A Just World : Multi-disciplinary Perspectives on Social Justice [1 ed.] 9781443867627, 9781443844789

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A Just World

A Just World: Multi-disciplinary Perspectives on Social Justice

Edited by

Heon Kim

A Just World: Multi-disciplinary Perspectives on Social Justice, Edited by Heon Kim This book first published 2013 Cambridge Scholars Publishing 12 Back Chapman Street, Newcastle upon Tyne, NE6 2XX, UK

British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library

Copyright © 2013 by Heon Kim and contributors All rights for this book reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. ISBN (10): 1-4438-4478-0, ISBN (13): 978-1-4438-4478-9

TABLE OF CONTENTS

Acknowledgments ..................................................................................... vii Introduction ................................................................................................. 1 Heon Kim John Rawls and the Occupy Wall Street Movement ................................... 9 Regina M. Hobaugh Making Global Capitalism More Just by Imposing an International Transaction Tax ......................................................................................... 23 John Raines Social Entrepreneurship as a Catalyst for Practical Social Justice in Economic Life ....................................................................................... 39 TL Hill and Jon Pahl Anti-Racist White Allies: The Need for Role Models............................... 53 Drick Boyd Understanding Human Security: Traversing the Intersection between Social Justice and International Conflict Management ............... 69 Aaron Tyler Promoting Social Justice through Self-Formation: Language, Affect and Morality .............................................................................................. 87 Margaret J. Rausch Iraqi Educational Opportunities, Fertile Soil for Justice and Peace to Grow.................................................................................................... 109 Martha Ann Kirk On A Just World: An Inter-religious Approach to Social Justice............ 127 Heon Kim

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Table of Contents

Bibliography............................................................................................ 145 Contributors............................................................................................. 157 Index........................................................................................................ 163

ACKNOWLEDGMENTS

I owe my gratitude to many people who have made this volume possible. My gratitude goes first to the contributors to this volume. With their specialties in diverse fields, they have created a rich and engaging dialogue which took place at the national conference, A Just World: MultiDisciplinary Perspectives on Social Justice, at Holy Family University in Philadelphia PA in March 2012, resulting in this volume. I am deeply grateful to the co-sponsors of the conference, Peace Islands Institute, Holy Family University, and Lutheran Theological Seminary. I am grateful to Sister Francesca Onley, the President of Holy Family University, Dr. Joseph Stoutzenberger, Dr. Megan Meyer and Dr. Jenai Grigg. I wish to mention with immense gratitude Mr. Gazi Ataseven of Peace Islands Institute. He has been greater than I could possibly thank him for. His never-failing support did not allow me to be lazy. Particularly, he showed his trust in me to overcome many difficult situations from the preparation of the conference up to this point of the publication of this volume. I thank my colleagues, Dr. Martin Weatherston, Dr. Peter Pruim, Dr. Storm Heter and Dr. Timothy Connolly at Department of Philosophy & Religious Studies, East Stroudsburg University. Without their warm encouragements on a daily basis, I would have lost my enthusiasm. I also thank my students who continually gave me fresh insights throughout our stirring class discussions on religion, justice, peace and globalization. Last but not least, I would like to express my gratitude for our editors at Cambridge Scholars Publishing, particularly Carol Koulikourdi, Amanda Millar, Emily Surrey and Soucin Yip-Sou for their genuine supports and understanding throughout the project. —Heon Kim East Stroudsburg, Pennsylvania, USA December 11, 2012

INTRODUCTION HEON KIM

Justice in society is a pressing concern in the world today. It not only involves individual and collective life, but it transcends geographical, cultural and economic boundaries of the globalized village. In this sense and despite its urgency today, social justice is a complex topic not easily studied or measured. Discussion about it must be, beyond theory, practical and multi-disciplinary. While dialogue about social justice occurs within many academic disciplines, it can be neither solely an issue of, nor fully understood by, one discipline. Its complex conceptualization and influence in all human life necessitates a multidisciplinary approach.1 Moreover, the term ‘social justice’ is a subjective term that carries with it a variety of connotations, depending on who defines it and to what social context it corresponds. Social justice today has its own meaning, which appeals to the unprecedented smaller globalized world. In our global village the problems in a society cannot be free from the world’s problems, and, to this extent, justice in society today is intrinsically linked to a global justice. The Arab Spring in the Near East and the Occupy Movement in the United States are indicative of recent global movements influenced by and affecting contemporary challenges of social justice. This volume, A Just World: Multi-Disciplinary Perspectives on Social Justice, is a multi-disciplinary analysis of social justice intended to offer an inter-disciplinary insight into what social justice means today and how it can be achieved to create a more just world. Eight scholars in this volume represent different disciplines and shed light on various aspects of social justice from their unique perspectives – the humanities, the social sciences, the business world, and the field of education. Without losing their unique approaches to social justice, they are inclusive in this collection. These contributors directly address 1

For this idea, I am indebted to Joseph Stoutzenberger’s key note speech to the conference held at Holy Family University in Philadelphia PA in March 2012, with the title A Just World: Multi-Disciplinary Perspectives on Social Justice.

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Introduction

problems facing our societies today from a broad spectrum of capitalist neo-liberal world order and with specific cases, including the Arab Spring and the Occupy Movement. In addressing the problems, the chapters in this volume also reveal deep-seated causes of the problems, and thereby identify the nature and characteristics of social justice in a contemporary context, providing considerable insight into long-term, sustainable solutions toward more just societies and a just world.

Chapter Overview In chapter 1, “John Rawls and the Occupy Wall Street Movement,” Regina Hobaugh discusses social justice from a philosophical perspective. She revisits the ideas of John Rawls (1921-2002), one of the most important political philosophers of the 20th century. In Hobaugh’s analysis, Rawls’ ideas on justice and fairness help deconstruct the motivations of the Occupy Movement. She argues: We can apply Rawls’ thinking to the concept of the “99 percent” and the concentration of wealth in the one percent… The Occupy Wall Street protest is a movement, not a political party, and hence does not have a fixed platform, but a consensus of protests as listed above. Socioeconomic inequality has been growing steadily in the United Sates for almost 40 years. The disparity between rich and poor has been growing, and the disparity has become greater, distribution has become more unequal. Currently, this movement has provided an opportunity to discuss the disparity, and this forced discussion represents a change from former times as there is an attempt to have a public discourse about inequality. I believe that Rawls would have been disturbed about the extent of inequality and would see the movement as doing something very positive. “Unfair” is now in the political discussion and has become an exciting dialogue. To address extreme inequality as unjust and not worthy of a democratic society is the focus of the Occupy Wall Street movement. Rawls would have liked this discussion of rational persons to try to resolve the problem of distributive justice.

In particular, Hobaugh notes the civil disobedience that the Occupiers have showed, and relates it to Rawls’ influential idea of ‘nonviolent civil disobedience,’ which serves as “an option when violations to justice have exceeded certain limits.” As abundant research on the Occupy Movement well illustrates, the dimension of justice most widely contested in the capitalist world today is economic justice. This dimension is revisited by John Raines, the author of Marx on Religion. In Chapter 2, “Making Global Capitalism More Just by

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Imposing an International Transaction Tax,” Raines offers a quantitative glimpse at contemporary global finance in his consideration of global injustice. In his analysis of various statistics, global inequality is continually increased because: [I]t is money making money from money without passing through factories or fields, without creating jobs or paychecks. It is money removed from investing in and creating an expanding productive capacity, a productive capacity that could, but now will not, employ the youth of the next generation in anything but low-paid jobs. In addition, this type of investment often hurts the real economy in other ways, for example driving up commodity prices and manipulating currency exchange rates.

The real economy, where profits and wages get counted as income, is contrasted to the “fictional” economy, wherein Raines finds a “formula for the rapidly expanding inequalities both of income and of wealth that has come to dominate the international political economy over the past thirty years.” Raines argues that this formula must be changed by imposing, what he calls, “a Global Financial Transaction Tax,” which would make long-term investments more prudent and profitable in the real economy. Another dimension of economic justice is examined by TL Hill and Jon Pahl in their coauthored chapter 3, “Social Entrepreneurship as a Catalyst for Practical Social Justice in Economic Life.” They consider social entrepreneurship to be “a new paradigm of business creation that challenges the primacy of shareholders and asks stakeholders to play an influential role in every aspect of the entrepreneurial process.” Hill and Pahl note the “voice” that social entrepreneurship makes in business arrangements. By allowing the voice of stakeholders in the governance of firms, social entrepreneurship switches the shareholder’s central authority in firms toward a more democratic control with individual agency and thus toward balance between the distribution and stewardship of wealth. From this perspective, Hill and Pahl examine several cases of social ventures to demonstrate how social entrepreneurship encourages and increases the voice for protecting local communities from exploitation and provides “practical, more-or-less egalitarian means to generate and distribute the economic, social, cultural, and religious components of a rich, satisfying, and just life for all.” Racial justice is another important dimension of social justice, especially in the global world today, in which diverse ethnic groups coexist, and thus in which an issue of peaceful coexistence becomes of particular importance. Drick Boyd sheds light on this dimension in Chapter 4, “Anti-Racist White Allies: The Need for Role Models.” In

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Introduction

examining the United States, he observes a dramatic shift in the racial and cultural makeup among an already diverse ethnic population. In this shift, racial prejudice and discrimination become more critical, especially for white people who have held the historical primacy and dominance. Boyd acknowledges that most whites in the United States are aware of the history of racism at the core of the “American experience,” but argues that they need role models to put that awareness into action and help actualize racial justice. Introducing such a role model, Boyd presents John Woolman (1720-1772) who worked for the abolition of the slavery and the slave trade economy, and J. Waites Waring (1880- 1968) who, as a judge, struggled for the equal recognition of blacks and whites in society. The pioneering ideas and exemplary behavior of these two historical figures are still suggestive, proffering role models for the white people toward racial justice in the United States today. Much work remains to be done, as Boyd asserts that “we are still seeking to undo the damage that slavery inflicted on our national spirit, and the way in which racism has warped our ability to understand and relate to people of different races and ethnicities.” Aaron Tyler, a specialist in the field of conflict transformation, looks at social justice from another angle, that of conflict management. In Chapter 5, “Understanding Human Security: Traversing the Intersection between Social Justice and International Conflict Management,” Tyler attempts to convince readers of the intrinsic relationships between human security, social justice and sustainable peace in violent conflicts. Tyler is convinced: Considering the hundreds of violent conflicts experienced, observed, and studied over the past six decades, one consistently affirmed lesson for practitioners and scholars in the field of conflict management is thus: For sustainable peace to be realized within and across communities experiencing violent conflict, social and restorative justice must be proactively pursued and largely realized on both individual and collective levels. Without this component of social justice, intra- and inter-state violent conflicts will likely continue or, at best, fall latent.

From a “peacebuiding” vantage point of social justice, Tyler analyzes contemporary theories in conflict management that demonstrates an underlying contention: social justice is a mandatory prerequisite for sustainable peace, and social justice can be only realized by securing human security on both individual and collective levels. This understanding of human security, Tyler suggests, provides a clue for reassessment of the Arab Spring as a challenge for human security.

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While Tyler gives priority to social justice in the realm of human security, Margaret Rausch underlines a self-formation process as an essential component of social justice. In Chapter 6, “Promoting Social Justice Through Self-Refashioning: Language, Affect and Morality,” she locates self-formation at the bottom line of social justice. Citing Thomas Sowell, Rausch points out that confused conceptions of justice can result in the promotion of injustice, just as distorted understandings of equality can advance inequality. Herein lies the importance of self-formation during one’s learning of language, morality and affect. For Rausch, “the connection binding language, affect, and morality is instrumental in cultivating such character traits as altruism, compassionate acceptance of others, group affinity, and patriotism, but it is also responsible for eliciting the opposite kind of response.” This analysis eventually leads Rausch emphasize education as the critical “remedy” for “the social injustice evident in many domains and institutions today.” Martha Ann Kirk concurs with both Rausch and Tyler’s findings. In Chapter 7, “Iraqi Educational Opportunities, Fertile Soil for Justice and Peace to Grow,” Kirk assumes that “quality education is the fertile soil giving opportunities for seeds of justice and peace to grow.” As a case study, she examines the schools at Iraq, where conflict after conflict continues to frame Iraqi experience in a reminiscent way of Tyler’s earlier chapter on human security. To Kirk, education is urgently needed for the common people of Iraq who suffered from the repeated injustices of war. Comprehensive education is most urgent in young children, “who lost family members or have repeatedly seen violence around them.” Having often been traumatized, angry, and distrustful of others, these children easily turn to revenge with hatred towards others. Sustainable peace relies on the security of these children, and social justice depends heavily on quality education. This task is promising according to Kirk’s in-depth interviews with 140 persons from the schools in Iraq. These interviews illuminate comprehensive education is helping Iraqi people after the 1988 massacres overcome fear, greed, and the cycles of violence. In the last chapter, “On a Just World: An Inter-religious Approach to Social Justice,” Heon Kim presents an inter-religious approach to social justice. Conceptualizing social justice as a contextual term, Kim illustrates the two different perceptions of social justice existing in the world today. One is the “social justice for competition,” whereby justice serves as a mode of competition like that envisioned in a free market system. The other perception is of “social justice toward co-existence, mutual support and solidarity.” While the former is a typical definition in the capitalist and neo-liberal world order today and what the Arab Spring and the

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Introduction

Occupy Movement are protesting against, the latter is drawn from both the Confucian virtue of jen (social humanness) and Islamic concept of adl (justice). Having schematized these two opposite definitions, Kim specifically underlines the concept of human dignity, which is central to Confucian and Islamic justice, yet markedly absent within the capitalist and materialist perception of justice.

Readership and Contributions This volume is a coherent collection of the proceedings of the national conference, A Just World: Multi-Disciplinary Perspectives on Social Justice, held at Holy Family University in Philadelphia, PA on 30 March 2012. The goal of the conference was to bring together a critical core of scholars from diverse academic fields to discuss social justice from multidisciplinary perspectives and to foster scholarly discussion on a just world. At this important gathering, engaging dialogue occurred among specialists from various disciplines, including economics, politics, language, education, philosophy, sociology, and religion. Audience members actively participated in discussions thus adding to the richness of the experience for everyone involved. As the President of Holy Family University underscored in her opening remark, a just world is a timely and extremely important topic in this global world. Owing to this success, the conference proceedings have been carefully scrutinized to provide both the cutting edge research of our distinguished contributors as well as the fruits of our conference dialogue to a broader audience. Given the matchless credentials of the contributors, the editor is confident that this volume will be received as nothing short of a landmark in multi-disciplinary discussion on social justice. It is destined to also make a considerable impact in charting new directions for future scholarly work on justice. The sweeping global problem of injustice has resulted in a considerable number of studies; however, there has been little done to examine justice from a multi-disciplinary perspective, and this volume fills that void, particularly as it presents common features of today’s problems and discusses global social justice. As a multi-disciplinary work, this volume will surely capture the attention of specialists in social justice from diverse academic disciplines. Scholars in the relevant interdisciplinary fields of ‘a just war,’ ‘war and peace,’ and ‘international relations and politics’ will likewise want to explore this text. Social scientists in the burgeoning areas of global movements and conflict theory will also find this volume a valuable case

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study, as it deals centrally with the features, the implications, and the questions of subjects such as the Arab Spring and the Occupy Movement. A Just World: Multi-Disciplinary Perspectives on Social Justice is unique in that it provides the most recent discussion on the timely topic of social justice. While this volume provides discourse by specialists in justice, it should attract a readership beyond academia and may well catch the attention of anyone who is interested in justice and who seeks a just world.

JOHN RAWLS AND THE OCCUPY WALL STREET MOVEMENT REGINA M. HOBAUGH

The idea of social justice is not new and has roots in religious tradition, and the idea has the support of many believers in a faith committed community. Social justice generally refers to the idea of creating a society or institution that is based on the principles of equality and that values human rights and recognizes the dignity of every human being. The Catholic Church’s teaching on social justice is contained in many papal encyclicals, and has been most fully expressed by Pope Leo XIII, in Rerum Novarum (“Of New Things,” 1891). This document, which was an open letter, passed to all Catholic bishops that addressed the condition of the working classes and for the first time addressed social inequality and social justice issues with Papal authority, focusing on the rights and duties of capital and labor. Since Leo XIII, Papal teachings have expanded on the rights and obligations of workers and the limitations of private property. Although there is a strong foundation in Catholic Social teaching (and in other religious traditions) for social justice, this volume focuses on a multidisciplinary approach to social ethics. My objective will be to present a secular view of social justice. As a philosopher, I will attempt to recognize the religious elements of social justice, but will stress the secular aspects of social justice in an appeal to a wider range of thinkers. I have chosen the work of John B. Rawls to represent the secular view of social justice from a philosophic perspective, because many consider John Rawls the most important political philosopher of the 20th century. Rawls also is interdisciplinary in his presentation because he uses psychology, economics, sociology and political science to present his position. 1 He took an old idea, that of the “social contract,” thought of a fresh way of using it, and came up with principles for a just society, that are widely discussed.

1

Chandra Kukathas and Philip Petti, Rawls: A Theory of Justice and Its Critics. (Cambridge: Polity 1990), 10.

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Although this is a philosophical approach to social justice, there are two principles of “Catholic Social Teaching” that are pertinent to social justice and that are supported by Rawls’ treatment of justice: The first is the life and dignity of the human person: The foundational principle of all “Catholic Social Teaching” is the sanctity of all human life and the inherent dignity of every human person. Human life must be valued above all material possessions. The second is the preferential option for the poor and vulnerable: Catholics believe Jesus taught that on the Day of Judgment God will ask what each person did to help the poor and needy: The Catholic Church believes that through words, prayers and deeds one must show solidarity with, and compassion for, the poor. The moral test of any society is how it treats its most vulnerable members. The poor have the most urgent moral claim on the conscience of the nation. People are called to look at public policy decisions in terms of how they affect the poor. Many thinkers believe that the protests have done more to “conscious raise” the discussion on social justice this past year than in decades of church teaching.2 John Rawls was born in Baltimore, Maryland, in 1921. His father, a corporate lawyer, supported President Franklin Roosevelt and the New Deal. The New Deal was a series of economic reforms to remedy the harmful effects of the Great Depression initiated by the president to provide relief to the poor, recovery of the of the economy to normal levels, and reform of the financial system to prevent a repeat of the depression. Rawls’ mother was a women's rights activist. The second of five sons, Rawls tragically contracted and passed on infectious diseases to two of his brothers who died from them. These developmental life experiences deeply affected Rawls, and shaped his views on justice. Rawls attended mainly private schools before entering Princeton University in 1939. He was unsure about a career but ended up majoring in philosophy. This stimulated an interest in religion, and he considered training for the ministry. He thought about becoming an Episcopal priest, although subsequent war related events would drastically alter his decision. After graduating with a degree in philosophy in 1943 from Princeton University, he enlisted in the Army and served in the South Pacific for two years in an infantry intelligence unit. He was traumatized by the horrors of war and especially the Holocaust. These events caused Rawls to turn away from religion. After his discharge from the Army following the war, he 2

Thomas Massano, “Occupation Therapy,”America, 205, no.17 (2011): 10.

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returned to Princeton and pursued an advanced degree in philosophy under the GI Bill of Rights. He earned his PhD in 1948. In 1950, Princeton hired Rawls as an instructor in the philosophy department, but he also continued his own studies, especially in economics. In 1952, Rawls won a Fulbright fellowship to Oxford where he first developed the idea for what later became his famous "thought experiment" which he explained in his revolutionary work published in 1971, A Theory of Justice. After returning to the United States, he joined the philosophy faculty at Cornell, then at the Massachusetts Institute of Technology, and finally at Harvard University. He remained a professor of philosophy at Harvard from 1962 until he retired in 1991. He passed away in 2002.3 Rawls was mainly an academic man, involved in abstract thinking and writing. During the Vietnam War, however, he led an effort at Harvard that questioned the fairness of student military draft deferments. Why, he asked, should college students, many with social and economic advantages, avoid the draft while others without these advantages had to go to war? He preferred a lottery system, which the United States eventually adopted late in the Vietnam War. Many, perhaps, think of social justice in a more global context, with international protests that brought about sweeping change in the Middle East. But social justice in our own domestic situation in America received close scrutiny this past year with the Occupy Wall Street movement. A short overview of the Occupy Wall Street movement will highlight the far ranging influence this movement has had on the United States, and the world. Protestors have received a tremendous amount of attention this past year, both in the international and the national scene. The “protestor” was even chosen as the Time person of the year and the Wall Street protestors have much in common with the protestors seeking equality and justice throughout the Mid-East in the spring of 2011.

How did the movement begin? The Canadian-based Adbusters4 Foundation proposed a peaceful occupation of Wall Street to protest corporate influence on democracy and voice outrage at the lack of legal consequences for the bankers behind the global financial crisis, as well as the growing disparity in wealth between the top 1 percent and others, the “99 percent”. 3

Hilary Putnam, “John Rawls: Biographical Memoirs,” Proceedings of the American Philosophic Society, Vol. 149, No. 1 March 2005, 114-17. 4 See www.adbuster.org/campaigns/occupywallstreet

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The Adbusters Blog entitled “A shift in revolutionary tactics,” is credited with being the genesis of the movement. Micha White, the senior editor, said they had suggested the protest via their email list and it "was spontaneously taken up by all the people of the world.” Adbusters' website said that they wanted to set the agenda for a new America. Their poster was a dancer atop the charging bull, for the bull market of Wall Street. The internet group Anonymous encouraged its readers to take part in the protests, calling protesters to enter lower Manhattan and set up tents and barricades to occupy Wall Street. On September 17, 2011, the protest begins, with about 1,000 people gathering in downtown Manhattan and walking up and down Wall Street. The protesters settle into Zuccotti Park, two blocks north of Wall Street. At first, the police start arresting mask-wearing protesters, using an arcane law dating back to 1845 that bans masked gatherings unless part of “masquerade party or like entertainment.” Celebrities get involved, e.g. filmmaker Michael Moore addresses the crowd at Zuccotti Park. Noam Chomsky, noted philosopher sends his regards, and actress Susan Sarandon and Princeton academic Cornel West show up at the protests. Asked about Occupy Wall Street, President Obama says “I think it expresses the frustrations the American people feel, that we had the biggest financial crisis since the Great Depression, huge collateral damage all throughout the country... and yet you’re still seeing some of the same folks who acted irresponsibly trying to fight efforts to crack down on the abusive practices that got us into this in the first place.” In early October, Mayor Michael Bloomberg at first criticizes the protesters in a radio interview, saying they are “taking the jobs away from people working in this city” and that the protests are “not good for tourism.” He later softens his views and says that the protestors can protest as long as they obey the law. Conflict arose with Brookfied, the company that owns Zuccoti Park when the company planned to enforce park rules that ban tents and insisted on power washing the park. The wave of protests spreads worldwide from Europe to the Americas to Asia. While the demonstrations are generally peaceful, violence erupts in Rome when rioters hijack the protest there. In New York, thousands of people march to the U.S. Armed Forces recruiting station in Times Square to protest spending on foreign wars. Protesters march on major banks and financial institutions in honor of “Bank Transfer Day” — an attempt to urge Americans to move their money from big corporate banks to smaller community credit unions. In

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the month leading up to Bank Transfer Day, an estimated 600,000 people pulled their cash out of major banks. On November 15th in Oakland, police arrest 20 people and clear protesters from the plaza where they had been living; the mayor's legal adviser resigns in protest. And at 1:00 am in New York City, police begin evicting protesters from Zuccotti Park on Mayor Bloomberg's orders, arresting those who refused to leave and barring reporters from getting close to the scene. A judge rules that although the protesters do not have a First Amendment right to camp out in the park, they are allowed to return to Zuccotti sans tents and tarps. On November 19th, campus police at the University of California, Davis, pepper spray protestors who are peacefully obstructing a public walkway. Footage of the incident quickly goes viral online, prompting the school's chancellor to place the offending officers on leave and order an investigation. The protesters targeted Wall Street because of the part it played in the economic crisis of 2008 which started the Great Recession. They say that Wall Street's risky lending practices of mortgage-backed securities which ultimately proved to be worthless caused the crisis, and that the government bailout through the emergency Stabilization Act of 2008 was a failure of the government. Some have criticized the protests saying there is no unified set of demands, aims or goals for the movement. However, although the movement is not in complete agreement on its message and goals, it does have a message. Interviews with various participants state a consensus of concerns. But the movement does not state its goals in the traditional language of campaigns. The major concerns of the protestors seem to be that America produces abundance but there is not fairness in the distribution. The protesters want, in part, more and better jobs, more equal distribution of income, bank reform, and a reduction of the influence of corporations on politics. The protest is focused on economic justice and the complaints of the protestors are economic. The protests see a connection between the civil disobedience (the occupation of parks and streets) and this form of protest as a legitimate means of expressing their concerns to ensure social justice.

We are the 99% The top 1 percent of income earners has more than doubled their income over the last thirty years according to a Congressional Budget Office

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(CBO) report.5 According to the CBO, between 1979 and 2007 the incomes of the top 1% of Americans grew by an average of 275%. During the same time period, the 60% of Americans in the middle of the income scale saw their income rise by 40%. Since 1979 the average pre-tax income for the bottom 90% of households has decreased by $900, while that of the top 1% increased by over $700,000, as federal taxation became less progressive. From 1992-2007 the top 400 income earners in the U.S. saw their income increase 392% and their average tax rate reduced by 37%. In 2009, the average income of the top 1% was $960,000. This economic disparity is also important as the political class in the USA is considerably wealthier than most Americans, with nearly half the members of Congress being millionaires, as is the President and his predecessors. The President in an October 6th news conference6 pointed out that the reason that so many Wall Street executives weren’t prosecuted was that what they did wasn’t illegal, it was “immoral or reckless.” International response to the Occupy Wall Street movement has been somewhat favorable. With support from the People’s Republic of China, Egypt, Greece, India, Korea, Poland, and Vatican City as well as others. Conservatives see the situation of disparity as the fault of individuals whereas the liberals see structural forces at work -- lack of health insurance, student loans -- that they cannot overcome.

Rawls’ Principles The secular approach to social justice holds that every society has a basic structure of social, economic, and political institutions and these need to fit together. Philosophers of social justice theory throughout history have debated how these institutions should best fit together. In testing how well these elements fit and work together, John Rawls based a key test of legitimacy on the theory of “social contract.” To determine whether any particular system of collectively enforced social arrangements is legitimate, Rawls posits that one must look for consensus and agreement by the people who are subject to it. Obviously, not every citizen can be asked to participate in a poll to determine his or her consent to every proposal in which some degree of coercion is involved, so one has to assume that all citizens are reasonable. The process of selecting principles of distributive justice should not be arbitrary, if it were, then discussion 5

Trends in the Distribution of Household Income. www.cbo.gov/publications/42729 report (accessed October 25, 2011). 6 www.whitehouse.gov/the presss-office/2010/06news-conference-president.

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about distributive justice would be futile. Resorting to tradition might seem to be a reasonable and good start. But what about the unfairness of traditions? For example, slavery had been a long tradition in the United States, and no one would propose that this tradition should remain and be upheld. This is one of the key elements of Rawls insight in devising a scheme of social justice. Rawls determined a particular sort of “thought experiment” to construct an argument for a two-stage process to determine a citizen's hypothetical agreement. This is the fascinating concept of the “veil of ignorance.” To say that we are self-interested rational persons is to say that we are motivated to select, in an informed and enlightened way, whatever seems advantageous for ourselves. To stand behind the “veil of ignorance” is a mind game to provide ignorance of such things as race, gender, social class, sex, health, etc. However self-interested and rational persons do have some knowledge, for example they have general information about possible situations that human beings can experience and do have general knowledge about human behavior. This new “state of nature” (an idea Rawls might have gleaned from John Locke) provides the origin to think through and choose the principles that should govern people in the real world. Rawls sees this as a fair procedure and if principles were chosen by means of this procedure then the principles would be fair. Behind the “veil of ignorance” individuals are given the task of choosing the principles that shall govern the actual world. Rawls believes that he has set up an inherently fair procedure here. Because of the fairness of the procedure Rawls has described, he says, the principles that would be chosen by means of this procedure would be fair principles. Consider how “rules of a game” are determined in advance of the start of play. After play has begun, it is unfair to change the rules. Since a self-interested rational person behind the “veil of ignorance” would not want to belong to a social group, or a class or sexual orientation, or have a health issue, that is discriminated against, then he/she would not choose principles that would discriminate against this group. Recall, that behind the “veil of ignorance” you do not know into which group you would be when the veil is removed. Likewise, a self-interested rational person would not want to belong to a generation that has fewer resources than another. So he/she would endorse the principle: “Each generation should have roughly equal resources” or “Each generation should leave to the next at least as many resources as they possessed at the start.” This translates for Rawls into rights language that would say that all generations, both present and future have the right to an equal amount of resources.

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John Rawls and the Occupy Wall Street Movement

Rawls is ready to determine his principles of justice, after completing this “thought experiment” of the “veil of ignorance”. Rawls argues that self-interested rational persons behind the “veil of ignorance” would choose two general principles of justice to structure society in the real world. These are the:7 Principle of Equal Liberty: Each person has an equal right to the most extensive liberties compatible with similar liberties for all. This is the Egalitarian aspect to Rawls theory. The Principle of Equal Liberty ensures the right to freedom of speech and assembly, in the political process. This principle has priority. Difference Principle: Social and economic inequalities should be arranged so that they are both (a) to the greatest benefit of the least advantaged persons, and (b) attached to offices and positions open to all under conditions of equality of opportunity. The second principle is a little more complicated but gives us the chance to think about inequality in society. This involves the equality of opportunity. Where you start out in life it is not fixed as to where you will finish your life. You have the chance to advance in society regardless of the starting position. If someone makes more than someone else because he takes more risks he is justified in making more as long as the least advantaged (say the lowest quintile of society) benefits. So, equally able and equally motivated, you have equal chances. That is Equality of Fair Opportunity. Neither law nor distribution of income should hold people back from achieving success. This is a difficult principle because people do not begin equally at the starting gate of life. This would mean that achieving equality through taxation, health care, education, etc. need to be determined. It is not that people can make as much as they want, the government has the right to tax to bring about this beginning equality. Under the liberty principle you have rights to participate in government and the political process, including freedom of association and freedom of expression—and personal liberties—liberty of conscience, freedom of religion. Rawls does not include the liberty to earn as much as you can in the market among the fundamental liberties. The Difference Principle is a unique combination of more familiar ethical theories. For example, it includes the “socialist” idea that the burdens and responsibilities of society should be distributed according to ability and benefits should be distributed according to the needs of the individual. This is a very Marxist interpretation. The “least advantaged” 7 A full discussion of the principle can be found in John Rawls, A Theory of Justice (Cambridge, MA: UP Belnap of Harvard UP, 1971), Section 11.

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have the greatest needs and that those who receive special status also bear special responsibilities. However the use of these special skills held by those with special status should be rewarded, and the Difference Principle allows for those individuals to receive just compensation. What the nonegalitarian aspect of the difference principle does not permit is that the improvement in the social and economic status of those who are already well off cannot occur unless it does something positive for those who are already disadvantaged. It cannot make the life of the less advantaged any worse. The really important question is which inequalities are appropriate? So Rawls does two really great things. He provides a reasoned argument about fundamental issues of justice, and it is not an “either/or” proposition in the debate. Both liberty and equality is possible, not liberty or equality. The difference principle allows that the person at the top could do lots better but the person at the bottom needs to do as well as they possibly could do. The person at the bottom has to do as well as he can without undermining the incentive for the person at the top. The difference principle is an attempt to maximize the good for the less advantaged. The yardstick for calculating justice is the standard of the quality of life of those at the bottom, not those at the top. Also you do not want to stop with the status quo because the people at the top are already so well off. Rawls admits that you currently have an unjust inequality in society.

Rawls and the Occupy Movement Let us now apply this to the Occupy Wall Street movement. We can apply Rawls’ thinking to the concept of the “99 percent” and the concentration of wealth in the one percent. John Rawls’ student Joshua Cohen as well as New York Times columnist Steven B. Mazie have suggested this response from Rawls and I concur. The Occupy Wall Street protest is a movement, not a political party, and hence does not have a fixed platform, but a consensus of protests as listed above. Socioeconomic inequality has been growing steadily in the United Sates for almost 40 years. The disparity between rich and poor has been growing, and the disparity has become greater, distribution has become more unequal. Currently, this movement has provided an opportunity to discuss the disparity, and this forced discussion represents a change from former times as there is an attempt to have a public discourse about inequality. I believe that Rawls would have been disturbed about the extent of inequality and would see the movement as doing something very positive. “Unfair” is now in the political discussion and has become an exciting dialogue. To address extreme inequality as unjust and not worthy of a democratic society is the focus of

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John Rawls and the Occupy Wall Street Movement

the Occupy Wall Street movement. Rawls would have liked this discussion of rational persons to try to resolve the problem of distritutive justice. But how much force can protestors use to force the conversation?

Rawls and Civil Disobedience This leads naturally to the related problem, that of civil disobedience, e.g protestors closing the Port of Oakland, a dramatic act of civil disobedience, another was setting up tents in parks. John Rawls is also one of the most influential sources of discussions about civil disobedience, since in addition to updated liberal thought about inequality in A Theory of Justice, he also articulated a theory of civil disobedience. Some have even considered A Theory of Justice as “the most influential contemporary philosophical discussion on civil disobedience.”8 What exactly does Rawls mean by civil disobedience? How far can he support dissent? How does he view nonviolence? Rawls defined civil disobedience as “a public, nonviolent conscientious yet political act contrary to law usually done with the aim of bringing about a change in the law or policies of the government.”9 It is “disobedience,” that is, deliberate violation of the laws of a particular society. It is “civil,” because those that practice it are supportive of the regime and the electorate that support it.9 The dissenters try to avoid violence but insults and expressions of hatred that would endanger future cooperation. The society in which the disobedience takes place must be at least “piecewise just.” This general consensus on justice or piecewise justice allows the leverage for an appeal to a common sense of justice. The hope is that individuals will look to a future time when change will occur and the society will move to this next level of justice invoked by the dissenters. This situation causes a delicate balance of risk of pushing for justice in one area while putting at risk laws in other areas. Once we see civil disobedience in terms of the duty to seek justice, then the necessity of restraint becomes clear. It also helps clarify why dissidents must be willing to suffer punishment. This willingness to suffer shows a “bond of fidelity” with the regime to cooperate in the future.10 A noteworthy philosophic antecedent concerning civil disobedience in philosophy is the trial of Socrates as reconstructed by Plato. Socrates was 8

Adam Hugo Bedeau, Civil Disobedience in Focus (London: Rutledge, 1991), 4. Andrew Sabl, “Looking Forward to Justice: Rawlsian Civil Disobedience and Its Non-Rawlsian Lessons,” Journal of Political Philosophy 9, no. 3 (2001): 308. 10 Ibid., 318. 9

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accused of corrupting the young and using his skills as a philosopher to pervert the loyalties of the young to their rulers. Socrates pleaded innocent and refused to cease his practice even if the court decided against him, which they did. The court sentenced Socrates to death. Against the urging of his friend Crito, who visited him in prison, Socrates refused to escape and submitted himself to be judgment reached by the duly established authority, which was death by poison, the famous drinking of the hemlock. Socrates provided the precedent for resisting a law or policy considered unjust while still maintaining respect for the existing political system as legitimate. His complaint was not against the laws, but against the judges. If indeed he did escape he would have confirmed the judges in their opinion of him as a criminal. The term “civil disobedience” became an engrained part of the American political vocabulary as Henry David Thoreau argued the right of individual conscience, and is a landmark philosophic thinker on civil disobedience, although as Hannah Arendt points out with less dramatic consequences than Socrates for his actions.11 Thoreau spent one night in jail for refusing to pay the poll tax to a government that permitted slavery. However, he permitted to allow his aunt pay it the next morning after spending only one night in jail. Again, Thoreau as Socrates, protested against the injustice of the laws. John Rawls regards civil disobedience as having an important role to play in democratic societies. When social arrangements are just and efficient, and when we enjoy their benefits, we ought to comply with them. Rawls has already given us the criteria for justice of these principles, when these principles would be chosen under a “veil of ignorance.” Their fairness out to be judged when they are readily accepted by all those who do not know what social position they will come to occupy or what talents they have or lack, or what their preferred plan of life will turn out to be. All bias has been ruled out, and therefore the principles that are chosen will be fair. Unfortunately, even the best practicable political procedure could result in the enactment of unjust laws. If we have to rely on majority rule, then it becomes apparent that unjust laws can be easily passed, because majorities are far from infallible. For if one willingly accepts benefits provided under the constitution, and the constitution itself is just, then one is obliged to abide what the majority decides. Rawls believes that “[A theory of civil disobedience] attempts to formulate the grounds upon which legitimate democratic authority may be 11

Hannah Arendt, Crisis of the Republic: Lying in Politics; Civil Disobedience; On Violence; Thoughts on Politics, and Revolution (New York: Harcourt Brace Jovanovich 1972), 59.

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dissented from in ways that while admittedly contrary to law nevertheless express of fidelity to law and appeal to the fundamental political principles of a democratic regime”.12 Rawls’ model of civil disobedience in society may be applied in very limited circumstance and only in a society that is “well-ordered” for the most part.13 Nevertheless injustice can occur in such a society and can express dissent only when there is a context of a democratic state in which citizens accept the overall legitimacy of the constitution. Recall that Rawls has already given a hypothetical original position that no one knows his particular place in society. Behind this “veil of ignorance,” free, equal and rational individuals established the two fundamental principles that will provide the framework to regulate social interactions. The injustice of a law alone is the foundation for civil disobedience. Rawls does not want anarchy. Nonviolent civil disobedience becomes an option when violations to justice have exceeded certain limits. Nonviolent civil disobedience is then an act through which the minority appeals to the majority to reconsider a particular issue within the society. All the while the existing constitution and the shared perception of rights and duties remain. Certainly questions arise. Although one makes an appeal to a sense of justice of your fellow human beings, you must be ready to accept the legal consequences because the protestor sees the political system as generally a legitimate political system, but there is an extreme injustice in some areas. Civil disobedience shows that the system is not addressing this particular injustice and the civilly disobedient action is an appeal to others in society to recognize this. The protestor has put himself out there. It is a risk taking move. When do the violations of justice exceed the limits that legitimize acts of nonviolent civil disobedience and who and how to judge? Civil disobedience argues Rawls, “becomes necessary when the condition of free cooperation are being violated.” And its application expresses the fidelity to “the fundamental political principles of a democratic regime.”14 Yet, while giving the appearance of radical dissent, “civil disobedience still remains a reformist practice that often strengthens the existing societal order.”15 The withdrawal of consent is limited to the challenging of individuals laws, the other elements of the State remain unchallenged. Rawls’ theory of civil disobedience has a controllable notion of dissent that can still be recognized with the general consensus on our ideas of 12

Rawls, 385-386. Ibid. 363. 14 Ibid. 382-83, 385-86 15 Roland Bleiker, “Rawls and the Limits of Civil Disobedience,” Social Alternatives 21, no. 2, (Autumn 2002): 38. 13

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freedom and justice. Dissent cannot challenge the foundation of the established political and social order. There is inherent in Rawls’ position a respect for legal procedures. By willingly accepting arrest and punishment, dissenters show that their opposition to the law remains faithful to law, and their actions are intended to affect the sense of justice of the majority. Their actions are based on conscientious reasons and flow from deeply held and foundational convictions. Rawls spells out three conditions which he insists must be met if one is to be justified in engaging in civil disobedience. The first is that the injustice protested against must have been more or less deliberately inflicted for some length of time in spite of protesters having already followed more conventional routes for expressing opposition to that injustice (for example, by lobbying politicians.) The second is that the injustice protested against must clearly violate the liberties involved in equal citizenship. And the third is that unacceptable consequences should not result from a general tendency to engage in civil disobedience whenever a case of similar standing arises.3 The conditions are liberal and demonstrate that John Rawls goes quite far in justifying civil disobedience. Rawls believes that in a democratic society each man “must act as he thinks the principles of political right require him to do.”16 There is no infallible authority to determine who is right. This places a heavily burden on conscience, but he still sees the tremendous obligation of government. In Rawls’ view, “if civil disobedience seems to threaten civil peace, the responsibility falls not so much on those who protest as upon those whose abuse of authority and power justified such oppositions.”17 Rawls clearly places the burden of moral culpability on the shoulders of the government that imposes such unjust laws.

Conclusion “Occupy Wall Street” has provided an inspiring rally call for social justice for many citizens of America. John Rawls has helped to provide these philosophical foundations for the movement and provide principles of justice by reconciling equality and liberty to support human demands for justice. He also provides a compass for how citizens can conscientiously 16

Alan Carter, Alan. “In Defence of Radical Disobedience,” Journal of Applied Philosophy 15, no..1 (1998): 32. 17 John Rawls in James Rachels, ed. Moral Problems: A Collection of Philosophical Essays (New York: Harper & Row, 1975), 140.

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use civil dissent to reach their demands. I believe he would support both the ideas of justice demanded by the “99 percent” and their methodology for achieving their goals. He does so with a universal appeal to rational discussion and open ended dialogue to a broad range of “rational, enlightened persons.”

MAKING GLOBAL CAPITALISM MORE JUST BY IMPOSING AN INTERNATIONAL FINANCIAL TRANSACTION TAX1 JOHN RAINES

Capitalism has always been about making money, but until recently that mostly meant making things in factories or harvesting things from fields that others would need and would buy. But in recent years that has dramatically changed. The vast proportion of international financial transactions has become purely “fictional”—money using its money to make nothing except more money. The statistics I am about to cite to support this claim are quite astonishing, indeed so staggering as to invite incredulity. I will depend upon the statistical work done by the French economist Francois Morin, who is also a member of the Governing Board of The Bank of France. In his 2006 book entitled The New Wall Of Money he admits that his findings are so startling as to be of “a vertigo producing nature.” He speaks of the recent financialization of the world economy and “the capacity of finance to crush, with its huge weight, the real economy.” That is the problem Morin is trying to document: a new global casino that threatens the financial base of the real economy where every day we humans try to find work in order to live.2 What happens if we compare the total US federal expenditures in 2002 with the total of exchanges in the exotic financial products called derivatives in the same year? The reason I am using figures from 2002 is 1

I was helped in the research for this paper by Patricia Kolbe, a graduate student in the religion department who is also a trained stock broker, and also by Daniel Jacobs, an undergraduate major in mathematical economics at Temple. 2 Quoted from Francois Morin, Le Nouveau Mur De L’Argent: essai sur La Finance Globalisee (Seul, 2006, from pp. 48/49. The sources for the following statistics cited by Morin are: FMI (Key Financial Centers), also La Banque Mondiale (Quick Query), also BRI and La Bangue Central Europeene (Target), and The Federal Reserve (Fedwire).

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the fact that Morin had those figures in hand as he wrote and published his book in 2006. In 2002 our total federal expenditures (both on and offbudget) was $2.01 trillion. That same year, transactions in derivatives were $699 trillion—more than three hundred times as much money as the total federal expenditures in that year. An even more dramatic comparison is to contrast the total global Gross National Product in 2002 (combining all 199 nation-states of the world)— to compare that with the total international financial transactions, which included speculations in commodity futures, currency exchange rates and other derivatives and exotic financial products. The global Gross National Product in 2002 was $32.4 trillion. Now compare that to the over $1,122 trillion in international financial transactions in that same year. Notice that what Morin does is somewhat unique in his field. He does not measure the value of the financial products in trade at the end of any given reporting period, products which in the meantime could and most certainly were traded innumerable times. Instead he measures what he calls the “circulation of liquidities.” Morin pictures his way of measuring with this metaphor. One can, he says, “measure the volume of water in a reservoir or the volume of water which has passed through the reservoir during a given period.”3 Morin is doing the latter, and he admits that the results “can give one a case of vertigo.” Here is his table of the global financial transactions for 2002. 1. Transactions in Derivative Products 2. Currency Exchange Transactions 3. Purchase of Financial Titles i.e. stocks and bonds 4. Transactions in Goods and Services i.e. the real economy

$699.0 trillion4 $384.4 trillion $39.3 trillion $ 32.5 trillion

The ratio of money invested in the real economy ($32.5 trillion) compared to money making money and only money in the fictional economy ($1,122.7 trillion) was 1 to 35—35 times more money embedded in speculative transactions as compared with the “goods and services” circulating in the total global real economies. Notice also that stocks and

3

Ibid. Concerning derivatives, it has recently been noted that “a segment of the market has fast become its most important one: derivatives…it has grown around 24 percent per year in the last decade.” Quoted from “The Global Derivatives Market, An Introduction” by Deutsche Borse Group, April 2008. 4

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bonds, thought to be the signature activity of global finance, are in fact only a small percentage of global financial transactions! However strange or even preposterous these statistics seem, it is interesting to note that in Europe Morin’s statistics have not been criticized but instead have entered into conversations concerning the need for a corrective push-back against this speculative frenzy of the past thirty years. For example former President Sarkozy of France in a speech in January 2010 before the 40th World Economic Forum in Davos, Switzerland said: This crisis is not just a global crisis. It is not a crisis in globalization. This crisis is a crisis of globalization. Globalization gave rise to a world in which everything was given to financial capital and almost nothing to labor, in which the entrepreneur gave way to the speculator, in which those who live on unearned income left the workers far behind, in which the use of leverage, to an unreasonable disproportionate extent, created a form of capitalism in which taking risks with other people’s money was the norm, allowing quick and easy profits but all too often without creating either prosperity or jobs.5

One could wish that those words were spoken by President Obama! But the truth is that Sarkozy speaks for a gathering storm of concern in Europe, but a concern given little voice or visibility on our side of the pond. Here is a problem with my argument. Total hedge fund assets in 2002 were less than $1 trillion. How could that less than $1 trillion add up to that astonishing $699 trillion in derivative transactions that Morin reports? The answer is twofold. First, hedge funds play an important part but are still only a fraction of the players in the global casino, the rest of whom can be found within what’s called “the shadow banking system.” These are financial institutions that act like banks but are not legally defined as banks and thus operate outside of federal banking regulations. 6 The second part to the question of how $1 trillion in hedge fund assets in 2002 lead to a significant proportion of the $699 trillion in derivative 5

Quoted from a pre-delivery embargoed text. Put briefly, the “shadow banking system,” sometimes called “the parallel banking system,” is the portion of financial institutions that act in the capacity of banks without being regulated as banks. At its peak, shadow banking accounted for $20 trillion in assets, which makes it bigger than the traditional banking sector, which unlike the shadow system must operate under federal reserve requirements and FCIC insurance premiums. In the recent financial melt-down virtually the entire crisis took place in the shadow banking system, precipitated by the now-infamous collateralized debt obligations.

6

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transactions is found in that word “transaction.” For example, one portfolio in a hedge fund might be worth, let us say, $10 million. The fund manager might turn over that $10 million portfolio two or three times a week. Moreover, the investment is likely to be highly leveraged, sometimes at levels of $1 to $40. In other words, for every dollar put up by a fund manager, up to $40 of credit can be used to increase the amount of the investment without the fund needing to commit more of its own capital. This vastly increases profits when things go well, but also vastly exacerbates losses when things go badly. It thus adds significantly to systemic risk. That risk was realized in the recent past and has led to government rescue (using public tax dollars) to save those investors, such as banks, that were considered “too big to fail.” What induces managers to move a portfolio so often or leverage their investments so significantly? It is the size of his or her pay check, because that paycheck results usually from a 20 percent cut of the total yearly profits of the fund they are managing, and the greater risk of the investment the greater potential profit to the manager (and to the investor). Moreover, this is what the investor insists upon—quarterly glowing results or they find a different hedge fund. This in turn has negative effects upon the real economy where employees work and live, as CEOs in response to insistent profit demands by investors transfer risks to individual workers in terms of health insurance costs, retirement benefits, etc. The result is to transfer security and wealth to the top and burden individual workers with increased daily exposure and expense. The recession, of course, makes the bargaining position of employees even more precarious, increasing the relationships of domination in the workplace. There is also a tax incentive. A goodly portion of that desired thing called profits, whether of managers or of investors, are then taxed in the USA not as “income” with its 35 percent maximum marginal rate but as “capital gains” and its 15 percent rate. Also, most hedge funds are registered off-shore in places like the Cayman Islands and so escape, in part, the grasp of the IRS. Put together the pay incentives for managers with a tax system that rewards speculation in the “fictional” economy as contrasted to the “real economy” where profits and wages get counted as “income”—put these two together and you have the formula for the rapidly expanding inequalities both of income and of wealth that has come to dominate the international political economy over the past thirty years.7 7

For statistics on global inequalities see Branko Milanovic, Worlds Apart: Measuring International and Global Inequality (Princeton Un. Press, 2005).

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Why increased inequality? Because it is money making money from money without passing through factories or fields, without creating jobs or paychecks. It is money removed from investing in and creating an expanding productive capacity, a productive capacity that could, but now will not, employ the youth of the next generation in anything but low-paid jobs. In addition, this type of investment often hurts the real economy in other ways, for example driving up commodity prices and manipulating currency exchange rates. This, then, is my argument. By the standards of our Western religious traditions this practice is to be morally condemned and therefore changed, returning by way of taxation some of those privatized profits to the purposes of the common life of the human community. That new Financial Transaction Tax (FTT) imposed every time a wager is made in the casino which global capitalism has largely become is where I am headed. And it needs to be a tax imposed world-wide—with definitive punishments for rogue nations or players who try to escape the system. I am not alone in this idea. Others interested in a transaction tax include prominent economists such as Simon Johnson and Joseph Stiglitz, both former chief economists for The International Monetary Fund, as well as financial heavy hitters like George Soros and Bill Gates. They have argued for such a tax both on moral grounds but also for purely financial reasons--to assert a degree of control over spiraling market volatility. It also includes important political actors besides Sarkozy of France, namely Merkel of Germany and heads of government in Italy, Spain, Belgium and Austria. In fact, the European Council has issued a detailed proposal for instituting a financial transaction tax which they have presented to the G-20 nations several times over the past few years. The relative lack of discussion on such a tax in our own country is both disturbing and instructive. The exception which proves the rule is the legislative proposal by Senator Harkins and Congressman DeFazio that would impose such a tax, legislation which for the past three years has been DOA in Washington. Why is so much more money invested in speculation than in the real economy of goods and services? Here is a fact that most of us do not know; and it is an important fact. It is more risky in terms of anticipated returns to invest in the real economy, where things are made and then must be sold, than it is to invest in the fictional economy. The speed and liquidity of the financial transactions make them more desirable for hedge fund managers and their investors. Why speed and liquidity? because it is easier to shed a loser. If you’ve put your investment in factories and machinery, you simply can’t get the investment back that quickly if the market goes sour. Avoiding the real economy makes risk more

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manageable. Thus, for responsible institutional investors such as pension fund managers or managers of university endowments it is a matter of prudent judgment to abandon “the commons.” That reality is the fact we must address and change. We must change the formula by which what is considered “prudent” is conceived and calculated. That change will be imposed by what I call a Global Financial Transaction Tax because it will change how after-tax profits are calculated. And that will change how investors make their decisions, where long-term investments (and thus fewer taxed transactions) in the real economy begin to appear more prudent and profitable. But before I go there I must first make my case for the ethical priority of the common good over against individual profit and advantage. I will seek to anchor my argument for a transaction tax in the moral wisdom as inherited by both Christianity and Islam.

Thomas Aquinas on “Usury” It seems such archaic language to talk about “the common good” or to speak of the state from which I come here in the United States as “the Commonwealth of Pennsylvania.” Can anything relevant to today’s financial and moral debacle be retrieved from those ancient discourses concerning usury in Christianity and riba in Islam? The central text in the reflections of Aquinas on private property and its proper uses is found in Summa Theologiae II-II, question. 66, article 2 entitled “Whether It Is Lawful For A Man To Possess A Thing As His Own.” Time and again in subsequent papal documents it is this text to which succeeding Popes return in order to position themselves on these issues.8 That text deserves our attention. It begins in a way typical of St. Thomas: Objection I. It would seem unlawful for a man to possess a thing as his own. For whatever is contrary to the natural law is unlawful. Now according to the natural law all things are common property, and the possession of property is contrary to the community of goods. Therefore it is unlawful for any man to appropriate any external thing to himself.

Thomas then goes on to state his own opposing position, saying:

8

One thinks of Pope Leo XIII in Rerum Novarum (1891) or Pope Pius XI in Quadragesima anno (1931) and more recently a text I will refer to later, Pope John Paul II in Laborem Exercens (1981).

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I answer that, Two things are competent to man in respect to exterior things. One is the power to procure and dispense them, and in this regard it is lawful for man to possess property. Moreover this is necessary to human life for three reasons. First, because every man is more careful to procure what is for himself alone than that which is common to many or to all; since each one would shirk the labor and leave to another that which concerns the community, as happens where there is a great number of servants. Secondly, because human affairs are conducted in a more orderly fashion if each man is charged with taking care of some particular thing himself, whereas there would be confusion if everyone had to look after any one thing indeterminately. Thirdly, because a more peaceful state is insured to man if each one is contented with his own.

But in a reflection on usury that is soon to follow Thomas added this important restriction on the uses of that private property he called money (and we call capital). “Now money was invented chiefly for the purpose of exchange, and consequently the proper and principal use of money is its consumption or alienation whereby it is sunk in exchange.”9 That is to say that the whole purpose of the private property called money is to facilitate exchange, to escape the limitations of exchange when exchange is confined to the face-to-face barter of perishables. That use of money, for Aquinas, is rational. But the use of money in usury, that is “to take payment for the use of money lent,” that for Thomas is irrational in that it requires the borrower (and the collateral required) to bear all the risk, putting lender and borrower into a sharply differing status. In contrast, for Thomas money should draw us together in a dense system of interdependence, not separate us into “the safe” and those “put at risk.” Why is that? It is because the whole purpose of that private property used in exchange which Thomas called money, and we will call “capital,” is to increase the common good that results from the industrious and orderly exchange of the surplus of our labor. Money is not first of all or last of all something private, but something that enhances exchange, facilitates the mutual dependence of each upon the labor of others. How different this conception of money and its moral purposes is, and how distant it is, from the dreams and practices of investment managers and their investors today! What we learn from St. Thomas and those in subsequent generations who learned from him is this. Work is not first of all or last of all something private and individual. It is something social and historical. Each generation sits down to what more recently Pope John Paul II called 9

Summa Theologiae II-II, question. 78, article 1.

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“the great workbench of humanity.” It is a workbench prepared for us by previous generations once seated at that bench we now temporarily occupy. Yes, work is what in today’s world we do “to make a living.” But it is far more than that; it is the unique human species’ way of doing our living together over time, constantly transforming our material dwelling and thus preparing the way for those who will follow and replace us when it becomes their turn, in the great procession, to take their place at the workbench of the human future.

Islam on “Riba” It is this same sense of the superior moral claims of the community over against individual interest and greed that moved the Qur’an to label riba, the taking of interest on loans, as haram or prohibited. When Islam appeared in Arabia, society was sharply divided into an elite of political rulers and wealthy merchants and the majority population that was mired in poverty. The cause which the Prophet Muhammad led was to reduce this inequality and move in the direction of an economy rooted in a community (ummah) of shared destiny. The revelations from Allah which the prophet received and transmitted commanded precisely such a task and goal. At the time, trade was an important and often the only way of making a living. And trade depended upon exchange. Both merchant and customer had need of money (gold, silver, etc.) and that need led to money lenders, who were the engines of exchange. But what was to be the nature of the transaction? How could indebtedness, loss of collateral and the resulting impoverishment be avoided? That is where the Qur’an, the sunnah (sayings) and sharia (laws) made their intervention. Lending with interest was prohibited. The exchange must embody mutual risk and, hopefully, the desired mutual benefit. Neither party to the transaction was to be independent of the fate of the other. Society was to be a community of shared destiny. Money used in trade has for its fundamental purpose not the acquisition of private wealth but the expansion and elaboration of exchange. And the purpose of exchange is to embody in economic practices a community that is made into a community (an ummah) by its common destiny in an ever more elaborate division of labor from which all members can and should derive benefit. That this prohibition against riba (interest-taking) was a radical contravention of established practices is made evident in the language of

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the Qur’anic verses which announce this prohibition and what happens to those who ignore it. Here are two such verses. Those who devour interest-taking will not stand except as stands one whom the Evil One by his touch hath driven to madness. That is because they say: ‘Trade is like interest-taking,’ but God hath permitted trade and forbidden interest-taking. Those who, after receiving direction from the Lord, desist shall be pardoned for the past; their case is for God (to judge); but those who repeat (the offence) are Companions of the Fire; they will abide therein (for ever). (Q, 2:275)

And again, “O ye who believe! Fear God, and give up what remains of your demand for interest-taking, if ye are indeed believers. If ye do it not, take notice of war from God and His apostle; but if you turn back, ye shall have your capital sums; deal not unjustly and ye shall not be dealt with unjustly” (Q, 2:278-279) Unlike the Christian West, which long ago abandoned the religious values and practices that prohibited usury, those engaged in banking practices in a number of Muslim-majority nations have sought out and established an Islamic-approved alternative to the banking system that in the modern world governs global capital transactions, and one that is built precisely upon the taking of interest. Countries such as Malaysia, Indonesia, and Dubai are examples. And in Turkey, the Gülen Movement (inspired by the Sufi scholar Fethullah Gülen) has established 117 branches of a bank which abjures the taking of interest on credit and instead has sought out financial practices which respond to modern banking needs that are, nevertheless, consistent with the prohibition against riba. Muslims living as minorities in Western capitalist states face more difficulties in trying to answer their financial needs and still be consistent with traditional Islamic prohibitions. In the United States, for example, Yahia Abdul-Rahman, the author of The Art of Islamic Banking and Finance has founded several interest-free financial institutions. In that book he argues for five models of business transactions that remain both effective and riba-free: 1. 2. 3. 4. 5.

Cost-Plus (Murabaha) Leasing (Ijara) Joint Venture (Musharaka) Money Management (Mudaraba) Financing Future Production (Ba’I ul Salam).

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Making Global Capitalism More Just

As Yahia Abdul-Rahman argues: “Riba-free banks do not lend money but instead invest it in the customer or product” and assume a mutuality of risk with the borrower.10 Under what are sometimes extraordinarily difficult circumstances (think of house mortgages), members of the minority Muslim community in the United States are attempting to remain a community, a kind of counter-cultural community of shared destiny. Just how counter-cultural these practices are is made clear when contrasted with one of the favorite financial practices used by Western hedge funds to protect themselves (but not their customers!) against loss. It is called “selling short.” The hedge manager, using the investor’s money, will purchase what he/she thinks will be winners in the market, but at the same time engages in a practice that takes advantage of the investor by making a bet that covers the loss (to the hedge fund but not to the investor) if the original investment goes bad. Here is how it works. You borrow shares you think are overpriced and likely to decline from a broker and then sell them on the open market. When the predicted decline happens, you buy back the lower priced shares and pay off the broker. The profit to the hedge fund (but at the expense of the individual investor) is the difference between the original (inflated) price and the new lower price of repurchased shares. It is reported that precisely this policy was pursued by traders at Goldman Sachs in the housing bubble that in 2008 triggered the Great Recession. At the same time employees at Goldman Sachs were selling credit default swaps to investors who thought the price of houses would continue to inflate, they were also selling short, betting against the investor without telling the investor. There is a Wall Street saying that states this policy quite exactly. It goes like this: “bulls get fed and bears get fed but pigs get slaughtered.” Given this relatively recent transformation of international financial transactions into a casino like character, it seems an appropriate time for Christian ethics to renew that older discussion on usury but now applied to modern trading practices. That is what I am attempting here.

10

Yahia Abdul-Rahman, The Art of Islamic Banking (Wiley, 2010), 129.

John Raines

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Imposing an International Financial Transaction Tax11 A tax on financial transactions makes more costly and therefore less desirable the high turnover rates of speculative investments. On the other hand, it makes long-term investments in the real economy more inviting. Costs count. The higher costs imposed by a transaction tax would change the formula for prudent investments. And that would change the behavior of big time institutional investors such as pension fund managers. For those of us relatively new to this discussion, it may come as a surprise to learn that as recently as the early 1990s 38 nations were imposing one form or another of a transaction tax. These included sizeable markets such as Great Britain, Japan, Germany, France and Italy. Even the United States gave it a thought when, in response to the market crash in 1987, House Speaker Jim Wright proposed such a tax. At the time that conversation went nowhere, and soon other countries first reduced and finally eliminated the tax because they thought, quite correctly, that removing the tax would make their domestic market more competitive in attracting foreign financial flows. But recently the conversation has revived and on September 28, 2011 the European Union proposed a financial transaction tax that would, in the words of Tax Commissioner Semeta, “cover financial transactions involving stocks, bonds, derivatives, structured products and other types of trades.” The European Union proposal has received strong support from major players, including Germany, France, Spain and Austria. But it has also been criticized and 11

A recent Vatican document refers to this new purely speculative trading practices, saying: “In material goods markets, natural factors and productive capacity as well as labour in all of its many forms set quantitative limits by determining relationships of costs and prices which, under certain conditions, permit an efficient allocation of available resources….[But] since the 1990s, we have seen that money and credit instruments worldwide have grown more rapidly than the accumulation of wealth in the economy, even adjusting for inflation. From this came the formation of pockets of excessive liquidity and speculative bubbles which later turned into a series of solvency and confidence crises that have spread and followed one another over the years.” The document concludes that “taxation measures on financial transactions with fair rates modulated in proportion to the complexity of the operations, especially those made on the ‘secondary’ market…would be very useful in promoting global development and sustainability according to principles of social justice and solidarity.” That tax is precisely what I am proposing here. (Quoted from “Towards Reforming the International Financial and Monetary Systems in the Context of Global Public Authority” issued by the Pontifical Council for Justice and Peace on 10/25/2011, >http://www.radiovaticana.org/en1/Articolo.asp?c=532223