Markets and morality: a tale of two uproars
The howls of protest against fat cat bonuses during this financial crisis stem from a deep-seated source of moral outrage. For many people, it just seems like common sense that it’s unfair for Wall Street executives to reward themselves for creating the mess robbing millions of their savings.
(Photos: Protest outside Goldman Sachs in New York, 19 March 2009/Eric Thayer)
Evolutionary biologists and social psychologists believe this moral sense is innate, an instinct for cooperation and fairness that has been honed over millions of years of natural selection into a universal moral grammar that gives us a “gut feeling” about ethical dilemmas.
If we have this moral instinct, it would seem natural for politicians to appeal to it. Some are doing that, while others seem to be missing the mark. The news over the weekend from the United States and France shows the two different approaches in action.
In the U.S., President Barack Obama — a man who knows how to speak movingly about justice and values — is coming under fire for not rising to the challenge with an appeal to higher motives. New York Times columnist Thomas Friedman took him to task on Saturday:
“We’re in a once-a-century financial crisis, and yet we’ve actually descended into politics worse than usual. There don’t seem to be any adults at the top — nobody acting larger than the moment, nobody being impelled by anything deeper than the last news cycle…
“President Obama missed a huge teaching opportunity with A.I.G. Those bonuses were an outrage. The public’s anger was justified… Had Mr. Obama given A.I.G.’s American brokers a reputation to live up to, a great national mission to join, I’d bet anything we’d have gotten most of our money back voluntarily. Inspiring conduct has so much more of an impact than coercing it…
“There is nothing more powerful than inspirational leadership that unleashes principled behavior for a great cause,” said Dov Seidman, the C.E.O. of LRN, which helps companies build ethical cultures, and the author of the book “How.” … Laws tell you what you can do. Values inspire in you what you should do. It’s a leader’s job to inspire in us those values.”
In France, from where I’m watching all this, the government has been openly talking in moral terms for months. Back in September, when the crisis really hit, President Nicolas Sarkozy announced the end of “a financial capitalism that had imposed its logic on the whole economy and contributed to perverting it. The idea of the absolute power of the markets that should not be constrained by any rule, by any political intervention was a mad idea. The idea that markets are always right was a mad idea.”
(Photo: President Sarkozy speaks in Toulon, 25 Sept 2008/Jean-Paul Pelissier)
A month later, he said that crisis aid for banks, which totalled 10.5 billion euros in 2008, meant that bankers had had entered into “a moral pact” with the nation to fight the financial crisis together. “Today, everyone has to live up to his responsibilities. There is a moral pact.” When the large bank Société Générale, which got 1.7 billion of those euros in aid, decided last week to award its four top executives with a total of 350,000 stock options, Sarkozy called that a scandal.
In one of the best sound bites of the season, Economy Minister Christine Lagarde said “It’s about time that Société Générale rhymes a bit more with ‘intérêt général'” (the general or public interest). This speaks directly to the disgruntled voters’ feeling that big bonuses and stock options right now violate the common good. She also threatened legal action to regulate executive pay if the companies wouldn’t do it themselves. SocGen got the message and its executives gave up the stock options within hours of Lagarde’s comments on French radio.
For an excellent discussion of the ethical aspect of this crisis, take a look at this opinion piece — “Morals: the one thing markets don’t make” –by Britain’s Chief Rabbi Jonathan Sacks. In it, he bemoans “the gradual disappearance of the cluster of principles that went by the name of morality. Whatever its source – religion, conscience, custom or code – it meant that there are certain things you don’t do because they are not done. You don’t reward yourself when customers, clients or shareholders or employees are suffering losses. You don’t pay yourself out of all proportion to what you pay others. You don’t take advantage of your position just because you can. You are guided, even if no one is watching, by a sense of what is responsible and right. Without that internalised code of honour and trust, no institution can be sustained in the long run.”
What do you think about the role of moral principles in this crisis? Is Sacks right to saw no institution can survive in the long run without a moral code that no law can lay down?