The economic turmoil continues. The US Senate has approved the $7,000 billion bailout, and the bill will return to Congress on Friday. Inter-bank lending rates hit an all time high in both New York and London yesterday, the markets are dropping, then bouncing, then dropping again and, ironically, just 12 months after the run on Northern Rock, the bank has today withdrawn savings products as customers stampede back to the safety of a nationalized bank.
If and when the dust from this global financial crisis settles, and politicians and regulators begin to reflect on how the money markets went so spectacularly wrong, to whom will they look for advice?
Step up, Archbishops of York and
This clerical commentary will annoy those who prefer men of the cloth to mind their own business. Now, for a host of reasons – not least the effect the crisis will have on the global poor – the financial crisis is their business. As Sentamu put it in his speech to the Worshipful Company of International Bankers, “Am I my brother’s keeper? Yes, I am, when short selling leads to mergers with redundancies for thousands of my brothers and sisters.” But even though the Archbishop of Canterbury used Marx to illustrate his point, neither he nor his colleague seem to be suggesting that there is a basically more viable economic system. Rather, their interventions illustrate that there are two different visions of market capitalism in play.
On the one hand, we have the view propagated by neo-liberal economists who seem never to have read Adam Smith’s Theory of Moral Sentiments, but draw extensively from his Wealth of Nations. By “pursuing his own interest”, so the argument goes, the individual “frequently promotes that of the society more effectually than when he really intends to promote it.” If the system is allowed to function with the absolute minimum of government intervention, the hidden hand of the market will deliver the common good. Thus the market is allowed to detach itself from society’s deliberations about what is good, and profit becomes the sole motivation and objective. It is this state, of the market having a life and agency of its own, that becomes, in biblical language, a matter of idolatry.
On the other, we have the view that the market exists in a wider moral and social context, where the common good is a matter of moral deliberation. As the Archbishop of Canterbury suggests, here things like social stability and common prosperity are important. Capital is a means to these ends, and not an end in itself. If the market can be relativised and de-sacralised, it might be transformed from a capricious master with unconditional authority to a dynamic and immensely valuable servant. A market economy in its proper place makes the generation of wealth a worthy task, but only because it is second order pursuit.
Many argue that the banking crisis shows us that we have left too much to the ‘hidden hand’, and that a little more regulation earlier might have saved us from massive state intervention now. But it is the moral vacuity of the markets and the untrammeled pursuit of profit for its own sake, spiced by hefty financial reward for risk taking, which have resulted in undermining the human goods, not least trust, which the system needs in order to operate well in the first place.
Jim Chanos, one of the first investors to suspect that ENRON was massively overvalued, summed it up well on Channel 4 News earlier this week: “We’re still not doing enough of the ‘trust thing’… the banks just don’t trust each other’s marks.” The irony is that trust is one thing that you can’t buy on global markets, not even if you have $7,000 billion.
