high, and they want to do what is right for the country, but the domestic cost of action outweighs the domestic benefit because much of the benefit redounds to the rest of the world; or

4. They think the risks are high but they cannot move unless others move?

This means some way has to be found to persuade countries to internalize the beneficial effects their policies will have on everyone else - to internalize the spillover effects. That, my friends is a task that only an Academy as this we are in now can undertake. A task that I am sure most of us would gladly undertake, because it is a task that would help those in the world in more need of our support, the poorest of the poor.

Thanks.

Monday, May 14, 2007

Speech: On "Deus Caritas Est" and International Charity

VATICAN CITY, MAY 5, 2007 (Zenit.org).- Here is the text of an address from Dominican Father Augustine De Noia, the undersecretary of the Congregation for the Doctrine of the Faith.

The address was given April 27 as part of the plenary session of the Pontifical Academy of Social Sciences. It focused on "Deus Caritas Est."

* * *

Pontifical Academy of Social Sciences
XIII Plenary Session 27 April 2007,10:30-12:30

CHARITY AND JUSTICE IN THE RELATIONS AMONG PEOPLE AND NATIONS: THE ENCYCLICAL "DEUS CARITAS EST" OF POPE BENEDICT XVI

J. Augustine Di Noia, O.P.
Undersecretary, Congregation for the Doctrine of the Faith

It is an honor and a pleasure for me to address this distinguished pontifical academy at the start of your 13th plenary session, and to bring you the greetings of the Cardinal Prefect of the Congregation for the Doctrine of the Faith, William J. Levada, who, with Archbishop Paul Josef Cordes and Cardinal Renato Martino, first presented Pope Benedict XVI's encyclical "Deus Caritas Est" to the world at a press conference on Jan. 25, 2006, but who is unable to join you today.

It is a particular pleasure to share the podium with Archbishop Cordes who, as president of the Pontifical Council Cor Unum, plays a crucial and active role in securing the charity and justice in the relations among people and nations that is your topic in this session of the Pontifical Academy of the Social Sciences.

The focus of your discussion is the Holy Father's short but tightly argued first encyclical, ""Deus Caritas Est"." In its two parts, the encyclical makes two hugely important points. I should like first to state what I think these two points affirm, and then to suggest something of their significance within a social scientific perspective informed by the Catholic faith.

Eros and Agape: The Sanctification of Desire

As everyone who has read the encyclical will know, in his discussion of eros and agape, Pope Benedict insists on the unity of these two forms of love, as well as the continuity between them. He is particularly concerned to refute the widespread notion that the Christian faith separates these two loves, and even suppresses the one -- eros -- in favor of the other -- agape. On the contrary, asserts the encyclical, eros is ever reaching out towards its fulfillment in agape. The powerful dynamism of desire is itself a sign that human persons are made for and directed toward a love that never ends.

In order to clarify this immensely significant first point, allow me to turn for help to one of Pope Benedict's favorite authors, St. Augustine.

In his writings, and especially in his "Confessions," St. Augustine frequently invites his readers to consider the things that they have desired and the things that they desire now -- to consider, in effect, the experience of desire. When we have thought about things that we have desired very badly, and have worked very hard to possess, St. Augustine asks us to acknowledge that, in the end, we have often lost interest and become bored with these very things, and that we then move on to seeking other things.

For St. Augustine, this is most definitely not a cause for lament. On the contrary. In pondering the experience of desire, we learn something very important about ourselves: No good thing that we have wanted and even possessed can finally quench desire itself, because we are made for the uncreated Good which is God himself.

This means that the good things of this world -- and all the more so, the good of other persons -- far from being obstacles in our quest for ultimate happiness, point us to the Good itself which is their source and in which they share. If we do not love the good things of this world, how shall we be able to love their Maker?

The triune God, who made us for himself and who wants to share the communion of trinitarian love with us, uses the good things of this world to lead us to him who is, we could say, Goodness itself. The challenge -- and, sometimes, the tragedy -- of human existence is to desire and love the created good as if it were divine, to invest an absolute value in what cannot finally satisfy the human heart. That is what sin is. But rightly ordered desire and love of the good things of this world and the good of other persons is already a participation in the Good which is God himself.

These lessons from St. Augustine help us to grasp the point the Holy Father is making in the first part of "Deus Caritas Est" -- that eros is meant to lead us to agape, to the love of God and to the love of one another in God. Pope Benedict resists absolutely the misreading, sometimes perverse, that claims to see in Christian faith the suppression of the ordinary fulfillments of human earthly life, particularly human intimacy and love, in favor of a good beyond life.

On the contrary, for Christian faith the whole range of human desire -- or, to use more technical language, the inclination to the good embedded in the very structure of human existence -- finds it complete fulfillment in the love of the triune God, and nothing less. Although Pope Benedict does not use this expression in the encyclical, we might call this unity of and continuity between eros and agape "the sanctification of desire."

The Service of Charity: The Integral Human Good

The second principal point argued in "Deus Caritas Est," according to the reading I am suggesting today, is actually implicit in the first and is advanced in the second part of the encyclical.

This second point is captured brilliantly in a passage from paragraph 19 of the encyclical: "The entire activity of the Church is an expression of a love that seeks the integral good of man: it seeks his evangelization through Word and Sacrament …; and it seeks to promote man in the various arenas of life and human activity. Love is therefore the service that the Church carries out in order to attend constantly to man's sufferings and his needs, including material needs. " This "the service of charity" is directed to the integral human good, a description of which is the substance, as we have seen, of the encyclical's first major point.

For, while it is true that no created good can satisfy the desires of the human heart, God nonetheless intends us to enjoy these created goods precisely as his gift to us, affording a participation in his own Goodness. These created goods are not rendered irrelevant or dispensable by the fact that they are not themselves ultimate or absolute. The ultimate good does not cancel out or exclude limited or subordinate goods: They retain their integrity and finality in their very ordering to the ultimate good.

Man does not live on bread alone, indeed, but he needs bread in order to live. Integral human fulfillment encompasses a range of created goods even as it necessarily entails a directedness, an inner tendency, toward the enjoyment of the uncreated Good who is God himself, the Father, Son and Holy Spirit who enjoy a communion of life into which we, created persons who are not God, are invited to share as their friends -- and nothing less.

This integral human good is the object of the Church's service of charity: the ultimate good and the intermediate or subordinate goods, the spiritual well-being and the material well-being, the goods of this earthly life and the good beyond life.

Again, Pope Benedict is concerned to refute the pernicious suggestion that, by affirming the priority and ultimacy of a good beyond earthly life, the Church overlooks the poverty and suffering of this world, or, worse, conspires with the "prinicipalities and powers" to maintain the unjust structures that are responsible for this human suffering.

On the contrary. The service of charity encompasses the whole range of the integral good of human beings. The encyclical explains at length how this service of charity has been exercised in Christian history and how it can be exercised in the present day. In the midst of this service, the Church keeps to the forefront that vision of the human good and human dignity that God himself has revealed and inscribed in the human heart from the very moment of the creation of the universe. "The entire activity of the Church is an expression of a love that seeks the integral good of man" ("Deus Caritas Est," No. 19).

"Deus Caritas Est" in the Perspective of the Faith and the Social Sciences

What I have identified as the two major points of the encyclical "Deus Caritas Est" pose a range of challenges to the reflection of Catholics whose professional life is devoted to one or other of the social sciences. In this brief paper, I can only hint at some of the more significant of these challenges -- not only because of the richness of the encyclical's teaching, but also because of the diversity of the social sciences themselves.

For the most part, the program of this plenary session takes its inspiration from the second part of "Deus Caritas Est" in which the Holy Father has a great deal to say about the Catholic understanding of the service of charity and about the practical implications of this understanding for contemporary politics, society and culture. These issues are the bread and butter of social scientists like those who make up this distinguished academy.

To contribute to a robustly Christian engagement with these issues, social scientific inquiries informed by faith must take into account the truth about human nature which is in part already legible in the creation of men and women in God's image and is fully revealed in the contours of the face of Christ -- what the encyclical terms "the integral human good."

The contribution of the social sciences to Christian reflection on these issues thus needs to be framed within the context of the Church's generous tradition -- expressed with great clarity in Pope John Paul II's encyclical "Fides et Ratio" -- according to which the truth discovered in the sciences is in principle coherent with the truth contained in revelation.

The fundamental reason for this lies not in our ability to manipulate bodies of knowledge, but in the nature of truth itself which is one, and thus more radically, in the nature of God himself who is the author of the created order just as much as of the economy of salvation. The Catholic principle is that what is discovered to be true by human reason cannot contradict what is known to be true by faith. This principle forms the background for the important things that Pope Benedict XVI has to say about faith and reason in his discussion of politics in paragraph 28 of "Deus Caritas Est."

The Holy Father's observations here have a direct bearing on the contribution of the social sciences to Christian reflection on the service of charity, understood as an instance of the interface of faith and reason. As an encounter with the living God, faith opens up "new horizons extending beyond the sphere of reason." "But," continues Pope Benedict, faith "is also a purifying force for reason itself. From God's standpoint, faith liberates reason from its blind spots and therefore helps it to do its work more effectively and to see its proper object more clearly" ("Deus Caritas Est," No. 28).

In accord with the traditional Catholic principle, reason retains its integrity and proper finality, but faith contributes to its work by locating the objects of scientific inquiry on, so to speak, the widest possible conceptual map -- that provided by our awareness of the divine desire to share the communion of trinitarian life with creaturely persons, or, to use the terms of the encyclical, the integral human good.

With these principles firmly in place, it seems to me of the greatest possible importance for social scientists like yourselves to resist reductionist accounts of human nature and society, and relativistic accounts of moral reasoning and norms -- accounts which almost by definition obscure the wider horizons of faith about which Pope Benedict speaks in the encyclical.

Such accounts are by no means entailed by research in the social sciences, but often arise from pre-existing philosophical assumptions that come to influence and shape the conclusions of scholarship. This is not the place to trace the complex history of these connections and dependences.

But there is no reason why research that focuses on specific aspects of human behavior and interaction needs to deny the existence of the wider horizon which faith reveals to us. As Pope Benedict tellingly affirms in "Deus Caritas Est," "faith liberates reason from its blind spots."

What is not susceptible to observation and generalization within the limits of a particular social scientific discipline or model can nonetheless provide the context for a fuller understanding of the objects of social scientific inquiry.

I mention this point because the Church faces a huge challenge in the present day in her interaction with international agencies and national governments whose social policies have been influenced by reductionist social science. It can be demonstrated that an entirely secular anthropology -- in the sense of an alternative account of the meaning of human existence -- has, especially since the '90s, come to shape the programs and policies of many international organizations, including the United Nations.

In place of an earlier paradigm in which universal human rights and a common human nature played a normative role, the alternative anthropology espouses the socially constructed character of truth and reality, the priority of cultural diversity, the deconstruction of all moral norms, and priority of personal choice. Although the roots of this secular anthropology are philosophical, the social sciences have been the principal vehicle for its diffusion in modern western societies.

When the Church, in this environment, advances her vision of the integral human good, her interventions are frequently caricatured as retrogressive and intrusive. The alternative anthropology has so powerful a hold on the media, the international aid agencies, many NGOs, and other influential bodies that it is difficult to advance the Christian vision of the integral human good through dialogue, argument and counter-argument. The new anthropology is viewed, in effect, as self-evident and not in need of argument. This situation has created many practical problems that sometimes make it difficult for Catholic aid agencies even to function at the local, national, and even international levels.

Some years ago, when the then Cardinal Ratzinger was its prefect, the Congregation for the Doctrine of the Faith invited about thirty Catholic university faculties across the world to sponsor consultations and symposia on the natural law and universal human values. It is significant that, now as Holy Father, he should state in "Deus Caritas Est" that "the Church's social teaching argues on the basis on reason and natural law, namely, on the basis of what is in accord with the nature of every human being" (No. 28). But it must be admitted that this newly emergent secular vision denies the applicability -- indeed, the knowability -- of any universal account of human nature and destiny.

It is urgent for social scientists whose practice of their disciplines does not in principle exclude some broad account of the integral human good to counter this secular anthropology and the social engineering programs inspired by it. The straightforward, and well-argued account of the Christian vision of the integral human good presented in "Deus Caritas Est" should facilitate the kind of discussion and argument which needs to take place. I cannot think of a better forum for this much-needed debate than the floor of this distinguished academy.

* * *

The encyclical "Deus Caritas Est" bears the date of Christmas 2005, the first Christmas of the pontificate of Pope Benedict XVI. This is significant. The only-begotten Son of God took on human nature in order that human persons might share in the divine life. It is this communion of life with creaturely persons that the triune God desires. "I wish in my first Encyclical to speak of the love which God lavishes upon us and which we in turn must share with others" ("Deus Caritas Est," No. 1).

St. Augustine somewhere remarks that it is very difficult for human beings to believe in this love. But we can see that no account of the human condition can be complete that neglects, excludes or denies that the integral human good is found only in the love of God revealed to us on the first Christmas in the Incarnate Word made flesh.

[Text adapted]