dominican publications

Has Economic Policy Lost Touch with Ethics?


  • Catholic Economics: Alternatives to the Jungle, by Angus Sibley, 2015, Collegeville, Minnesota, The Liturgical Press, 256 pp., pbk, $19.95.

  • And the Weak Suffer What They Must? Europe, Austerity and the Threat to Global Stability, by Yanis Varoufakis, 2016, London. The Bodley Head, 368 pp., caseebound, £16.99
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The interesting thing about these two books, by authors coming from very different perspectives, is that both develop lines of argument back to a common source. Varoufakis explains that, while looking through the papers of John Maynard Keynes at King’s College, Cambridge, he noticed a copy of Thucydides’ History of the Peloponnesian War in the original ancient Greek. Browsing through the pages he noticed a passage underlined in pencil. In this the powerful Athenian generals explained to the conquered Melians that they were about to do as they pleased with them because, ‘the strong actually do what they can and the weak suffer what they must’. Varoufakis decided to draw on this passage for the title of his book. It appealed to him because of its relevance to the position of Greece today in its relationship with the European Union, about which he writes. It also resonated because, after The Great War, Keynes used the logic of this argument to warn the Allies that the vengeful terms they had imposed on Germany at Versailles were a boomerang that could come back to haunt them. This was the eventual fate of the Athenians at the hands of the Spartans.

Angus Sibley also quotes from Thucydides, in this case from the funeral oration by the famous Athenian statesman, Pericles:

We [Athenians] are prevented from doing wrong by respect for the authorities and for the laws, having an especial regard to those who are ordained for the protection of the injured, as well as those unwritten laws which bring upon the transgressors of them the reprobation of the general sentiment.

Essentially both authors are saying that economic policy as practised in the world today has lost touch with ethics and any sense of the common good as understood by humankind back to ancient Greece.

Angus Sibley is an actuary by profession and a former member of the London Stock Exchange. He is a convert to Catholicism and an expert in Catholic Social Teaching.

Yanis Varoufakis is Professor of Economics at the University of Athens. He became the world’s most prominent opponent of austerity when, as Minister for Finance of Greece in 2015, he refused to accept the terms of the loan agreement dictated to his bankrupt country by the Eurozone’s leaders. He is generally considered to be a Marxist.

I must admit that my expectations of these two books were not realised. I expected Sibley to be a little naive about the conflicts of interests and distributional cleavages of today’s world, to more or less say that, ‘if only we were nicer to each other, the world would be a better place’. In fact his critique of modern capitalism is forensic and brutal, backed up by detailed and consistent sources drawn from all the Popes from Leo XIII to Francis. Indeed he frequently draws on the philosophy of St Thomas Aquinas and on the New Testament.

By contrast I expected Yanis Varoufakis to be more polemical. He relates that, when they first met, Wolfgang Schauble, the German Finance Minister, refused to shake his hand. Nevertheless, he retains a high regard for Germany, recalling the solidarity given to Greece when it laboured under the oppressive regime of the colonels between 1967 and 1974. Yanis Varoufakis writes in a style that is a fine blend of the academic and the political.


The importance of solidarity and distributional justice is a core theme of both books. For Varoufakis, the 2008 crisis was made much worse than it needed to be. Labour market reforms, known as The Hartz Reforms, reduced the capacity of German workers to purchase the goods they produced. Deprived of domestic demand, surplus German products flowed to peripheral economies where they were bought on tick. Debt-fuelled annual growth of 5 per cent made fragile deficit-ridden societies look like miracle economies compared to Germany growing at 1 per cent. But these imbalances were to prove fatal when the crisis came. (Varoufakis is wrong about Ireland: we didn’t have a fiscal deficit at the onset of the crisis.)

But, according to Varoufakis, the post-war system that had constrained the exercise of financial power by the strong over the weak, people and nations alike, started to unravel when America began to drift from surplus to deficit. The great stabilising instrument that had kept the post-war world order together was kaput. The global responsibility that came with large trade surpluses and the need for global balance was pushed on to a Europe unprepared for that responsibility. The European currencies were jettisoned from the dollar zone in 1971. The European Monetary System (EMS) created in 1978, and a precursor to the single currency, was an attempt to respond to the new circumstances. Ireland made a strategic choice to separate from sterling by joining the EMS, thus making our bed in Europe.

Specifically, Yanis Varoufakis traces the ‘Race to the Bottom’ in employment conditions to a speech given in Warwick University in 1978 by Paul Volcker, the head of the US Federal Reserve (FED). It concerned the inability of the US to recycle its surpluses. America had earlier ended the Bretton Woods compact for convertibility based on dollar/gold values. This is a complex technical argument but, according to Varoufakis, the majority of people in the majority of countries eventually acquiesced in the notion that labour was overvalued and overprotected, manufacturing was over-rated while finance was undervalued and in need of unshackling. Everything became increasingly reducible to its financial value; and financialisation of the global economy, with its attendant deregulation, led ultimately to the 2008 crisis.

Angus Sibley recalls that the Glass-Steagall Act was introduced in 1933 to segregate banking activities. It resulted in 40 years of financial stability until it was repealed in the 1990s under President Clinton, thus completing a process of deregulation commenced in the 1970s. The absence of constraints on bank lending permitted the build-up of disastrously inflated debts which everyone now knows about.


Whereas Yanis Varoufakis is hugely pessimistic about the sustainability of the European Integration Project, Angus Sibley is concerned for the sustainability of the planet under conditions of modern capitalism. He argues that the notion that we must elevate competition to minimise the cost of everything is one of the foundations of orthodox economic thought; so it has been ever since Adam Smith. It is based on the underlying assumption that we all want to be able to consume more; therefore we must make everything cheaper so that we can afford more of everything. But the big problem today, at least in the world’s richer economies, is that we are, by and large, consuming too much and thus overstraining the world’s resources. He points to the warning of John Paul II: ‘Man consumes the resources of the earth … in an excessive and disordered way’. (Centesimus Annus, par. 37)

Sibley is scathing about individualism and the libertarians who abhor regulation. The more extreme libertarians reject the entire notion of social justice. He particularly indicts the neo-classical economists of the Austrian School, like Ludwig Von Mises, for advocating that labour should be regarded as any other commodity to be bought and sold on the market. Such ‘commodification’ of labour, according to Sibley, in effect dehumanises human work, treating workers as equipment and workers as raw material. From a Catholic standpoint, Sibley asserts, this is theologically heretical and morally disgraceful. Strong words indeed! Interesting too that Von Mises was a Catholic.

At the time of writing the two women contesting the leadership of the Conservative Party in Britain claim to be practicing Christians. It is doubtful if either would have much in common with Angus Sibley. In fairness, neither is a Catholic. But another high profile woman, Anne Widdicombe, is, like Sibley, a convert to Catholicism and to go by her autobiography, Strictly Anne, would be on the other end of the spectrum of social and economic views to his. Never once does she mention Catholic Social Teaching even though she is clearly passionate about her faith. It is puzzling that adherence to the same Gospel values can produce such contrasting perspectives on the nature of modern capitalism. But Angus Sibley backs up every significant proposition with references to impeccable sources in Catholicism. People of faith on the political right would be hard pressed to challenge him from a theological perspective. 

In a chapter entitled ‘The Libertarian Disrespect for Labour’, Sibley rounds on present-day capitalists including Ryanair’s Michael O’Leary, for their lean and mean approach to cost cutting. Specifically, he condemns precarious work, noting that there are around 1.4 million employee contracts in the UK that do not guarantee a minimum number of hours of work. As he puts it, this is labour market flexibility taken to extremes and an example of how the world of labour has gone backward since laissez-faire principles have re-asserted themselves. He is a staunch defender of trade union rights as a viable corrective.


While Sibley and Varoufakis are on the same wavelength about the absence of solidarity and a disregard for the common good, the former does not deal specifically with Europe. The latter is quite certain that the European integration project has lost its way. He avers that the institutional deficits which have become clear since the 2008 crisis were known to Jacques Delors as far back as the 1980s. His hope was that a crisis, if it came, would propel the final stages of integration. But the project is now stuck, lacking sufficient support to go anywhere. In an appendix Varoufakis outlines a four-point proposal which might put the project back on the rails.

That Yanis Varoufakis is critical of the European elite will hardly surprise anyone given his battles with them while he was Greece’s Finance Minister. What might surprise is his friendship with the former British Tory Chancellor, Norman Lamont. Actually, he quotes an entertaining, if perhaps not quite accurate, explanation of why individual countries signed up for the single currency. According to Lamont’s analysis:

The French feared the Germans.

The Irish wanted to escape Britain.

The Greeks were terrified of Turkey.

The Spanish wanted to become like the French.

The southern Italians craved migratory rights to Germany.

The northern Italians wanted to become German.

The Dutch and the Austrians had all but become German.

The Belgians sought to heal their sharp divisions by merging into both Holland and France under the auspices of a reconfigured Deutsche Mark.

The Baltic States shivered at the thought of a resurgent Russia.

The Slovakians had nowhere else to go after separation from their Czech brethren.

Slovenia was escaping the Balkans.

Finland had to do something Sweden wouldn’t.

And finally, the Germans feared the Germans.

After the war the German Christian Democratic Union (CDU) was structured on a sectional basis to ensure broad representation. Some years ago I met a visiting delegation of CDU members of parliament. They were from the Workers’ section of the Party and described themselves to me as the ‘The Jesus Marxists’.

Even though Sibley does not discuss Europe in any detail, it is in reality the point of intersection of the two books. European integration was the grand project of post-war social democracy and Christian democracy – the latter largely based on Catholic Social Teaching. Europe is now in crisis and the integration project is in peril. Austerity and perceived lack of democratic legitimacy have undermined mainstream politics and a disturbing political populism of right and left is in the ascendancy. The flaws in the single currency are likened by Sibley to a riverboat being launched on a calm sea, fine until the storms come.

If I have any criticism of these valuable books it is that neither author appears to be aware of the work of Karl Polanyi which deals with many of the issues exercising their minds. Polanyi was a Hungarian socialist who had to escape to Britain from the Nazis. He subsequently moved to the United States and his single book, The Great Transformation, was published in 1944. It is a canonical work of political economy. Essentially, Polanyi advanced three theses, viz:

That the economy is always and everywhere embedded in society;

That labour, land and money are fictitious commodities;


That people have always pushed back against market oppression – a phenomenon he called ‘The Double Movement’.

The first two of these theses are relevant to the work of both Sibley and Varoufakis and all are relevant to current circumstances. Interestingly, Polanyi was a Christian Socialist with a sympathy for Marxism although he did not accept its tenets of historical materialism and class war. It is a pity neither author embraced his work. He believed in a market economy but not a market society which I think is the core argument of both Sibley and Varoufakis.

That said, both books should be essential reading in these post-Brexit days for everybody concerned with rescuing Europe from the Hayakian nightmare of deflationary austerity into which it has descended and which is so alienating its citizens.

David Begg served as secretary general of the Irish Congress of Trade Unions from 2001 to 2015.

Tags: Religion, church, Christians, society, economics, Austerity, Europe, Golbal Stability, Pope Francis, David Begg