People think that bankers and the finance industry is based on one thing — making money. But the whole of finance is premised on an ethical position, according to the economist Nick Silver.
That position is not expressed, verbalised or “out there”. It’s assumed that the market and banks are ethically and morally neutral, but they’re not. They’re buying into the idea that the goal of their work is to improve society, to make people better off. And that is their ethical position.
The problem is, according to panellists at a Religion Media Centre online briefing held on 11 October, this goal is not working.
And the ethics underpinning the current financial chaos in the UK are transparent — lack of justice, less love for the neighbour, personal independence at the expense of communities, decisions without evidence and a democratic deficit. All of which points to even more fundamental questions of what kind of society do we want to live in?
Mr Silver, founder director of the think tank Radix, said the regulatory system under which banks operate was based on allocating capital efficiently to where it was most needed and therefore improving society. There were two obvious questions: is this really what we want as a society? And does it work?
The system maintains wealth inequality and there was a recognition that a new system was needed, but it was very difficult to break out of this. People can see change is needed but changing the rules of the system are much more difficult than that.
Regarding the government’s recent mini-budget to incentivise growth by trickle-down economics, lowering tax for the rich on the basis that it would funnel down into growth was, he repeated, several times, bulls**t.
Their position was not internally consistent, it prioritised growth without additional measures on improving workforce skills, productivity or planning. That was not ethical.
Trickle-down economics was deeply problematic for Rachel Muers, a professor specialising in modern Christian doctrine and ethics at Edinburgh University.
The presumption that everybody’s aim was to become powerful, strong, independent and invulnerable was a fantasy and a “denial of one of the most fundamental commonalities of humanity, that we’re vulnerable, interdependent, we rely on one another and on the natural environment”.
Christian ethical principles place the weakest most vulnerable people at the centre of global decision-making. By the treatment of those people will nations be judged. “I think we’re not doing great right now, to be honest,” Professor Muers said.
Those values are shared by Omar Shaikh, managing director of the Global Ethical Finance Initiative, who told the briefing that an Islamic principle was that people would be held to account for every single penny — how it was earned, spent, used for charitable work.
“How do you put the goodness of blessing into an Excel sheet? It’s something beyond simple economics,” he said.
His recent work on the Edinburgh Finance Declaration identified six shared principles, including the key core concept of stewardship. Wealth should be understood in a spiritual, broader concept than just a calculator.
The problem with trickle-down economics was that “we’re not starting from a level playing field”, he said. It wasn’t about the common good.
Eve Poole, an author and former Third Church Estates Commissioner, identified meritocracy as the basis for the new government’s economic policy: the idea that we can all flourish, pull ourselves up by the bootstraps and get as rich as we possibly can. “There isn’t really evidence to support it,” she said. Further, the whole concept created a sneering attitude to the poor, on benefits, not on the property ladder, undeserving and labelled as “scroungers”.
“I disapprove of it like mad from a Christian point of view, because it is a fantasy. It’s not based on any evidence and it’s also very, very inhuman,” she said.
The idea that unseen forces, Adam Smith’s notion of the “invisible hand”, would automatically correct the market and enable efficient allocations, was predicated on a Judeo-Christian god, this idea of an “avuncular gentleman sitting on the cloud, who would keep an eye on that”.
She concluded: “This bears no relationship to reality, which is a matter of justice for me.”
There was some discussion as to how realistic it was to expect the markets to change. Mr Shaikh referred to endowments in the Ottoman Empire, which ran services such as education and healthcare in an entirely separate system from government taxes and regulations. Shared moral principles would tell the technocrats administrating this system not to do things that were harmful to society, but they could plan for long-term goals. Further exploration of the idea of long-term institutions was needed, he said.
Rachael Saunders, deputy director of the Institute of Business Ethics, had met business and banking leaders in recent weeks as they grappled with the financial chaos. They had created hardship funds for workers dealing with the cost-of-living crisis and designed pay increases to help those that needed it most.
But there was a straw man round the table, she said, which was the assumption that it was the bankers and finance markets that were behind the government’s new policy. They were incredulous.
“I was in a meeting recently, and those investment bankers were dismayed and confused, actually, by the recent mini-budget and what the intent of it was and its impacts.”
She had also met, through her institute, senior people from retail banks in the UK where the conversation was about being responsible to customers, ensuring that even in a cost-of-living crisis, they were not losing focus on other issues, such as the environment.
“I thought what was really notable about the past few weeks was that no one’s been out in the media or in the public space calling for these policy interventions. I don’t know who the contemporary advocate for trickle-down economics is outside of the current cabinet. And I think that’s what’s really interesting, the political dynamic. Who are these politicians responding to? Who’s asking for this?”
And that was the key for Ms Poole. “We are supposed to be living in a democracy. And this is an extraordinary intervention by a not democratically elected leadership, which is having a massive effect on the citizen.”
She agreed that it was faster to change an economy through consumers and business than through public policy and government, but citizens also had a role. “It is really important that we reflect on that and try to figure out how we can collectively express an agency when things are done in our name that we do not approve of.”
You can watch the entire discussion below:
