Monetary policy these days is complicated, ineffective, and quite possibly immoral. The complexity is inevitable; there is no simple way to ensure that the supply of money and credit is appropriate in a large modern economy. The ineffectiveness is evident: central bankers let that supply grow too fast before the 2008 financial crisis, and have unable to return monetary conditions to normal since then.
“It has been computed by some political arithmetician that if every man and woman would work for four hours each day on something useful, that labour would produce sufficient to procure all the necessaries and comforts of life … and the rest of the 24 hours might be leisure and happiness.”
Institutions need to evolve over time. Institutions must rely on their traditions. These two statements may sound irreconcilable, but institutions – companies, hospitals, government agencies, schools, political systems, churches – can only thrive if they manage both to change and to remain true to their principles. In his surprising resignation, Pope Benedict XVI has given an example of the right balance.
What is the right size for pensions? That question can be approached in two ways: “then” and “now”. Pensions, and other economic arrangements to support elderly people, may be considered repayments for what they did back then, when they were young. Alternatively, these payments may be considered as a share of output right now. In rich countries, the two approaches are in conflict. The “then” logic, which is based on promises made long ago, supports higher pension payments than the “now” logic, which is mindful of rapidly ageing populations. Politicians struggle to find acceptable compromises between the two approaches.
The Islamic approach to finance was once the most advanced in the world. The period of pre-eminence ended six or seven centuries ago, but the religion’s fundamental insights into the field could help form a financial system suitable for the 21st century.
When I was a boy I was fascinated by my parent’s copy of “The Family of Man”. The book, taken from a 1955 photography exhibition at the Museum of Modern Art in New York, was like a window into the big world. The beautiful images of people from many countries showed that the human condition was essentially the same everywhere: we all went through the same noble story of birth, love, struggle, religion and death. Much later I learned that the photographer Edward Steichen, who designed the show, wished to inspire exactly such sentiments. In the words of Carl Sandburg, taken from the book’s prologue, the human race was “one big family hugging close to the ball of Earth for its life and being”.