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Title: THE CAUX ROUND TABLE: ASPIRATIONS AND ACHIEVEMENTS ALIGNED WITH PAPAL ENCYCLICAL CARITAS IN VERITATE - An Analysis
Date: 17-Jul-2009
Category: Announcements
Source/Author: Stephen B. Young, Global Executive Director
Description: Pope Benedict XVI’s recent encyclical, Caritas In Veritate, from the point of view of Catholic social thought and teachings provides rather complete intellectual and spiritual support for the views of the Caux Round Table (“CRT”) on moral capitalism and its efforts to promote more responsible global business practices.

THE CAUX ROUND TABLE: ASPIRATIONS AND ACHIEVEMENTS ALIGNED WITH PAPAL ENCYCLICAL CARITAS IN VERITATE 

An Analysis by Stephen B. Young, Global Executive Director

 
Pope Benedict XVI’s recent encyclical, Caritas In Veritate, from the point of view of Catholic social thought and teachings provides rather complete intellectual and spiritual support for the views of the Caux Round Table (“CRT”) on moral capitalism and its efforts to promote more responsible global business practices.
 
The CRT’s ethical Principles for Responsible Business, which are easily used in all business decisions, provide strategic leadership guidance for stakeholder relationships which embodies the high aspirational standard of Caritas. The CRT’s risk management assessment platform, Arcturus, provides more day-to-day tactical analysis of stakeholder relationships from this aspirational perspective of Caritas. CRT initiatives seeking the recovery of financial assets stolen through corruption from poor and developing countries and invested in money centers and coming to a deeper global understanding of Qur’anic guidance for good governance similarly align with Pope Benedict’s recommendations for a more just global order.
 
The CRT’s approach to free markets and private property and to the use of money and prices to stimulate wealth creation for humanity rests on three fundamental concerns. One is for human dignity; another is to apply the dynamic of Kyosei to decision-making; and the third is to serve as a steward of power and resources for purposes higher than one’s own use and indulgence.
 
Importantly, in his encyclical Caritas In Veritate, Pope Benedict XVI concludes that financial profit is not the best measure of success and achievement. He writes as follows:
 
“Profit is useful if it serves as a means toward an end that provides a sense both of how to produce it and how to make good use of it. Once profit becomes the exclusive goal, if it is produced by improper means and without the common good as its ultimate end, it risks destroying wealth and creating poverty.” (at paragraph 21)
 
The mismanagement of risk and pricing in technologically sophisticated global financial markets that produced the collapse of such markets in late 2008 and the current severe recession provides us with an immediately relevant example of how the wrong kind of profit seeking does indeed destroy wealth.
 
The first and most fundamental of the CRT Principles for responsible business states that the goal of capitalism is a responsibility to community to produce wealth that is of benefit for many. The CRT seeks those measures which will use profit suitably for the larger end of human flourishing.
 
The Pope believes that this current economic crisis can become an opportunity for discernment, in which to share a new vision for the future, a process in which the world needs to “rediscover fundamental values.” The CRT, it bears noting, was created to find such fundamental values from which a more responsible and sustainably profitable world business culture could grow and thrive. Our presentation of such fundamentals can be found in our sets of principles for business, government, NGOs and owners of wealth.
 
In line with the CRT’s focus on human and social capital as the deep source of tangible wealth creation, the Pope notes that “the primary capital to be safeguarded and valued is man, the human person in his or her integrity.” (at paragraph 25)
 

In an important part of his argument, the Pope continues:

“In a climate of mutual trust, the market is the economic institution that permits encounter between persons, inasmuch as they are economic subjects who make use of contracts to regulate their relations as they exchange goods and services of equivalent value between them, in order to satisfy their needs and desires. The market is subject to the principles of so-called commutative justice, which regulates the relations of giving and receiving between parties to a transaction. But the social doctrine of the Church has unceasingly highlighted the importance of distributive justice and social justice for the market economy, not only because it belongs within a broader social and political context, but also because of the wider network of relations within which it operates. In fact, if the market is governed solely by the principle of the equivalence in value of exchanged goods, it cannot produce the social cohesion that it requires in order to function well. Without internal forms of solidarity and mutual trust, the market cannot completely fulfill its proper economic function. And today it is this trust which has ceased to exist, and the loss of trust is a grave loss.”

Like the CRT, the Pope recognizes that the market is not an intentional moral instrument; it only reflects the values brought to it by those who seek to buy and sell:

“Admittedly, the market can be a negative force, not because it is so by nature, but because a certain ideology can make it so. It must be remembered that the market does not exist in the pure state. It is shaped by the cultural configurations which define it and give it direction. Economy and finance, as instruments, can be used badly when those at the helm are motivated by purely selfish ends. Instruments that are good in themselves can thereby be transformed into harmful ones. But it is man's darkened reason that produces these consequences, not the instrument per se. Therefore it is not the instrument that must be called to account, but individuals, their moral conscience and their personal and social responsibility.” (at paragraph 36)

The CRT’s Principles for Responsible Business were designed to engage the “moral conscience and their personal and social responsibility” of those who make their living in the market economy, including financial markets of all types.

Economic development, believes the Pope, is impossible without upright men and women, without financiers and politicians whose consciences are finely attuned to the requirements of the common good. (at paragraph 71) The CRT hopes that its principles and their implementation can help attune consciences to such requirements of the common good in ways that can sustain justly profitable enterprises.

Precisely in order to help individual’s link the “better angels of their natures” to their economic activity the CRT proposed its ethical principles for responsible business. James Madison in one of his Federalist Papers wrote that “if men were angels, there would be no need for government.” The same thought applies just as well to markets and business as the Pope himself noted above: if all people were angels, markets would be perfect. But we are not angelic. To remediate that fault, we need guidance in forming our ideals, our standards of conduct, our modes of self-control, our concern for others. Such guidance, the CRT believes, does not come from within market exchanges but originates beyond them in culture and society. Thus, the CRT provides for general application its ethical principles and its Ethical Leadership Profile to assist individuals in coming to a more full appreciation of their ethical stance in decision-making.

The Pope acknowledges in his Encyclical that “Much in fact depends on the underlying system of morality.” (at paragraph 45)

Ethics, the Pope writes, must apply to the system, to the core of business operations and financial intermediation. His scope for business ethics encounters no opposition from the CRT, which has long advocated principled decision-making for all in business and finance. The Pope argues that “Efforts are needed –and it is essential to say this – not only to create “ethical” sectors or segments of the economy or the world of finance, but to ensure that the whole economy – the whole of finance – is ethical, not merely by virtue of an external label, but by its respect for requirements intrinsic to its very nature.” (at paragraph 45)

He adds later in his Encyclical the observation that “Finance, therefore — through the renewed structures and operating methods that have to be designed after its misuse, which wreaked such havoc on the real economy — now needs to go back to being an instrument directed towards improved wealth creation and development. Insofar as they are instruments, the entire economy and finance, not just certain sectors, must be used in an ethical way so as to create suitable conditions for human development and for the development of peoples. It is certainly useful, and in some circumstances imperative, to launch financial initiatives in which the humanitarian dimension predominates. However, this must not obscure the fact that the entire financial system has to be aimed at sustaining true development. Above all, the intention to do good must not be considered incompatible with the effective capacity to produce goods. Financiers must rediscover the genuinely ethical foundation of their activity, so as not to abuse the sophisticated instruments which can serve to betray the interests of savers. Right intention, transparency, and the search for positive results are mutually compatible and must never be detached from one another. If love is wise, it can find ways of working in accordance with provident and just expediency, as is illustrated in a significant way by much of the experience of credit unions.” (at paragraph 65)

The Pope also requires of financial capitalism that: “What should be avoided is a speculative use of financial resources that yields to the temptation of seeking only short-term profit, without regard for the long-term sustainability of the enterprise, its benefit to the real economy and attention to the advancement, in suitable and appropriate ways, of further economic initiatives in countries in need of development.” (at paragraph 40)

The Pope’s recommendations on this point were anticipated by the CRT’s Seven Points of reform, issued to focus remedial attention on improvements to financial markets in the wake of the 2008 crisis.

Just so, the CRT advances a program of “moral capitalism” that puts ethical considerations at the heart of business, not on the periphery.  The CRT Principles uniquely integrate ethical aspects of stakeholder relationships with core financial requirements of business success.

In this very vein of analysis the Pope asserted:

“Locating resources, financing, production, consumption, and all the other phases in the economic cycle inevitable have moral implications. Thus every economic decision has a moral consequence.” (at paragraph 37)

Thus the Pope concludes that:

“Yet there is also increasing awareness of the need for greater social responsibility on the part of business. Even if the ethical considerations that currently inform debate on the social responsibility of the corporate world are not all acceptable from the perspective of the Church's social doctrine, there is nevertheless a growing conviction that business management cannot concern itself only with the interests of the proprietors, but must also assume responsibility for all the other stakeholders who contribute to the life of the business: the workers, the clients, the suppliers of various elements of production, the community of reference.” (at paragraph 40)

In 1994 the CRT first issued its principles for business calling attention to this very aspect of business decision-making – going beyond shareholders to stakeholders.

In what reads as a direct acknowledgment of CRT Principle for Business Number 2 on the obligation of multinational companies to contribute to the countries where they do business, the Pope wrote:

“It is true that the export of investments and skills can benefit the populations of the receiving country. Labour and technical knowledge are a universal good. Yet it is not right to export these things merely for the sake of obtaining advantageous conditions, or worse, for purposes of exploitation, without making a real contribution to local society by helping to bring about a robust productive and social system, an essential factor for stable development.” (at paragraph 40)

In discussing his concern for environmental protections, the Pope in effect endorsed CRT Principle for Business Number 6 on taking action to preserve and enhance our natural environment. The Pope in paragraph 50 of his Encyclical refers to “a responsible stewardship over nature”.

Part of the needed response to excessive technological expertise in our thinking, suggests Pope Benedict XVI in this Encyclical, should be “a deeper critical evaluation of the category of relation.” (at paragraph 53) Isolated individualism gives rise to a profound poverty of both spirit and understanding. It is a limiting constraint on our use of human reason to properly balance our production and consumption with the needs of both the human and the natural ecologies in which we must survive. 
The Pope writes that: “As a spiritual being, the human creature is defined through interpersonal relations. The more authentically he or she lives these relations, the more his or her own personal identity matures. It is not by isolation that man establishes his worth, but by placing himself in relation with others and with God.”   (at paragraph 53) Reciprocity, holds the Pope, must be considered as the heart of what it is to be a human being. (at paragraph 57)
 

One of the core CRT values stances – Kyosei – provides just the kind of relational thinking that the Pope recommends. Kyosei expressly encourages non-zero or win/win decision-making where one’s own well-being depends on interactions with a wider set of forces and resources.

Therefore, the task of preparing us for wise action the Pope argues “cannot be undertaken by the social sciences alone, insofar as the contribution of disciplines such as metaphysics and theology is needed if man’s transcendent dignity is to be properly understood.” (at paragraph 35) Thus, the Pope worries that modern technological thinking can only suggest that business investment is merely a technical act, not a human and ethical one, which in truth it is as well. He advises us that “Technologically advanced societies must not confuse their own technological development with a presumed cultural superiority, but must rather rediscover within themselves the oft forgotten virtues which made it possible for them to flourish throughout their history.” (at paragraph 59)

Technology, says the Pope, is a profoundly human reality, linked to the autonomy and freedom of man; technology expresses and confirms the hegemony of spirit over matter, and so must remember that it is never merely technology. Technology has its proper ends in expressing God’s trust to humanity to keep and till the earth, an undertaking that should mirror God’s creative love. (at paragraph 69) In short, technology is an expression of Caritas, a moral dimension that guides the use of numbers, algorithms, and practical theorems.

This inclusive approach to intellectual understanding of what makes for successful business is quite in keeping with the CRT’s sensitivity to the “fit” of its ethical principles with many great world religious traditions. One may not need theology to set a market-responsive price for goods or services, but one would be quite short-sighted and remiss to ignore higher purposes in seeking how best to sustain a profitable enterprise over time. Practically speaking, people are shaped in their behaviors by their cultures and religions. Thus, the CRT seeks not to ignore this dimension of global business reality.

In harmony with this CRT approach, the Pope observes in his encyclical that:

“Evolving societies must remain faithful to all that is truly human in their traditions, avoiding temptation to overlay them automatically with the mechanisms of a globalized technological civilization. In all cultures there are examples of ethical convergence, some isolated, some interrelated, as an expression of the one human nature, willed by the Creator: the tradition of ethical wisdom knows this as natural law. This universal moral law provides a sound basis for all cultural, religious, and political dialogue, and it ensures that the multi-faceted pluralism of cultural diversity does not detach itself from the common quest for truth, goodness and God.” (at paragraph 59)

In our efforts to better understand Qur’an and to promote analysis of contemporary research into the moral sense of human persons, the CRT is actively demonstrating the constructive possibilities of what the Pope assets to be true.

Even more, perhaps, than the two earlier Encyclicals of Pope John Paul II (Laborem Exercens and Centesimus Annus), this latest Papal expression of Catholic social teaching embraces and validates the CRT’s approach to reform of global business practices.

 


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