A 'Good Bank' to Foster Development

Finance is only a tool. It is a tool that has recently been used poorly...But it can also be used to do good.

ROMA (Chiesa) - Sandro magister presented the following article on the concept of a "good bank", From L'Observator Romano in his Chiesa:

A "good bank" to foster development. Finance can work miracles

Finance is only a tool. It is a tool that has recently been used poorly, and as a result has been too harshly condemned. But it can also be used to do good. In a certain sense, finance can work miracles. The opportunity is there, and it is the solution to the crisis underway. The means is there, and it is the creation of a "good bank" that would finance a global project for solving the crisis, and would represent the hedging of the "bad bank" proposed in recent months.

From 1939-1940, loans were made to finance the second world war, and, following this, more bonds were issued to finance the Marshall Plan. The tragedy of the war resolved - if one can speak of it this way - the problems of unemployment. The Marshall Plan resolved the problems of poverty, guaranteeing the reconstruction of postwar Europe. Both of the initiatives resolved America's economic problems.

The war to the finance today to overcome the crisis is, instead, the war on global poverty. The reconstruction to be guaranteed today is that of poor countries.

This might seem like contradiction, but it is only by involving the entire world in a greater effort that the effects of the crisis can be reabsorbed, as soon and as well as possible. After the inaugural address of the new president of the United States, it can be hoped that an "Obama Plan" might be launched to overcome the crisis, combating poverty and thus permitting not only his nation but all of humanity to emerge from its plight.

In 1939, the problems of production support and unemployment were solved by arming soldiers and building cannons. In 1946, it meant rebuilding a partly destroyed Europe. Today, production capacity can be supported - much more globally, and at much lower costs - with a plan of intervention on behalf of poor countries, to satisfy their potential demand and initiate adequate economic activities through investment in infrastructure projects.

Poor countries are therefore the objects of today's reconstruction. The project of a war against poverty to confront the crisis would immediately give rise to further economic initiatives and related investment. Entrepreneurial initiative would be fostered again, and the stock markets would reward the companies involved, guaranteeing support for their production capacity.

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How significant is this project, and how could it be financed? It could be just as significant as the bubble that would weigh on the "bad bank" that is spoken of so often, and like this latter, it could be financed with a fifty-year loan to be undersigned by all the rich countries in the world. It is likely that even the projection of the resources necessary is frightening. But what should be even more frightening is the lack of real alternatives. Instead, one should think in terms of costs and benefits, in terms of opportunity, as was done when it was decided to finance the second world war and the following reconstruction plan.

Today, greater resources are required. But today, the world - which has entered the economic cycle of production and prosperity - has capacities much greater than it did seventy years ago. In order to absorb the giant bubble that will coalesce in the "bad bank," there is therefore the need for a project to produce true sustainable wealth: the hedging of the "bad bank" must be done with the "good bank." In order to absorb past losses, an overall world economy of growth and prosperity is necessary.

Just as happened for Europe, revived by the Marshall Plan and returned to economic growth and even an economic boom in ten years, so it could be - although with different phases and processes - for the economies of the poorest countries, which in twenty or thirty years would be able to begin paying back the debt by producing their own wealth and prosperity. This is what has happened over the past twenty years in Asia, where today there are economies that are even supporting our own. Solidarity also pays in concrete terms.

This is a courageous and complex project. It will not produce the hoped-for results immediately, and there will be many obstacles. But it can be done, by using finance. In this way, finance could recover its true meaning. The good one.

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Chiesa is a wonderful source on all things Catholic in Europe. It is skillfully edited by Sandro Magister. SANDRO MAGISTER was born on the feast of the Guardian Angels in 1943, in the town of Busto Arsizio in the archdiocese of Milan. The following day he was baptized into the Catholic Church. His wife’s name is Anna, and he has two daughters, Sara and Marta. He lives in Rome.