Paper on moral foundation of collective action against economic crime (final)

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A Paper delivered at Jesus College Cambridge in September 2012 at the 30th International Symposium on Economic Crime

Transcript of Paper on moral foundation of collective action against economic crime (final)

  • MORAL FOUNDATION OF COLLECTIVE ACTION AGAINST ECONOMIC CRIME

    BY DAUD VICARY ABDULLAH

    President & Chief Executive Officer

    and

    Professor Dr. Abbas Mirakhor

    First Holder

    INCEIF Chair of Islamic Finance

    International Centre for Education in Islamic Finance (INCEIF)

    Lorong Universiti A

    59100 Kuala Lumpur

    MALAYSIA

    Daud Vicary Abdullah

    Tel: +603 7651 4141

    Fax: +603 7651 4143

    E-mail: dvicary@inceif.org

    Professor Dr. Abbas Mirakhor

    Tel: + 603 7651 4010

    Fax: +603 7651 4143

    E-mail: abbas@mirakhor.com

  • 2 | P a g e

    MORAL FOUNDATION OF COLLECTIVE ACTION AGAINST ECONOMIC CRIME

    I. INTRODUCTION

    By whatever definition or measure, economic and financial crimes are on the rise at

    such a rapid pace to resemble an epidemic 1. No country, society, culture or community

    seems immune to their devastating impact on victims, economies, governments and

    societies2. Not long ago, these activities were known as victimless crimes3.

    Consideration of these crimes has evolved over the last four decades. General concern

    about them however intensified post-9/11 and accelerated post-2007/08 financial

    crisis4. Activities that used to be thought of as developing country crimes, such as

    bribery, corruption and fraud, are now major concerns of rich countries as well. While

    the financial crisis focused attention on crimes of the white collar elite, empirical

    research was pointing to an alarming phenomenon: the everyday crimes of the middle

    class, crimes being committed by those at the very core of contemporary society.6

    Much analysis of the growth in economic and financial crimes have focused on rapid

    economic changes resulting from globalization and the accelerated pace of global

    expansion of information technology.7 Very little attention has been paid to what a

    number of observers consider as the most fundamental of all changes: the erosion of

    morality.8 To be sure, there are classes of sociological, political, and psychological

    studies, theoretical and empirical, that have dealt with what is referred to as a market

    anomie, meaning the weakening market morality or normlessness.9 To our

    knowledge, however, there have been very few studies that relate directly the growth

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    of economic and financial crimes to the erosion of morality worldwide, even in societies

    where the market does not have a dominant role in the economy.10 Some have

    focused their sight on the rapidly weakening general moral standards and admit that the

    humanity is facing a particularly acute moral confusion. The cause, however, is said to

    be the rapid changes that have undermined many of the institutions or traditions that

    previously formed and policed our values. Further, says Richard Holloway, the Bishop

    of Edinburgh, there can be little argument about the agent that has caused this change;

    it is the dominance of the global market economy and the social and cultural

    movements that have accompanied its ascendance.11 Accordingly, globalization led to

    the emergence of conservative administrations, in the 1980s and 1990s, that radically

    restructured and removed traditional restraints on markets and on capital leading to

    unleashing of greed, self-centered and self-interested behavior. Importantly, this

    unfettering of the market has been accompanied by a number of cultural and social

    movements that questioned traditional approaches to human relations. The result has

    been described as the political triumph of the Right and the cultural triumph of the

    Left.12

    According to the above argument, causes of the particularly acute moral confusion

    are to be sought in the political triumph of the Right and the cultural triumph of the

    Left. There is no erosion, in other words, in the moral standard of humans. Holloway

    argues that there can be little doubt that our confusions are particularly acutenot

    because we are less interested in or committed to the moral life than we used to be

    but, presumably because of unfettered market and cultural changes. For long,

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    however, causal direction has been assumed from erosion of mortality to crime. Those

    with weak ethics are naturally more likely to commit crime in all circumstances13, and

    that it is taken as axiomatic that weakening ethics is one cause of crime.14Moreover,

    concern with white collar crimes preceded by decades the strengthening of

    globalization, deregulation of the markets and cultural changes.

    Whatever the cause(s) of erosion of morality across cultures, recovering a universal

    moral principle, acceptable to all members of the human community, will have to form

    the foundation of effective mobilization of international cooperation in collective action

    against economic and financial crimes. For reasons that this paper hopes to argue, the

    demand for international co-operation in combating these crimes has not succeeded

    to elicit the desired results because of lack of a well-articulated, globally-shared moral

    basis for collective action against economic crime. The basic thrust of this paper is that

    such a moral foundation is urgently needed. Given the deep pluralism that characterizes

    contemporary humanity, this is a daunting challenge. Holloway provides two helpful

    suggestions by defining two characteristics for any emerging morality. First, the

    principle of harmis a useful guide in steering our way through the currents of debate

    about what is or is not allowable or moral behavior and, second, the emerging morality

    must be characterized by the principle of consent.15

    This paper argues that unlike other complex moral issues facing human society, no

    one would deny the enormous, clear and unambiguous harm caused by economic and

    financial crimes. The outrage against these crimes are so strong that at least one

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    observer refers to them as crimes against humanity.16 The extent, intensity and depth

    of the harm these crimes cause are well-described by their victims, according to which

    this paper classifies them as assault upon human dignity, trust, contract and property,

    all of which constitute fundamental elements of the institutional infrastructure of

    societies. Without these, no social cohesion or continuity would be possible leading to

    what Hobbes envisioned as a war of all against all. The paper argues that the first

    requirement suggested by Holloway is already met. The paper further argues that

    Holloways second requirement, integrally related to the first, can also be met. The

    paper suggests that a moral principle that can meet the requirement is the golden rule

    with its long history, in one form or another, in all known systems of thought, in all

    societies, cultures and religions.

    Accordingly, the next section deals with the first principle. It discusses the clear and

    unambiguous principle of harm as it pertains to the devastating damage caused by

    economic and financial crimes to human dignity, trust, contract and property. The third

    section argues that the changes brought about by globalization and technical progress in

    our time are not too dissimilar to those in the seventeenth and eighteenth centuries

    which also changed moral perception. The Scottish Enlightenment thinkers responded

    by envisioning a new moral sense. The section argues that, given the will, humanity

    can respond to the present state of moral confusion by redefining the prevailing moral

    sense in terms of the golden rule. The fourth section discusses the golden rule as a

    universal moral principle that could be adopted as a result of consent of a broad

    representation of all segments of humanity who would not want each other harmed

  • 6 | P a g e

    by economic crime. Section four also discusses the golden rule, its history, its presence

    in all cultures and religions, its attribute of universalizability and potential for

    attracting global consent. Section five concludes the paper.

    II. EXTENT AND INTENSITY OF HARM CAUSED BY ECONOMIC

    CRIME: MANY BROKEN WINDOWS

    Analytic thinking about economic and financial crimes has evolved over the last

    four decades. The most important dimension of this evolution has been the change in

    focus on economic crime as victimless to the recognition of its far reaching, adverse

    impact on a broad spectrum of victims. In 1982, a leading American political scientist,

    James Q. Wilson, advanced an idea that became known as the broken windows

    theory. The metaphor argued that if a broken window in a vacant building in a given

    neighborhood is left unrepaired, soon most of the windows of that building would be

    broken. The first unrepaired broken window signals that no one really cared about the

    building itself and its integrity.17 Generalized, the idea suggests that tolerating crimes

    leads to epidemics and, eventually, to social disintegration. Recently, William Black, the

    author of The Best Way to Rob a Bank is to Own One, has contextualized the broken

    windows theory to elite white collar crime. He suggests that Wilsons idea that

    tolerating widespread smaller crimes would lead to epidemic levels of larger crimes

    because it undermined community and social restraint has been proven by the