Opinion Valuing values

Why do people feel so strongly that this is a moral issue? Yes,debt and organised morality — well,all right,religion — aren’t strangers to each other. The Quran has a few words to say on usury. The first thing Jesus did in Jerusalem was clear out the money-lenders. But why has it become the central issue today? Is it because,like some articles in The Wall Street Journal have claimed,the economics of the crisis is so complex that business journalists are happier blaming everything on bad people? Or is there something about the financial industry that makes it easier for the religious to worry,for the mob to hoist their pitchforks?

There may be something to the latter thought. What,after all,does finance do? It exists to reduce the cost of finding faraway investment,and thus increase the average distance between a debtor and a creditor. In a world with globalised finance,you don’t rely on your village moneylender: you choose from several banks who’ll repackage your loan to sell to hedge funds halfway across the world. This reduces the cost of capital; but the moral pressure associated with closeness — in which the debtor knew the cost to the creditor of not repaying him,the creditor understood the difficulties facing the debtor — are lost.

Of course,this has happened throughout the economy as its complexity has increased. That’s a good thing,even if it has troubled many throughout the ages. Marx wasn’t happy that “productive relations” in a cash economy were intangible. (“All social rules and all relations between individuals are eroded by a cash economy; avarice drags Pluto himself out of the bowels of the earth.”) Even Alain de Botton worries that work today isn’t connected to its outcome,and that we don’t know where the things we buy are from — and thus that there is little poetry about workplaces or tools today. Few,he says,have written poems about fridges,for example. (Though many,I’d say,have used magnets to write poems on fridges.)

But finance is different from any of this. As Margaret Atwood pointed out after the credit crisis hit,“in Aramaic,the language that Jesus himself spoke,the word for ‘debt’ and the word for ‘sin’ are the same.” And financiers have been the target of populist anger throughout history — not just because of their wealth,but because their wealth has always struck the mob as being less rooted,more mobile,more dangerous. And if finance has always been different,what hope of marrying morality and financial markets?

Markets are not moral. They are,in the end,nothing more than a mechanism to provide prices. Adam Smith’s famous claim that “it is not from the benevolence of the butcher,the brewer,or the baker that we expect our dinner,but from their regard to their own interest” remains pivotal: nothing beats the market economy as a method of harnessing self-interest for the common good. To this way of thinking,let businessmen and financiers be cut-throat; and then let government or charities step in to smooth the rough edges of the world they form. Be amoral at work and then pursue moral ends efficiently. This isn’t a right-wing belief either: Bob Reich,a left-wing economist and former US labour secretary,has been shouting from the rooftops for a while that attempts to moderate this model — through pushing “corporate social responsibility”,for example — are doomed to failure.

Markets are not moral. But morality can affect markets. That’s what people are trying to get at today: the lack of some common ethical values can actually harm market efficiency. It is something that’s always been understood,actually; for example,a shared morality can build the trust that’s an essential lubricant for market economies. (Steve Knack at the World Bank believes that it is so essential to credit and repayment that differing levels of trust “explain basically all the difference between the per capita income of the US and Somalia”.) The reason microcredit works is through making debt and credit personal again,by reintroducing shame and honour as levers. As economist Paul Seabright says,the point is that well-designed systems can “make a little bit of public spirit,altruism or professionalism go a long way”. But the systems better be well-designed,and the little bit of professionalism better exist.

What people are really objecting to is two-fold: they object to market virtues being assigned moral worth (“greed is good”); and they object to those operating in markets believing that personal morality is irrelevant. Both make sense. Brown wants bankers to rediscover the value of the craftsman. And economists are beginning to question why financiers should be different from,say,doctors — who are trained to care not only for monetary results but also for a professional code that goes beyond that. After all,a profession which promises quick rewards by risking other people’s money and no social strings attached isn’t likely to get people who strike others as particularly moral individuals.

Sixty years ago,morality and economics mixed,and gave the world the welfare-state consensus. Forty years ago,baby boomers questioned the moral worth of being a life-long company man. Twenty years ago,Thatcher built the City. Today,Brown’s demolishing it. Perhaps,every twenty years we’ve got to look at market structures again — and bring them into line with what society demands.

mihir.sharma@expressindia.com