Is Lack of Morality an Explanation for the Economic and Financial Crisis? A Catholic Point of View

Abstract

Before 2008, several studies provided empirical evidence of a positive correlation between the functions of financial intermediation and economic growth. In 2008, the financial crisis shook trust in this correlation. Several studies found that comprehensive and fundamental changes were needed in the entire financial market. Attention focused on the role of morality as an essential and integral element of the economy, arguing that without a moral attitude at the individual and institutional levels, the whole system necessarily runs into crisis. Among the moral interpretations of the economy, which are concurrently based on philosophical tradition and religious doctrine, the Catholic Church has presented some of the most consistent and unified teachings related to such questions over time, but the effect on economic thinking is less than what relevance and other merits justify. Catholic social teaching suggests morality and the economy are inseparable and highlights the moral interpretation of economic discrepancies. By analyzing theoretical and empirical evidence, this paper assesses the economic validity and legitimacy of Catholic thought about the immanent role of ethics in the economy and the financial crisis.

What Is “Really” Taught in Financial Literacy Curriculum?

“…Peifer (2011) investigates 'religiously affiliated mutual funds in the USA and its morality in a significant way and morality also impacts economic behavior of SRI investors' to value the importance of morality in the financial market (pp.235-259). Katona (2020) assumed that 'the role of morality as an essential and integral element of the economy' and 'without a moral attitude at the individual and institutional levels, the whole system necessarily runs into crisis. (pp.…”

“…As an important issue in the financial field, financial morality has been studied by many other researchers, including cross-cultural financial morality (Bates et al, 2014;Brown, 2020), financial fraud, deviance, and crime (Sujana et al, 2020;Bhae et al, 2022;Anfusina & Mappanyukki, 2020), law and morality (Jones, 2003;Vaheesan,2021;Brennan, 1989), the age of selfishness and morality (Cunningham,2015), the relation between intellect and morality (Thorndike,1936), financial crises and morality (Mackey, 2019;Katona, 2020), common sense morality versus role morality (Kalajtzidis, 2012), the construction of morality (Krause, 2021), profession and financial morality recognition , business morality (Birch, 2004), financial education, emotions and morality (Maman & Rosenhek, 2017), morality and social reactions (Baskentli et al,2017), self-control and morality (Wikström & Svensson, 2010), and market and morality (Clark & Lee, 2011;Morgan, 2010).…”

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“…A sustainable financial system is one that creates and transacts financial assets which shape real prosperity in a way that serves the interests of people, the environment, and the economy as a whole, not just the rich. Green finance refers to financial instruments whose proceeds are used to promote sustainable, environmentally friendly financial systems such as green bonds, green loans and green mortgages (Flammer, 2020;Katona, 2020). The two main objectives of green finance are to internalize environmental externalities and reduce risk perception, both in financial markets and in the wider economy.…”