First position: still in his first year as pope, Francis holds the post of prime importance in the Vatican but insists on living modestly. Image: Getty
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Pope Francis’s mission to cleanse the Catholic Church of luxury

This summer he told a group of young nuns and monks, “It hurts me when I see a priest or nun with the latest model car. You can’t do this.”

A new spirit is abroad in the Vatican. After a conservative pope, John Paul II, who, in his declining years seemed increasingly out of touch with the wider world, and a Vatican insider pope, Benedict XVI, who never seemed in touch with it, Pope Francis has brought life to his office. Catholicism is enjoying a bounce. Even in secular Britain there has been a rise in the numbers making confession, including some who have not confessed for decades.

What is new? Much attention has been paid to Francis’s friendly words to groups that historically have been regarded as beyond the pale by Catholic Church authorities, notably gay people and atheists. Yet this aspect of his radicalism seems the least convincing: a case of style over dogma. There has been no discernible change in the official Vatican views on same-sex relationships, birth control or female priests. A former parish priest in Melbourne, Australia, who opposed the Church’s thinking in these areas was defrocked and excommunicated only last month, apparently on direct orders from Rome. His fate should not surprise. Such views have been dear to Catholicism since Saint Paul’s time. To expect a new pope to change them, or want to do so, is a little like expecting a supertanker to turn on a penny.

What is undeniably new, though, is Francis’s desire to cleanse his Church of luxury. He is truly the Austerity Pope for this new age of austerity. He shows intense empathy for the poor, the unemployed and struggling economic migrants. Hearing of the recent terrible drownings off Lampedusa, he said “today is a day of tears” and remarked that the “world does not care about people fleeing slavery, hunger, fleeing in search of freedom”. A few weeks ago in Cagliari, Sardinia, he protested that “the world has become an idolater of this god called money”. To his credit, he backs up his views with action. He drives around Rome in an old Ford Focus and lives not in the Apostolic Palace, but in a simple house in the grounds of the Vatican. At a detention centre in Rome soon after his coronation, he washed and kissed the feet of young offenders, including a Muslim woman.

He expects the rest of the Catholic Church to follow his example. This summer he told a group of young nuns and monks, “It hurts me when I see a priest or nun with the latest model car. You can’t do this.” He added, “Just think of how many children die of hunger and dedicate the savings to them.” Last month he denounced those ambitious “airport bishops” looking out for a more prestigious diocese, whom he compared to men “who are constantly looking at other women more beautiful than their own”; and he commented, “Careerism is a cancer.”

Few would disagree that the Catholic Church is well in need of reform. It has been stained by child abuse scandals, cover-ups and murky financial goings-on. As recently as June, Monsignor Nunzio Scarano, a highranking accountant in the Vatican’s assetmanagement organisation, was arrested on charges of conspiring to smuggle €20m in cash into Italy on behalf of a wealthy shipping family. Francis is well aware of the dangers his Church faces. In an interview with the Jesuit journal La Civiltà Cattolica, in which he complained that the Church was obsessed with birth control, abortion and gay marriage, he warned that if it did not find a new balance it would “collapse like a house of cards”.

Yet Francis is by no means the first Catholic leader to try to shake corruption from the Church. Take away the old car, the posing for selfies and the Twitter feeds, and he is, in many ways, an anciently familiar figure – a new pope in town, bravely trying to clean things up from the top. How well will he do? It may be helpful to take a glance at how his predecessor reformers fared.

The most spectacular effort at sanitising the Church took place almost a millennium ago. It followed iniquities that make those of today seem modest. For two centuries the papacy was a cash cow fought over by powerful local families. Popes murdered and were murdered. In 897 Stephen VII (who was later strangled) felt such resentment against his predecessor Formosus that he had him dug up from the grave, placed in a chair and tried for illegally gaining office. Found guilty, Formosus’s corpse was stripped naked, had its three benediction fingers hacked off, was reburied in a strangers’ cemetery and was then re-exhumed and thrown into the Tiber. Two decades later an infamous power player named Theodora installed her lover as Pope John X. Theodora’s equally formidable daughter Marozia later installed her own son, who was the bastard child of yet another pope. This era culminated in the staggered reign between 1032 and 1048 of Benedict IX, a depraved and murderous teenager on his appointment who, when he grew bored with being pope, sold the office to his godfather in return for 1,500 pounds of gold, only to change his mind and seize it back.

Reaction followed. It reached a climax under Gregory VII (1073-85) who felt such disgust towards high-living clergymen that, a little like Mao Zedong in his quest to cleanse the Communist Party of China from below, he called on low clergy, and even non-clergy, to rise up against them. As with the Chinese Cultural Revolution, violence erupted. In Italy, low clergy and non-churchmen of the pataria movement formed street gangs and attacked rich bishops and aristocrats, expelling churchmen from office. When one of the pataria leaders, an ex-soldier named Erlembald, was killed in 1075, Gregory moved to make him a saint.

However, the purge was not enduring. When later popes lost interest, bad old habits returned. This is hardly surprising. As the historian Norman Cohn once observed, “clergy constantly slipped into laxity – as any large body of human beings will tend to do”. Imposing austerity is a little like jumping in the air to defy gravity; it can be kept up for a time but eventually more profound forces will come into play.

By the 12th century the Catholic Church was back to its old ways. Those who could not stomach its power, its arrogance, its hunger for rent and tithes, and its clergymen’s luxurious lifestyle, looked elsewhere. Heresies flourished, from the Cathars and the Waldensians to those of eccentric charismatics, such as Tanchelm, who, for a few years in the Low Countries from 1112 won over many thousands of followers with his claims to be the equal of Jesus (which he backed up by having himself betrothed to a wooden statue of the Virgin Mary).

A pattern had been established, which has continued ever since: of excess and austere reaction. In the early 13th century the Church purged itself anew, notably by establishing two intensely austere monastic orders, the Dominicans and the Franciscans. Members of both took vows of poverty. Saint Francis of Assisi, the founder of the Franciscans and the present pope’s namesake and inspiration, set something of a benchmark for unworldliness. He began his preaching career half starved and semi-naked. Alarmingly for the Church, he was not even a clergyman.

In another age he might have been burned as a heretic but his timing was good. The reformist pope Innocent III saw how useful he and his followers could be and gave them his sanction. Innocent was soon proved right. Both the Franciscans and the Dominicans did wonders for the tarnished image of Catholicism and the Church. They also became heavily involved in its new heresy-smashing organisation, the Inquisition. Heresies were driven back and crushed.

By the 14th century, though, laxity had again crept back in. Popes and cardinals lived in infamous splendour in their new home, Avignon. By the end of the century the Church lost further respect when first two and later three rivals each claimed to be the true pope. Heresies abounded, culminating in an explosion of religious revolt in Bohemia, which seceded from the Catholic Church, only to be conquered and brought back into the fold.

Although the Church managed to bring itself to order for a time, excess again asserted itself with the Borgia family. This time worldliness helped bring the greatest defeat of Catholicism. Under Pope Leo X (1513-21) the enormous cost of rebuilding St Peter’s in Rome inspired an unusually venal campaign for donations. Disgusted, Martin Luther denounced the papacy. When princes backed him, Catholicism’s religious monopoly in western Europe was broken.

Yet the shock of this setback triggered one of the Church’s fiercest austerity fightbacks. At its forefront was yet another new monastic order sworn to poverty, the one through which Francis has made his own career – the Jesuits. With Jesuit help, the Church improved its image. It maintained its ascendancy in southern Europe and even regained an eastern Europe that had seemed all but lost to Protestantism, thanks to the Jesuits’ ingenious idea of offering free (Catholic) schooling to the children of the rich and powerful.

Probably we should not be surprised by the spectacle of this constant tug of war between austerity and excess. Every religion has its fault lines and this struggle reflects one of Catholicism’s deepest. It is the tension between the idealism of its very earliest days and the worldliness of its rise as a religion with power.

Under the guidance of Saint Paul in the first decades after Jesus’s death, Christianity moved into austere waters indeed. The early Christians make Pope Francis’s aspirations seem those of an idle pleasure-seeker. Saint Paul’s Christianity venerated everything that was abstemious and plain: plain clothes, plain food, meekness and, most of all, sexual abstinence. Some zealous early Christians even advocated chastity within marriage. The early Christians abhorred anything that smacked of indulgence: fine living, spicy food, flirtation and especially any kind of extramarital or unconventional sex. Simplicity and poverty were revered.

Yet even in those early days contradictions were evident. For one so keen on meekness, Paul was surprisingly keen to charm the wealthy and influential, and he converted a number of them. In the 4th century his successors hit the bullseye and won Emperor Constantine to their side, and with him the power of the Roman imperial state.

Thereafter worldliness came to the Church. It found itself the owner of ever more buildings and land, donated by sinners eager for help to enter paradise. By the 6th century the Church, which had previously been content to leave politics to emperors, became rather unexpectedly both a religion and a political state. When the western Roman empire collapsed, popes filled the vacuum and became rulers of Rome and its environs, princes of their very own theocratic kingdom. By the 11th century, when Gregory VII launched his cultural revolution, the Catholic Church was also Europe’s greatest landowner. The austerity Church possessed untold riches and power. Although its political power is now all but gone, the riches remain. No wonder today’s Catholic Church seems to fluctuate violently between extremes.

Will Francis have better luck than his reformist predecessors? Let’s hope so. The Catholic Church badly needs reform. He seems a likeable figure, warm and yet determined, informally open and sincere in his good intentions. He even likes Fellini films.

Yet it is far from certain how enduring his revolution will prove in the long term. If the past is anything to go by, trouble is likely to surface after his pontificate. Already he is 76. The Catholic Church has never been good at appointing radical young firebrands. Look into the future, a pope or two down the line, and it would not be surprising if lesser bad habits had begun to creep back, though one would hope that the Church’s worst abuses will have been exorcised.

This is the problem of any dictatorship elected by committee, which, when one strips away the robes and the pomp, is what the Vatican government is. Like another dictatorship elected by committee, like the government of China and like so many other authoritarian regimes of our time, the Vatican lacks transparency. It is not overseen. It is subject to laws of its own making only. Ultimately it is accountable only to itself. Such an arrangement will always tend to nurture secrecy, conspiracy and corruption. And it is commonly the fate of such regimes that they will clean up their act only when forced to do so by their own dire prospects: when catastrophic failure begins to seem a distinct possibility. This, as Pope Francis now recognises, seems to be the case with his Church.

Matthew Kneale’s “An Atheist’s History of Belief: Understanding Our Most Extraordinary Invention” has just been published by the Bodley Head (£16.99)

MILES COLE
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The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

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The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

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In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt