The financial crash of 2008 hit as I began secondary school, and I grew up under the policies of austerity which followed. To a large extent, there has been consensus across the political spectrum about what happened: in the years before the financial crash irresponsible public spending, and the subsequent deficit, left us vulnerable when the global downturn struck.
Liam Byrne, a Labour treasury minister famously wrote in a note to his successor in 2010, “Dear Chief Secretary, I’m afraid to tell you there’s no money left”. The response was thought to be obvious, the UK must clear the deficit and ‘balance the books’, and this action became the promise of Chancellor of the Exchequer, George Osborne.
Such was the public consensus on the need to cut the deficit that then Labour leader Ed Miliband failing to mention the budget deficit in a speech was regarded as a huge gaffe. This was despite the Labour party dedicating the very first page of its 2015 general election manifesto to a “Budget Responsibility Lock”, promising to “cut the deficit every year”.
Against this political backdrop, the cuts to public spending which resulted are unsurprising.
I am currently working in the office of Stephen Timms, Labour MP for East Ham, which is in the London Borough of Newham. 1 in 25 households in the borough are homeless, more than anywhere else in the country. At the end of the 2010-2011 financial year there were 2,710 households in temporary accommodation in Newham. By the end of the 2017-2018 financial year the figure was 4,892: a growth of 80%. Local councillor John Gray now puts the figure at 5,100.
The increase reflects a national rise in homelessness, a rise that has been linked back to austerity policies – funding for supporting vulnerable people with their housing has been cut 59% in real terms since 2010.
“funding for supporting vulnerable people with their housing has been cut 59% in real terms since 2010”
This essay aims to answer the following: ‘What got us here?’, ‘Should Christians accept it?’, and, ‘Where next?’
I will argue ‘free market’ capitalism is largely to blame for where we are now, and that this is a system Christians should not accept. Thankfully, there are many possible ways forward.
What got us here? ‘Free Market’ Capitalism
Markets are contexts in which parties or individuals engage in voluntary exchanges, conditional on reciprocation or compensation. Free markets allow parties or individuals to make exchanges without restriction or intervention.
In the UK markets exist in a system of capitalist production. This means they operate in an economic system characterised by private ownership of the means of production concentrated in one class, where the means of production are oriented towards the goal of profit-seeking.
‘Free market’ capitalism is closely associated with neoliberalism, which places the free market and free trade at the centre of the liberal worldview. It affirms “the superiority of individualized, market-based competition over other modes of organization”.
Neoliberal policies of deregulation, competition and privatisation defined the era of Thatcher, and some academics identify a ‘neoliberal consensus’ which understands Blair’s New Labour as “a continuation and extension of neoliberalism”. Consensus around the free market led Michael Sandel to coin the term “market triumphalism” – a widespread faith that markets, and market mechanisms, are the primary instruments for achieving the public good.
“market triumphalism – a widespread faith that markets, and market mechanisms, are the primary instruments for achieving the public good.”
This consensus provides the context to the 2008 financial crisis: a ‘too big to fail’ mentality which understood the ‘free market’ outlook governing the financial sector to be inviolable. Consequently, post-crash the UK government injected £137bn of public money in loans and capital to stabilise the financial system and provided financial guarantees to help restore confidence in the banks – promises to repay or compensate investors if they lost their money. The National Audit Office (NAO) estimates that total guarantees added up to over £1tn at peak support. Outstanding guarantees stood at £14bn as of 31 March 2018.
This provides the first basis for a Christian critique of ‘free market’ capitalism: unaccountable loss.
Because markets are conditional on reciprocation, exchanges should be beneficial to both parties. It is therefore thought that free markets typically lead towards situations of Pareto optimality – in which it is impossible to make a further exchange, without improvement to one party being accompanied by cost to another.
Although market exchanges are jointly beneficial to transacting parties, where exchange is unequal (one party benefits to a much greater extent) the exchange may be exploitative (this is not necessarily so – consider the patient receiving life-saving treatment who benefits more than the doctor receiving a fair wage).
Exploitation can be used to critique the idea of Pareto improvements, which are compatible with transacting parties being unequal beneficiaries. Pareto improvements exhibit a bias for the status quo which prevents structural and systemic injustices being addressed, “so long as the miserable cannot be made better off without cutting into the luxury of the rich”.
This provides the second basis for a Christian critique: exploitative gain.
Should Christians accept ‘free market’ capitalism?
According to the International Monetary Fund, global debt is now at a record high at 225% of world GDP – significantly higher than before the onset of the 2008 financial crisis. 
“global debt is now at a record high at 225% of world GDP”
One of the reasons for this debt ‘overhang’ is speculative activity – the creation of uncertainties independent of the productive process. Markets in so-called derivatives are now “about three times the value of all the assets anywhere in the world”. This is very different to the provision of credit for productive purpose, activity which accounts for less than 3% of the assets on the balance sheets of British banks.
Speculation increases both the risk that borrowers will not make the capital gains needed to repay debts and wider systemic risk.
There is reason to be worried about this risk:
The debt being created in the financial system is subject, unlike the earth and its assets, to the laws of mathematics, not physics. Whereas nature’s growth curve is almost flat; the rate of simple interest’s curve is linear. Compounded interest’s curve is exponential. Crucially, in order for the capital gains needed to repay debts to be made, capital growth must increasingly outstrip resources to ever greater extents. This pressures the (international) workforce to work increasingly longer hours and pressures the earth’s economy to function according to ‘extractivism’ – a “dominance-based relationship with the earth… [which is] the opposite of stewardship”.
“in order for the capital gains needed to repay debts to be made, capital growth must increasingly outstrip resources to ever greater extents”
Regrettably, Christian theology has been partly responsible for extractivism. In 1988 James Hansen testified about climate change in a congressional hearing. That year Time magazine awarded ‘Man of the Year’ to ‘Endangered Earth’. The accompanying essay by Thomas Sancton read as follows –
“In many pagan societies, the earth was seen as a mother, a fertile giver of life. Nature—the soil, forest, sea—was endowed with divinity, and mortals were subordinate to it. The Judeo-Christian tradition introduced a radically different concept. The earth was the creation of a monotheistic God, who, after shaping it, ordered its inhabitants, in the words of Genesis: “Be fruitful and multiply, and replenish the earth and subdue it: and have dominion over the fish of the sea and over the fowl of the air and over every living thing that moveth upon the earth.” The idea of dominion could be interpreted as an invitation to use nature as a convenience.”
However, this quote from Genesis 1:26-28 should instead invite us towards the right ordering of economic life in line with the responsibility to steward creation.
Genesis 2 contains a parallel account of creation, which adds detail to the narrative of the first chapter. The expanded instruction to the one above reads as follows (verse 15) –
“Then the LORD God took the man and put him in the garden of Eden to tend [dress, KJV] and keep it”
Tend (Hebrew ‘abad) means ‘to work or serve’. In the context of the garden, it refers to cultivation. The reason the KJV translates this word as ‘dress’ is that it has the nuance of adornment, embellishment, and improvement. Likewise, keep (Hebrew shamar) means ‘to exercise great care over’.
God desires for mankind to act as caretakers – maintaining and protecting his land so it can be returned to its owner in as good or better condition. While the language of dominion sets up Adam and Eve in the hierarchical position of rulers, this is to lose the nuance of the actual position and vocation of cultivation entrusted to them.
“God desires for mankind to act as caretakers – maintaining and protecting his land so it can be returned to its owner in as good or better condition”
Perhaps it is possible to understand the parable of the talents, and the parable of the minas (Matthew 25, Luke 19) in light of this creation mandate – as not only supporting enterprise but as emphasising the importance of productive, rather than speculative, investment. After all, speculative activity is analogous to gambling.
Like gambling, speculative activity carries risk. Where risk and reward are unevenly split, it becomes exploitative.
When the government provided guarantees in the financial crisis, it took on risk on behalf of the debtors. Speculators gained rewards without taking full responsibility for the liabilities they created.
In contrast, austerity has burdened those least able to pay with the costs of the recession. Those without assets and unable to gain the rewards of speculation, have shouldered the risk.
“Speculators gained rewards without taking full responsibility for the liabilities they created. In contrast… those without assets and unable to gain the rewards of speculation, have shouldered the risk”
Six years after the financial crisis, the wealth of the richest 1,000 families in the UK had increased 112% while median household income had only just reached pre-crisis levels.
Exploitation was the reason Christian leaders condemned usury. Prior to the availability of credit, owners of pre-existing assets such as land were the only creditors. This gave them the power to set hugely exploitative rates of interest. Scholastic Christian theologians equated usury with robbery, a clear violation of the seventh commandment in the Ten Commandments. Bankers and other creditors were punished with ostracism and excommunication. They were denied the chance to be buried in sacred ground or for their children to be married in church.
“Bankers and other creditors… were denied the chance to be buried in sacred ground or for their children to be married in church”
One of the reasons for such condemnation was an understanding that lending should facilitate common life in a community.
This relates back to the principle of stewardship:
“In biblical times, ownership was a relational rather than an absolute good. You owned land to produce and thereby participate in the common life of the community to which you belonged. This relational understanding of property sits in tension with centuries of practice of individual property law in most countries. Only God is recognised in the biblical vision as the owner of land. People, whether residents or sojourners, are only stewarding tenants called to develop relationships of mutual responsibility and care, forging a common life where all can flourish.”
Lending (without interest) and borrowing were permitted as means of expressing and cultivating relationships (Deuteronomy 15:8). Lending freely to those in need was a clear mark of righteousness or right-relatedness (Psalms 15:5), a mechanism for restoring equality and ensuring inclusion in the community. This explains the restrictions on the collateral that could be taken against loans (Exodus 22:25-38).
While these restrictions applied only to God’s people, it is interesting to note that Jesus radicalises the teaching on lending by broadening risky lending to those outside the community branded “enemies” (Luke 6:34-35).
Jesus also extends the principle of lending money without interest to the poor in Exodus 22:25: “Give to everyone who begs from you, and do not refuse anyone who wants to borrow from you” (Matthew 5:42). This is arguably not a call to indiscriminate lending, but to differentiated lending (i.e. not giving or lending without interest to everyone, but to everyone who begs) .
This presents an interesting challenge to our UK context where the policy of austerity has shifted the responsibility of caring costs from the state onto those in need. We are now in a situation where the main source of debt for the poorest in our society is often no longer the private sector (e.g. credit cards, payday lenders), but the state (e.g. DWP loans or debts from overpayments, local authority rental arrears). This highlights another interesting question: if debt is relational, we must ask about the consequences of shifting from a context of indebtedness to local individuals, to a context where the most vulnerable people in society are indebted to a national state.
A possible way forward?
The possibilities are many and various.
At a fundamental level there are alternatives to capitalism worth understanding, such as market socialism (a market economy where productive assets are in majority ownership) or property owning democracy (a market economy where productive assets are in widely distributed private ownership).
Limits could also be put in place to curb speculative activity. There is historical precedent for this even in the UK – in the 1950s and 1960s, the UK imposed limits on how much banks could increase lending each year.
This is the route advocated by economist Ann Pettifor who argues the need for “democratic regulatory oversight” of the financial sector, and for ‘easy, but dear’ – i.e. poorly regulated and costly – credit to be replaced by ‘tight, but cheap’ – i.e. closely regulated and affordable – credit. This would be a return to the origins of the monetary system as a reaction against usury, and would reflect the nature of the availability of credit as effectively ‘loaned into existence’ by banks. This is partly what makes the public discourse which compares government deficits to household budgets – as done by George Osborne when introducing austerity policies– so erroneous. In fact, the private commercial banking system issues or ‘prints’ the vast majority of broad money, the central bank issues less than 5%. 
“a return to the origins of the monetary system as a reaction against usury”
This shift would help redistribute the risks and rewards of contracts, and enable a more full participation in the common life for those people currently unable to access affordable credit.
Regulation would also aid accountability by eliminating externalities – effects that some parties cause on the well-being of others, which are not mediated by market transactions (e.g. air pollution). This would reduce the risks of market failure because the price equilibrium would more accurately reflect the true costs of exchanges.
Perhaps the most urgent example of dangerous externalities is fossil fuel extraction. The danger of a ‘carbon bubble’ has been raised with the Bank of England Committee that reviews financial stability. The UK is home to the fossil fuel financial centre of the world, with around 15% of the world’s emissions emanating from companies listed in the City of London. A number of steps could be taken – new coal, oil and gas companies could be prevented from listing shares on London Stock Exchange or issuing bonds and the ISA status of their shares could be removed.
This shift would ensure those who create financial risk in hopes of gain would also take financial responsibility for such risk.
Radical monetary and conservative fiscal policies have built a financial system on seeking unending profit, on the premise of unending resources and limiting credit.
It has led to unaccountable losses and exploitative gains.
Christians pursuing a fair financial sector which seeks to facilitate human flourishing should build a new financial system by providing affordable, regulated credit while accepting limits to profit and resource.
“a new financial system… providing affordable, regulated credit while accepting limits to profit and resource.”
‘Free market’ capitalism is not, and should
not be regarded as, inviolable.
 Liam Byrne quoted in Paul Owen, ‘Ex-Treasury Secretary Liam Byrne’s Note to His Successor: There’s No Money Left’, Guardian, 17 May 2010, theguardian.com.
 George Osborne “We have committed to running a surplus”, Spending Review and Autumn Statement, Hansard, 25 Nov 2015, hansard.parliament.uk.
 ‘Ed Miliband fluffs his lines and forgets to mention economy in keynote speech’, The Independent, 23 Sept 2014, independent.co.uk.
 The Labour Party Manifesto 2015, Labour, 13 April 2015, action.labour.org.uk.
 ‘More than 300,000 people in Britain homeless today’, Shelter, 8 Nov 2017, england.shelter.org.uk.
 Data taken from Local Authority Homelessness Statistics, Ministry of Housing, Communities and Local Government, 31 Jan 2019, researchbriefings.parliament.uk.
 John Gray speaking at a Centrepoint Parliamentary Roundtable on the Homelessness Reduction Act, March 2019, also on twitter.
 Mark Fransham and Donny Dorling, ‘Homelessness and Public Health’, British Medical Journal 24:4 (2008), pp. 48-59 (55).
 Stephanie Lee Mudge, ‘What is Neo-liberalism?’, Socio-economic review 6:4 (2008), pp. 703-731 (706).
 Andrew Hindmoor, What’s left now?: the history and future of social democracy (Oxford: Oxford University Press, 2018), p. 26.
 Michael Sandel, What Money Can’t Buy (New York: Penguin, 2008), p. 38.
 The colloquial term “too big to fail” was popularized by U.S. Congressman Stewart McKinney in a 1984 Congressional hearing, see ‘If It’s Too Big to Fail, Is It Too Big to Exist?, New York Times, 20 June 2009, nytimes.com
 Federico Mor, ‘Bank rescues of 2007-09: outcomes and cost’, House of Commons Library Briefing Paper Number 5748 (2018), pp. 1-19 (3).
 Federico Mor, ‘Bank rescues of 2007-09: outcomes and cost’, p. 4.
 Amartya Sen, Inequality Reexamined (Oxford: Clarendon Press, 1992), p. 31.
 Global Debt Database, IMF, 2 Jan 2019, blogs.imf.org
 John Kay, Other People’s Money: the real business of finance (London: Hachette UK, 2015), p. 51
 John Kay, Other People’s Money: the real business of finance, p. 52.
 Ann Pettifor, The Production of Money (London: Verso Books, 2017) p. 46.
 Naomi Klein, This changes everything: Capitalism vs. the climate (New York: Simon and Schuster, 2015) p. 131.
 Thomas Sancton, ‘Planet of the Year: What on EARTH Are We Doing?’, Time, 2 January 1989, content.time.com.
 Similar to the mechanics involved in investor-state dispute settlements (ISDS)
 ‘Recession rich: Britain’s wealthiest double net worth since crisis’, Guardian, 26 April 2015, theguardian.com.
 Joan Lockwood O’Donovan, ‘The Theological Economics of Medieval Usury Theory’. Studies in Christian Ethics, Vol. 14:1 (2001), p. 53.
 Charles R. Geisst, Beggar thy neighbor: A history of usury and debt. (Philadelphia: University of Pennsylvania Press, 2013), p. 7.
 Nathan Mladin and Barbara Ridpath, Forgive Us Our Debts (London: Theos, 2019), p. 53.
 Nathan Mladin and Barbara Ridpath, Forgive Us Our Debts, p. 60.
 Tim Jones, The new debt trap: How the response to the last global financial crisis has laid the ground for the next (Cambridge: Kolorco, 2015), p. 30.
 Ann Pettifor, The Production of Money (London: Verso Books, 2017) p. 5, 50.
 George Osborne: “We are going to ensure, like every solvent household in the country, that what we buy we can afford, that the bills we incur we have the income to meet”, ‘Comprehensive Spending Review’, Hansard, 20 October 2010, hansard.parliament.uk.
 Sir Mervyn King, then Governor of the Bank of England, in an interview with Martin Wolf, ‘Lunch with the FT’, Financial Times, 14 June 2013, ft.com.
 David Comerford and Alessandro Spiganti ‘The Carbon Bubble: Climate Policy in a Fire-Sale Model of Deleveraging’, Central Banking, Climate Change and Environmental Sustainability (London: Bank of England, 2016)
 ‘The Carbon Majors Database’, CDP Carbon Majors Report, CDP, 2017, cdp.net.
 Suggestions taken from Mark Campanale, ‘Interview with Mark Campanale: Founder of Carbon Tracker Initiative’, Climate Action, 26 August 2016, climateaction.org
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You write sooooooo brilliantly. Well done you. See you TuesdaySent from my Samsung Galaxy smartphone.
Very comprehensive post, Rachel.
The best economic system would be the following: which is embraced by the Catholic Church and has advocates like G.K. Chesterton and Dorothy Day.
Distributism (also known as distributionism or distributivism) is an economic ideology that developed in Europe in the late 19th and early 20th century based upon the principles of Catholic social teaching, especially the teachings of Pope Leo XIII in his encyclical Rerum novarum and Pope Pius XI in Quadragesimo anno. Distributism is the wild idea that property, power, and wealth should not be concentrated in the hands of a few tyrants running the State, nor in the hands of a few oligarchs running a corporation, but should instead be owned by all human beings, who have a natural right to private property, work and the fruit of the labors supplying their needs. Here the family is sovereign and holds priority over all.
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Thank you Alan, I had not heard the term Distributism before! It does not surprise me that there is a CST link, but I will look into GK Chesterton’s connection!