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

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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

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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