Rotten barrels or rotten apples?
Can global capitalism be reformed? Geoff Moore spoke on the subject to Northumbria Area Meeting. Pam Ratcliffe reports
Is it possible to consider the market economy as a school for virtues? This was one of the opening questions given by Geoff Moore when he spoke to Northumbria Area Meeting at an event organised by the Economic Justice Group in late 2012. Geoff is an Anglican lay reader and professor of Business Ethics at Durham University. His concerns focus on global capitalism and the need to reform. In his talk he outlined the causes of the recent financial crises, different models of capitalism and possible ways to restore the economy to a virtuous circle.
Could capitalism purport to borrow the values of socialism, or the church, whilst it still maintained the seeds of its own destruction? Anglo-American capitalism depended, he said, on an economic contradiction in which growth drives down wages; where markets become saturated and stagnate; and in which giant corporations and banking networks lead to oligarchy and monopoly.
Boom and bust
Geoff reminded us of the events that led to the current situation. Beginning in 1986, the deregulation of the financial sector led to the creation of a bewildering array of ‘financial instruments’, which enabled that sector to become separated from the real economy. By 2005, forty per cent of profits in the US derived from financial services, while manufacturing accounted for only thirteen per cent. Following deregulation, some organisations became ‘too big to fail’, and government became the ‘lender of last resort’. This led to a cycle of bubbles, boom and bust, leading, consequently, to huge bailouts of the private sector by the public sector. In contrast, Canada had rejected this policy of deregulation. It has continued to prosper.
In the thirty years to 2005, US debt rose from 160 per cent to 230 per cent of GDP. During the same period there was a 1.3 per cent decline in world economic activity, a thirty to fifty million increase in unemployment and 200 million people in developing countries were pushed into poverty. In the UK, in 2006, this crisis and the subsequent recession has resulted in twenty per cent of sixteen to twenty-four year-olds becoming unemployed. They are a lost generation.
There has also been a growing disparity of wealth: in the UK, CEOs receive 128 times their employees’ average wage; in the US it is 300 times. In 2008, when Merrill Lynch lost $27 billion, 700 employees received over $1 million in bonuses, a total of $3.6 billion. The economist, J K Galbraith, commented: ‘Not so much a market reward for achievement, but a warm personal gesture by the executives to themselves.’
Is this a systemic fault, or the fault of individuals – rotten barrels or rotten apples? In 2009 the UN published a manifesto for a ‘global economic ethic’ – justice, honesty, tolerance and fairness – but it was a plea only in general, unspecified terms, to do the job properly.
Christianity and capitalism
People of faith have reflected on the crisis: liberal market apologists have argued that Christian theology can be used to rationalise capitalism, whilst its critics point to the conditions of the poor. In Caritas in Veritate (2011) pope Benedict XVI took the view that the environment is God’s gift to everyone and in our use of it we have a responsibility towards the poor; that once profit becomes the exclusive goal… it risks destroying wealth and creating poverty; financiers must rediscover the genuinely ethical foundation of banking – that financial institutions should support social inclusion.
The Church of England’s view has been that ‘society is judged by its treatment of the most vulnerable… that the possession of great wealth is spiritually risky… that the focus of debate must be about the relative moral strengths of different kinds of capitalism’ (The Church and Capitalism – Reflections and Resources, 2011).
Christianity is a positive influence when it stimulates enterprise, reduces poverty, promotes integrity, ensures sustainability and fosters discipline in the market place. On 26 November 2011, in his enthronement sermon, Justin Welby, the bishop of Durham, said ‘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’.
Alternatives
The churches aren’t alone in their criticism of western capitalism. Tim Jackson in Prosperity Without Growth (2009) argues that ‘an economy predicated on the perpetual expansion of debt-driven materialistic consumption is unsustainable ecologically, socially problematic and unstable economically’. 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 help create a social world and to find a credible place in it.
Richard Wilkinson and Kate Pickett, in The Spirit Level, suggest that we need to convince ourselves that we can be just as happy with lower levels of consumption and that constantly growing wealth is not a good measure of national wellbeing: ‘Greater equality gives us the crucial key to reducing the cultural pressure to consume.’
As long ago as 1881 it had been suggested that cooperatives were an alternative to capitalism. Last year was the International Year of Cooperatives. Today, cooperatives have £1.1 trillion turnover worldwide. In 2011, in the UK, cooperatives had a £33 billion turnover – a 4.4 per cent growth in twelve months.
But there are alternative models of capitalism. Geoff told us about the Scandinavian model that fosters enterprise while at the same time being egalitarian, with high taxation, excellent public services, and least corruption. He also described the German system, which features a coordinated market economy, with shared ownership, consensual forms of management, and a long-term approach to training, industry-wide research and development and competition on the basis of quality rather than price.
Geoff finished by pointing out that underpinning western capitalism there is a powerful group of vested interests whose sole purpose is to maintain the current system. Despite all its flaws and inherent problems it serves those at the top well – too well! Although righteous anger has been shown on the streets of London, the banks have still not been broken up, leverage reforms have not been adequate, and there has been no move towards tighter corporate governance. We are still waiting for effective action to be taken.
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