Six years since the financial crisis and the City is still largely as short-term profit-focused as ever. It was refreshing to hear that admitted by Christine Lagarde, head of the IMF, and Mark Carney, governor of the Bank of England, at the Inclusive Capitalism conference in London on Tuesday. But it was even more refreshing to note the language these two distinguished commentators employed in suggesting ways forward. Words such as “trust”, “values”, “vocation”, that would have been alien before 2008.
Mark Carney observed that "it is necessary to recognise the importance of values and beliefs in economic life" and Christine Lagarde noted that "trust is the lifeblood of the modern business economy".
Any kind of moral framework seemed to have been abandoned in the run-up to the crash, as the world of business sought to create a new theology based purely on self-interest rather than recognising that self-interest is only one part of the human psyche. Lagarde said in the ten years leading up to the financial crisis, capitalism had become “more extractive than inclusive”.
Citing Pope Francis, Ms Lagarde expressed concern at the rising levels of inequality – the “root of all social evil” – which she said cast a “dark shadow” across the global economy. Tackling this is linked to the issue of trust she raised. A yearning for relationships and the trust that relationships require is part of what it is to be human. Seeking a common good through a higher purpose leads both to greater self-fulfilment and a more equal society.
Mr Carney used the word “vocation” in describing the role of business leader, and the need for business to have a clearly defined purpose that embraces societal benefit. “Business ultimately needs to be seen as a vocation, an activity with high ethical standards, which in turn conveys certain responsibilities. It can begin by asking the right questions. Who does finance serve? Itself?”
At best, business is a great platform to bolster human dignity through the medium of work as a vocation and also to benefit society through the goods and services it can create.
Mark Carney also recognised the danger of what has been called the "divided life" – whereby personal and corporate values seemed to be separated and in conflict. “Financiers, like all of us, need to avoid compartmentalisation – the division of our lives into different realms, each with its own set of rules. Home is distinct from work; ethics from law; the individual from the system.”
It was precisely this concern from business leaders that led to Cardinal Vincent Nichols being asked to facilitate what became the Blueprint for Better Business (BBB) initiative. The initiative has given business leaders space to reflect on themes such as vocation, purpose, character and the common good.
The Lagarde and Carney formula to renew the benefits and vigour of a market-based economy draws on ancient teachings from faith and philosophy – between them they cited Aristotle, virtue ethics and such principles as solidarity and reciprocity that are tenets of Catholic Social Teaching.
Renaming capitalism as “inclusive” is not enough. We need to re-join business to society in a shared venture to ensure the market-based economy is used for the benefit of society as a whole rather than for a self-selected few.
There remains a way to go on the journey, but Christine Lagarde and Mark Carney should be encouraged that the elements they talked about can be combined into a practical, powerful and restorative formula for business success, predicated on business purpose contributing to a more cohesive and fairer society.
Loughlin Hickey is a trustee and vice chair of the Blueprint Trust and was formerly Global Head of Tax at accountants KPMG
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User comments (7)
It does make me rather angry that our political leaders have dined out on the Trickle-Down-Theory for years and years, probably decades or even generations without the slightest need for evidence as to its efficacy. At the very meanest level, it would prevent a wealth gap opening up. But we know now for a long time that it cannot even effect that.
Totally mad. What do we say about human dignity when families can just be evicted from accommodation. Crazy.
Also demeaning to use the "unemployed" as scapegoats. All three main parties do this - attaching various unpalatable conditions to unemployment benefits.
We need something much more radical. We need a "citizen dividend" in which everyone is paid a dividend of the benefits from the economic success of the country. This would set free what Stantom calls as slaves of the economic system. They would have greater bargaining power against unreasonable employers. Benefits would be much simpler - since everyone would just get the dividends anyway. No strings attached.
This must surely be a good deal for the country?
Danny Dorling's book 'Unequal health THE SCANDAL OF OUR TIMES' confirms Pope Francis' concerns: "As income and wealth inequalities rise, so too do health inequalities. By May 2010 it had become apparent that men and women had a combined average life expectancy of 74.3 years in Glasgow compared to 88.7 in the Royal Borough of Kensington and Chelsea." A 19% difference. "It is necessary to go back to the recession of the 1880s to find a greater gap between areas." Then in 2011, "the first full comparison of numbers from local authorities showed that men and women in Manchester, Liverpool and Blackburn die ten years younger than men and women living in Kensington and Chelsea." "Within Britain the scandal of our times is not that inequalities in health are now wider than they were in the 1920s or 1930s; it is that we allowed them to become this wide knowing all we know today that was not known in the 1930s." Clearly none of this is acceptable to Christians. But, as well as the problem with Carney's and Lagrande's analysis that Mike calls out, the huge problem with their analysis is that their answer to inequality is a return to growth. When on a finite planet with finite resources already reeling from global warming the very last thing on earth that we need is a return to growth. The challenge is to think of ways of co-operating globally in order that all major industrialised countries can move towards steady-state sustainable economies.
I completely agree with Stantom about what is needed from the Church & Society. However it is dangerous to dismiss what Stantom called “high-minded economics”. For a start it is much more low-minded economics founded on beliefs such as “greed is good” and “there is no such thing as society”. It is important that we understand the ideas behind what is happening. They are in fact easy to understand but require a bit of reading – economics is far from being a science but consists of simple and most often mistaken ideas covered by a blanket of mystification. Everyone should understand the basics of economics so that we can really challenge the present system not just regret it is happening.
This is very London centric High Church rag, but for us catholics in the provinces struggling on benefit, it is far removed from our reality. I am sure if you go to the low (love ) church masses daily in our cathedrals, churches and shrines, you will find the real faithful, the devout pensioners, unemployed and disabled, with some workers out for lunch. What we are looking for from the church is not high minded economics, but help getting decent honest jobs with fair pay, to bring our children up faithful, healthy and strong, and lifetime tenancies with fair rents to allow our children to have stable homes in solid parishes. Before the changes to the housing act 1997, we had assured lifetime tenancies and fair rents, now families can be thrown in the gutter after 6 months.
Forcing benefit recipient's to take unpaid slavery or starve is the new British slave state, where is the concern for the downtrodden poor and proletariat Christians amongst Catholic intellectuals?
Support the Christian Social Democrat Party oppose the UKIP neo nazis.
Fine words from Christine Lagarde, head of the IMF, and Mark Carney, governor of the Bank of England but has it changed the ethos of either of their organisations. The IMF seems still to believe in the neoclassical economics that forces poor countries into free trade and prevents their development. Mark Carney’s bank is still involved in quantitive easing without directing its use by the commercial bank and thus merely putting money in the pockets of the rich.
The words are welcome but let us have some actions from both these leaders that start to put right the inequality that has been growing from the mid-seventies putting us back now to 1920’s levels.
Just imagine if everyone is guaranteed an income that they can live on:
1. inequality of opportunities would be diminished, such an income would dampen unemployment and poverty traps
2. personal and corporate lives: people could be more willing to risk whistle-blowing on dodgy business behaviour
3. vocation: people would be more willing to risk following their vocation, without worrying about losing life's essentials
4. inclusivity: everyone would be able to participate in the economy more freely
5. recognising work as work: not just business gives a platform to work -- also looking after elderly / children, charitable work...
My rough calculation is that to give everyone a basic income of £500 per month (children, adults, pensioners...) can be afforded by a flat tax rate of 45% on all income in the U.K.
What do we think of this deal?