This post comes from a number of inspirations provocations. First Duncan responded to Open Left’s call for a debate on the Future of Capitalism. His view was, basically, that finance should no longer be the Master but the Servant of industry. There will be more to come from him, so watch that space. Duncan knows his stuff, it will be worth it, and ought at least to explain how we can bring more effective capital to bear on an underperforming economy.
But then Ken Costa took up a valuable piece of real estate at the Financial Times in order to call for the markets to be ‘tamed’ so as to make capitalism ‘ethical’. He, too, called for ‘servant’ not ‘master’ and filled his column with fine words like:
We became identified with the market and lost sight of its real purpose: to enable us to fulfil a duty owed by virtue of a shared humanity to the wider community. Financiers created credit out of nothing but eschewed the responsibility of the creator.
Who is this ‘we’? The Costas? Speak for yourself. What does it mean to say that ‘the real purpose of the market is to fulfil a duty to the wider community’? When I buy a flower, or an iPod, or some cheese or a gilt or a house, what the hell is the duty to the wider community? To make sure that the iPod or Cheese was not too carboniferous?
And what is this thing about Finance being Master? In what sense? As far as I can see, the problem over 2000-2007 is that it was giving away free funds to anyone who came asking for it, like a cheap tart, not a Master. The real masters of my world – Google, Apple, the BBC – have no real need of finance. I think people are getting too excited by the colourful language.
There has never been such a thwacking of abstract straw men as can be found in the dreadful, preachy and wholly meaningless column that Ken Costa forced on the very busy and important people who read the FT, and he should be ashamed.
Now, I am tainted by some of the Oxford analytical tradition in philosophy, remotely influenced by Alfred Ayer and logical positivism. It has no doubt been utterly disproved by some other philosophy, notably later Wittgenstein. But at the core of the movement is some very justified irritation with the metaphysical nonsense that is frequently spouted by people clashing their abstract nouns together. Costa does this in spades when he calls on a Market to be Moral.
Because as far as I can see, it would be impossible to discern a moral market from an immoral one. It’s just a set of exchanges between humans. What makes one moral and other immoral? Perhaps in an immoral market, the participants ghoulishly rub their hands together, snicker wickedly, and spend whatever they make on baby seal purses, whilst the moral market sees the participants smiling sympathetically at one another and pledging 10% of their proceeds to developing a Green Donkey sanctuary. Or something.
Tell us more Ken:
The task we face is to recover that discourse, to rediscover the moral spirit of capitalism so that it best serves all people
Any clearer now? No, thought not.
The excellent and clear Tom Papworth, arguing with me about macro-whatever on a LibDemVoice post, points out one illustration of inappropriate moral language for plain old transactions:
Actually, in my experience it is usually the lender who is condemned as the usurer and the borrower as a victim of circumstances. The sooner we accept that lending and borrowing is just a transaction. like selling and buying, the better
My previous point had been that savers were portrayed by some political types as “innocent victims”, and borrowers as feckless. Which is (a) meaningless – why is foregoing consumption necessarily more virtuous and (b) not very useful in a demand recession. Again, I am not clear on how some extra moral language might have helped the financial markets from being f***ed in the last few years:
Over to Ken Costa to help me again:
That moral spirit is distilled in the simple principle: “Do unto others as you would have them do unto you.”
Aaaaah. Now I get it. But hold it a mo. How would that work in a market? When you transact, you normally rely on someone wanting the opposite of what you want. I am a buyer, you are a seller. It thrives on difference.
But, Ken gives us an example:
Its practical power is evident: if the purveyors of sometimes dishonest sub-prime mortgages had followed this golden rule a lot of misery would have been avoided.
Um, what? The people lending the money thought the people borrowing the money wanted it. The borrowers thought they could pay back. The buyers of the securities thought they could sell them on. They all got it wrong. What made the subprime mortgage ‘dishonest’? Its failure to have an accurate statement of the entire future path of the house prices in the prospectus? Ken, you need to help us with some practical steps:
We need to take three practical steps: example, education and engagement. Example means leaders must set the tone. Education means engendering a robust business culture in tomorrow’s leaders and establishing ethics committees in companies on a par with, say, the remuneration committee. Engagement means forging links with all the other social partners who make business possible, increasing charitable giving and tackling environmental degradation and poverty.
These are not practical steps, they are three words beginning with E. What the **** the last one has to do with the price of beans is quite beyond me. “Give more to charity and stop wrecking the environment” – what is this to do with the workings of markets? Markets are a means by which buyers and sellers come together. And what does ‘leaders must set the tone’ ‘mean? Next time Gordon Brown buys a sandwich, he should pay over the correct amount? Not swear at the shopkeeper? And does this canting busybody really think that an Ethics Committee at a company will do . . . what exactly?
“Sir, I think we have struck £100bn of oil. What shall we do?”
“Let’s ask the ethics committee . .. . ooh, they’ve emailed back. Ignore the oil, set up a basket weaving collective that gives half the profits to a donkey sanctuary”.
Seriously, this sort of meaningless drivel (a) wastes newsprint (b) makes politicians think they are doing something when all they are doing is making pleasing noises to one another and (c) annoys the living hell out of me. In an email to a friend pondering some research on this subject, I found myself writing this:
“Markets can no more have the term moral or good applied to them than can a paragraph or an argument or a set of equations or painting. Moral is a term to be applied to human intentions, markets are simply aggregates. I can understand what the Left means by it, but what they really mean is “I want X to happen: so if the market doesn’t do X (say, employ 1m miners, or deliver butter for a penny a pound) I will call it ‘immoral’.” But I find it, to put it kindly, not useful.”
Before I sign off: I had a great meeting with Shelter and loads of others on the subject of Housing taxation. yup, the Mansion tax again. The research by Tom Crawshaw is a fantastic summary of the figures you need on this subject. Unfortunately, the meeting said little about the SUPPLY of houses, without which the house prices booming all the chuffing time problem will not be solved. Again, the Land Tax came up. More on that in the future.