St Paul’s and the protesters

Can global capitalism bereformed?

Geoff Moore

Humanity before profit

The economy is destroying our environment

Earth provides enough to satisfy every Bankers Greed, but not everyman’s need

We are the 99%

GROW THE REAL ECONOMY:love, energy, care, skills,empathy, knowledge, teaching, wisdom,watchfulness, learning,experience

Idealistic?Incoherent?

and yet ….

1. The market as a school for the virtues?

Hirschman’s (1982) doux-commerce vs. self-destruction theses of capitalism

Not necessarily mutually exclusive – moral basis of capitalist society constantly depleted and replenished at the same time

An excess of depletion leads to a consequent crisis

It might be possible to specify conditions under which the system would gain in cohesion and legitimacy

2. Anglo-American capitalism and the global financial crisis

Economic contradiction – a system that depends on growth but drives down wages

Saturation of markets and stagnationRise of giant corporation at beginning of 20th

Century and intertwining of banksFinancialisation of capitalism

Stock markets and easily transferable paper claims Bewildering array of new financial instruments

From M-C-M’ to M-M’ economy USA – profits from financial services 40% of total from

5% of employees by 2005, c.f. Manufacturing 13%

Speculation, bubbles and debt USA total debt as % of GDP – 160% in 1975, 330% in

2005Market for corporate control

Focus on short-term profits and companies as financial investments

Role of government ‘Big’ government post WWII which sided with money

managers by introducing deregulation Consolidation into ‘too big to fail’ financial institutions Government as lender of last resort

Bubbles, boom and bust, bailouts

“… the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes the by-product of the activities of a casino, the job is likely to be ill-done.”

J.M. Keynes

Capitalist businesses

Long-Term Capital Management A story of boom, bust and bailout

Enron etc. Since 1997 more than 10% of US public companies

restated results (GAO 2002) Corporate fraud and involvement of CEOs, CFOs and

Boards of DirectorsIndividual rewards

CEO compensation in 2007 of top 500 firms in USA 300 times average worker; UK 128 times in 2009

Bankers’ bonuses e.g. Merrill Lynch in 2008, 700 employees received bonuses of over $1m, total £3.6b, but firm lost $27b.

“Not so much a market reward for achievement, as a warm personal gesture by executives to themselves”

J.K. Galbraith

Global financial crisis

House price bubbles serviced by cheap and easy credit

Backed by bundling up of mortgages into MBSs including sub-prime category

Ratings agenciesCredit default insurance available

The bubble burst in 2006 as interest rates rose

Whereabouts of toxic assets not knownBanks stopped lending to one another

September 2007 – Northern Rock (UK)September 2008 – Lehman Brothers & AIG (USA)Banks holding securities off-balance sheet had to

bring them on-balance sheetRefinancing / part-nationalisation of banks

Impact – USA-originated assets written down by $2.7 trillion

1.3% decline in world economic activityUSA Japanese style malaise?30-50 million increase in unemployment200 million in developing countries pushed into

poverty

Rotten apples?Rotten barrel?

An excess of depletion over replenishment in the moral basis of capitalist society could lead to a crisis

3. Responses – regulation or a new global ethics

Regulatory reform Break-up of banks? Leverage reform Tighter corporate governance

But fundamentally no change

Governance without ethics

Manifesto for a global economic ethic (UN 2009) Principle of humanity Non-violence Respect for life Justice Solidarity Honesty Tolerance Based on rights, Kantian concern for others as ends,

Golden Rule, fairnessEthics without governance

Moore (forthcoming)

4. The effects

Recession

Unemployment

Poverty exacerbated

2011 – 2.62m; 16-24 1.02m

Number of years to reach GNI threshold for LDCs

Gross National Income (GNI) per capita, three year rolling average, target $1,086LDCs that have met 11LDCs that should reach it by 2020 7LDCs that should reach it in long term 27** 3 unknown, range from 10.2 years

(Bangladesh) – 112 (Malawi)

• Most of the LDCs likely to miss MDGsSource: UNCTAD, 2011

5. Christian perspective

“When the age of the Reformation begins, economics is still a branch of ethics, and ethics of theology; all human activities are treated as falling within a single scheme whose character is determined by the spiritual destiny of mankind …”

R.H. Tawney (1990: 272)

Tensions in the Christian approach

Liberal market apologists e.g. Michael Novak – Christian theology used as a rationalisation of a system chosen for other reasons?

Critics of the market and capitalism e.g. Ulrich Duchrow – starts from the condition of the poor under capitalism; status confessionis

Brown 2010: 168-184

Catholic social teaching

Caritas in Veritate (2009)“Once profit becomes the exclusive goal, if it is produced by improper means and without the common good as its ultimate end, it risks destroying wealth and creating poverty” (13)

“The environment is God’s gift to everyone, and in our use of it we have a responsibility towards the poor, future generations and humanity as a whole” (33)

Supportive of ‘social enterprise’ (32)

“Financiers must rediscover the genuinely ethical foundation of their activity.” (44)

‘Towards reforming the international financial and monetary systems in the context of global public authority’ (2011)‘In his social encyclical, Pope Benedict XVI precisely identified the roots of a crisis that is not only economic and financial but above all moral in nature.’

Need for a world political authority and central world bank

‘In this process, the primacy of the spiritual and of ethics needs to be restored and, with them, the primacy of politics – which is responsible for the common good – over the economy and finance’

Church of England teaching

‘The Church and Capitalism. Reflections and Resources’ (2011)‘The overwhelming message of both OT and NT is that a society is judged by its treatment of the most vulnerable, that their condition is threatened by greed and the rapacious pursuit of wealth, and that the possession of great wealth is spiritually risky.’

‘… focus of debate must be about the relative moral strengths of the different kinds of capitalism and about how capitalism is practiced.’

Rowan Williams (2010)Economic exchange is one of the things

people doEconomy as ‘housekeeping’

Life lived in common Stability allowing all to grow and flourish Vulnerable are nurtured Leisure and creativity find room

Christian theology – mutuality “Each believer is called to see him / herself as equally

helpless alone and gifted in relationship” (25) Character and virtue

Higginson (2011) and forthcomingChristianity is a positive influence when it:1. Stimulates enterprise2. Reduces poverty3. Promotes integrity4. Ensures sustainability5. Fosters discipleship in the marketplace

“… this is a moment of opportunity, because the idols have fallen, idols of prosperity and institution, and in the empty space left we can see clearly that the true God remains” Bishop Justin, Enthronement sermon, 26th Nov. 2011

6. Secular sources

“An economy predicated on the perpetual expansion of debt-driven materialistic consumption is unsustainable ecologically, problematic socially and unstable economically.”

Jackson (2009: 175-6)

Alternative understanding of prosperity “To do well is in part about the ability to give and receive love, to enjoy the respect of our peers, to contribute usefully to society, to have a sense of belonging and trust in the community, to help create the social world and find a credible place in it. In short, an important component of prosperity is the ability to participate meaningfully in the life of society.”Jackson (2009: 189)

Source: www.news.bbc.co.uk/nol/shared/bsp/hi/pdfs/29_03_06_happiness_gfkpoll.pdf

Geared towards ecological transformation:Increased energy and resource efficiencyRenewable and low carbon technologies and infrastructuresPublic assetsClimate adaptationEcological enhancement

Lower returns / higher labour content

Jackson (2009: 197)

e.g. Germany 200 times solar energy as Britain, 12% of electricity from renewables c.f. 4.6%, 250,000 jobs c.f. 25,000

Ecological investment

“Greater equality gives us the crucial key to reducing the cultural pressure to consume” Wilkinson & Pickett (2009: 226)

We need to convince ourselves that we can be just as happy with lower levels of consumption and that, correspondingly, growing GDP is not

a good measure of national well-being

Voluntary simplicity

Alternative forms of capitalism

Scandinavian social-market capitalism Enterprise High taxes Excellent public services Egalitarian Least corrupt (Higginson 2011)

German horizontal coordinated market economy Patterns of share ownership and access to finance Form of corporate governance and consensual forms of

management Cooperative relationships particularly with firms in the same

industry Approach to training and apprenticeship Research and development conducted on an industry-wide basis Competition based on quality rather than price

References Brown, M. (2010), Tensions in Christian Ethics, London: SPCK. Church of England (2011), ‘The Church and Capitalism. Reflections and Resources’,

available at www.churchofengland.org/media/1355764/churchandcapitalism.pdf. Higginson, R. (2011), ‘Look for hope beyond the US’, Church Times, 18th Nov. Higginson, R. (forthcoming 2012), Hope for the world: Christian faith and the global

economy. Jackson, T. (2009), Prosperity without growth. Economics for a finite planet, London:

Earthscan. Moore, G. (forthcoming 2012), ‘The virtue of governance, the governance of virtue’,

Business Ethics Quarterly. Pontifical Council for Justice and Peace (2011), ‘Towards reforming the international

financial and monetary systems in the context of global public authority’, available at http://www.zenit.org/article-33718?l=english

Pope Benedict XVI (2009), Caritas in Veritate, available at http://www.askacatholic.com/_Resources/document_directory/POPE_BENEDICT_XVI_Caritas-In-Veritate.pdf

Tawney, R.H. (1990), Religion and the rise of capitalism, London: Penguin. UNCTAD (2011), ‘The Least Developed Countries Report 2011’, available at

http://www.unctad.org/en/docs/ldc2011_en.pdf Wilkinson, R. & K. Pickett (2009), The Spirit Level. Why equality is better for everyone,

London: Penguin. Williams, R. & L. Elliott (2010), Crisis and Recovery. Ethics , economics and justice,

Basingstoke: Palgrave Macmillan.