It is difficult to imagine that anyone enters political life with the aspiration to be in the driver's seat when budget cuts are the name of the game. They have accepted leadership at a time when their respective legislative bodies have adopted austerity plans that will create friction between citizens and their government.
Those who are called to leadership when times are tough will, I am sure, be searching for allies and ideas from all sectors. They face a disgruntled, angry and dispirited public that has lost faith in its political and financial leaders and in the systems they have created. Cutting public sector jobs, eliminating programs or postponing projects are very unpopular measures that most officials are loathe to propose for fear of election-day reprisals.
As the U.S. congressional super-committee approaches its deadline for cutting some $1.2 trillion from the $14 plus trillion U.S. government debt and new governments in Italy and Greece are installed, the debate about fundamental fiscal, financial and economic issues is on center stage. Many are asking very fundamental questions about the purpose of the financial system, the routine services that it needs to provide and what, if any, responsibility it has to re-energize economies.
At the macroeconomic level, economists and academics can assemble the varied perspectives and data to provide evidence for the many different viewpoints that exist on these issues. Political and government leaders, on the other hand, are expected to turn the implications of specific agreements and commitments into laws and regulations. The absence of fiscal responsibility lies at the center of each crisis. In each country the solutions adopted will have different characteristics, but they will all have significant implications for both communities and financial markets.
The voices of other leaders have also been weighing in on the challenges that individual countries and the global financial system are facing. More wisdom and creativity will be needed if the integration and interdependence that exists is to have a solid foundation and be appropriately organized and governed. The message from the Occupy movement calling for greater economic justice and reforms that will meet the needs of the 99 percent has gained significant support and must be included in the debate.
Two faith traditions weighed in recently on the search for a solution to the lingering consequences of the 2008 financial meltdown, the anemic economic growth that continues to exist and the efforts to re-establish a firm foundation for future economic activity. In a recent op-ed that was published in the Financial Times, Archbishop Rowan Williams expressed his support for three of the recommendations that were included in an October document released by the Pontifical Council for Justice and Peace.
The social purpose that the financial system must serve, they agreed, is a public good that should be protected and grounded in a stable and secure global financial system. This principle should be the foundation upon which all financial institutions are built, and it should directly inform the scope of the services they provide to the public.
They are also in agreement about the need to separate "routine banking business" from investment banking and the more speculative side of the business where depositors' capital can be used, without their knowledge, in more risky ventures. They recommend that governments recapitalize banks, and, in return, that the banks use that capital "to help reinvigorate the real economy."
It is appropriate also to ask about the contribution of other leaders in this challenging environment, especially that of the corporate sector and their numerous proxies in the public square, such as the U.S. Chamber of Commerce. The private sector needs to be heard in the debate about such fundamental issues as tax reform and the appropriate responsible contribution that they such be making for the public services and amenities that they rely on every day. This should include such thorny issues as transfer pricing, tax havens and on a proposal, upon which the Vatican and the archbishop express agreement, "financial transaction taxes."
Corporations in the financial services sector that expressed remorse for the financial meltdown that happened on their watch are few and far between. True leaders need to find their voice and propose the best tools to provide access to credit and routine banking services for all. The challenge of reinvigorating the real economy will be much more difficult, but in a time of painful austerity their collaboration is essential.
When economists are called to political leadership, as has happened in Greece and Italy, when religious leaders are drawn into the debate about financial services and economic growth and when civil society is clamoring for economic justice, times are, without question, tough. This is an opportune time for true corporate leadership to find their voice in the conversation, re-evaluate their role in the economy and promote the social responsibility of the corporations that they lead.
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