A banker told me of his richy rich life. Out with clients in an exclusive bar, the beneficent holders of infinite wealth incurred a bill of £40,000, mostly spent on champagne. The banker was blessed but of course strings were attached. We scratch your back; you scratch mine. On Monday he returned to work all giddy off luxury, made a killing on the markets with the money of the clients; now the clients are richer, and the cycle continues. Pounds for the men who already had the pounds.
The Church of England is in a spot of bother. Moralising against the exploitative practices of the payday lender, Wonga, they then find out that their £5bn pension fund, which has a policy that explicitly bans it from investing in payday lenders, holds an investment in Accel Partners, a US venture capital firm that is one of Wonga’s biggest investors. Ouch.
Repentant but undeterred, the Archbishop of Canterbury is still committed to “competing you out of existence” through the creation of credit unions. A titanic battle has been set of David and Goliath proportions: the church, the needy man’s David and the purveyor of religious instruction, against the beastly, Goliath-esque Wonga, bountiful in their provision of easily accessible loans at ridiculous high annual interest rates that assist hapless individuals manage their cashflows. The Church has a bit of a PR problem at the moment, with gay marriage and all, and they are not known for their financial acumen. Wonga spent £16m on advertising in 2011 and has a number of high-profile TV and football club sponsorships, including a four-year deal with Newcastle United starting in the 2013/14 season. This brouhaha has given them extra publicity!
So what is the non-church going man needy for cash to do: wait for the credit union to swoop in and rescue him from the clutches of the feeding vulture of Wonga; or go to his iphone app, click (sorry, touch) one or two buttons and hey presto there is the money to pay for the leak in the ceiling? No, the church has a long way to go before it can effectively ‘compete’ but credit has to be given to the Archbishop’s desire to fight. He did not sermonize on the need to follow Jesus for salvation and propound abstract principles. He saw a problem and offered a solution. Archbishop Justin Welby wants to get into the ring. He wants to rumble.
Not that his words lack precedent. The Church does like to get down and dirty if the need arises. In some small towns in Italy in the 15th Century, the Jewish community were the de facto issuers of credit. Reviled were they for their interest charges, but the shylocks were accepted because where else would people get money? Franciscan preachers were disgusted. On a wave of fire and brimstone, they entered towns presenting sermons to huge gatherings of people, condemning the Jewish moneylender and their iniquitous practices, fulminating against the people for taking usury and bringing in God’s wrath, and calling on inhabitants to appease His wrath by foregoing usury.
An expiatory procession would follow, during which each member of the community was supposed to contribute to the formation of a lending institution, sponsored by wealthy Christians, that extended credit on a non-profit basis. This was known as ‘Monti di Pieta’. The community would invest in the initial capital of the Monti, normally in exchange for a plenary indulgence (the church, as representative of God, forgives the individual for his sin or sins). With the money from the Monti, individuals would receive credit.
Many Monti di Pieta were created, but problems plagued it. They were continually reliant on charity, and without the profit motive they were inefficient. But people, due to their religious faith, were attracted to the Monti and donated for the remission of the sins. Moreover, the Jewish community would have to pay tax to the Monti as well as offer their expertise to set it up.
The Monti di Pieta evolved to become like banks in medieval Italian society although they were hampered by their charitable status. Their mutual structure was sustained because individuals were so worried about their religious destiny, they donated. This was a significant incentive in a pious society. Today, society is not pious; their objectives are not divinely orientated.
Instead, their objectives are money-orientated, and that is why Wonga works in a post-modern world. Keynes recognised that the quest for money preoccupies 9/10 of a man’s soul; religion does not. There is no worry about hell and damnation. It is about the here and now.
So, the here and now means indulgence; indulgence to satisfy ones desires. Enabling indulgence only occurs with the medium that allows acquisition of goods and services which satisfy: money. And those richy rich have loads of it, and they want more. If that means buttering up a banker to invest on his behalf by buying $1000 champagne, or exploiting the demanding customer (remember the individual demands, Wonga is not forcing the individual to become a customer) because he is in a temporal period of need, then so be it.
For the Church to step in with the offer of credit unions, it is doomed to failure. The Monti di Pieta worked because people were scared and because the state supported the Monti. Today, the people are scared of not having money, and the state is not antagonistic to the profit maximisation needs of Wonga. But at least Archbishop Welby is trying and he has kicked up a storm. It will not last.