DN Editorial: Faith & finance

TWO PROMINENT Italians have recently weighed in on Wall Street excess.

One is Martin Scorsese, whose "Wolf of Wall Street" is the debauched bio of a crooked and high-living broker. The movie's a hit with critics, and traders have been howling in approval at Manhattan screenings.

These same Wall Streeters have been less receptive to criticism offered by another Italian (by profession, if not birth): Pope Francis.

His "Evangeli Gaudium" denounced "the absolute autonomy of the marketplace and financial speculation," and questioned the efficacy of trickle-down economic theories.

Talk radio labeled the pope as a Marxist, though he simply called for a "return of economics and finance to an ethical approach which favors human beings."

The Wall Street Journal sent a small army of editorialists after Francis. One sniffed that while the pope may be a "genius," he is clearly not an "economist." Well, we can all thank God for that.

It was the devout free-market economists, bolstered by their zealous belief in complex econometric models, who thought it would be a good idea to let unregulated Big Finance loose on the U.S. economy.

Unfortunately, these true believers were also in charge of bank regulation. They ignored warnings that mortgage fraud was growing to epidemic proportions in their deregulated hothouse because they believed that "efficient" markets would always self-correct. And they did correct - after 12 million people lost their jobs/homes/savings, and the Fed pumped $4 trillion into the banking system.

This shows how you can be an "economist" and not be a "genius." Only someone who's never seen "Goodfellas" could believe that greedy, unsupervised people will not commit systemic fraud.

Even now, these same economists ignore the damage done via the derivatives and synthetics they encouraged. Thus, they display what we might call a "faith-based" belief in the goodness of unchecked finance.

The pope, on the other hand, has behind him the data-based work of researchers like Emmanuel Saez (Cal Berkeley), Thomas Picketty (Paris School of Economics) and Simon Johnson, of the IMF, who say that as Big Finance gobbles up a larger share of U.S. GDP (9 percent vs. 5 percent 20 years ago) and corporate profits (40 percent at the height of the bubble, vs. 10 percent 20 years ago), the real economy suffers. Wages stagnate, opportunity dissipates, mobility declines.

In western economies, the rise of deregulated finance has coincided with the withering of the middle class, chronic poverty and the rise of the super-rich. Only someone operating outside the boundaries of logic could see this as a coincidence.

Still, some continue to insist that while the market may engage in some "creative" destruction here and there, free markets are ultimately and eternally efficient.

Heck, they're almost immaculate, like . . .

Well, Francis is too modest to say. But too good a leader not to call for a form of ethical capitalism that promotes the interests of all.