Former top London banker sees moral disaster in market economy

November 6, 2011

(Former Lazard International Chairman Ken Costa listens during a Future of Finance Initiative conference in Horsham, southern England, December 8, 2009. REUTERS/Stefan Wermuth)

A former top London banker, weighing into a protest movement in Britain against abuses and excesses of modern capitalism, said on Sunday the market economy had lost “its moral foundations with disastrous consequences.”

Ken Costa, a former chairman of UBS Europe and Lazard International, spoke out after being appointed by Bishop of London Richard Chartres to lead an initiative aimed at “reconnecting the financial with the ethical.”

Britain has become preoccupied with the ethics of elite financiers since a group of protesters, unhappy at the excesses of modern capitalism and its huge inequalities in wealth, pitched tents outside St Paul’s Cathedral in London last month.

The controversy brought to a head by the St Paul’s protest has elicited comments from Prime Minister David Cameron and the head of the Church of England, the Archbishop of Canterbury Rowan Williams, raising questions about regulation, including a financial transaction tax.

Writing in the Sunday Telegraph, Costa said he would look at “how the market has managed to slip its moral moorings.

“For some time and particularly during the exuberant irrationality of the last few decades, the market economy has shifted from its moral foundations with disastrous consequences,” he said.

While still regarding financial incentives as “both valid and effective,” he said there was a need to “rebalance the equilibrium between risk, responsibility and reward.”

The St Paul’s demonstration replicates others worldwide, but has spotlighted not only banker bonuses and directors’ pay but also relations between politicians, financiers and the Church and the role they should play in society.

On Sunday, leader of the opposition David Miliband entered the fray, writing in the Observer: “You do not have to be in a tent to feel angry.

“Many of those who earn the most, exercise great power, enjoy enormous privilege — in the City and elsewhere — do so with values that are out of kilter with almost everyone else,” Miliband said.

“Only the most reckless will ignore or, still worse, dismiss the danger signals.” He said corporate bosses should have to justify their rewards to an employee who sits on a committee deciding salary packages.

The Archbishop of York John Sentamu, the second most senior cleric in the Church of England, wrote in a regional newspaper over the weekend: “The ill effects of very large income differences between rich and poor are that they weaken community life and make societies less cohesive.”

A new survey showed that Britain’s top company directors received a 50 percent average pay rise while the majority of Britons are having to endure a pay freeze during a period of austerity imposed by the government to reduce high debt.

via Ex-top banker sees moral disaster in market | Reuters.

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This is interesting to me as a social theorist and researcher. What follows are excerpts from an essay, “The Relativity Of Money”, I drafted in seminar; “Men Of Ideas” with Lewis Coser; in 1985. While my paper was purely analytical and theoretical, it seems that issues I explored as potentially problematic, seem to be salient today. This is how I see it, doesn’t mean it can by fixed…

Although economics tends to be all about the statistics of dollars and cents, production and consumption are dependent upon people. Labor is the engine that propels both production and consumption. Work involves the exchange of an individual’s labor power for “wage money.” Spending in the form of consumption for material goods (necessities and luxuries) and saving or investing for the “future” are the manifest gains from the exchange of labor for money. Marx believed “that human thought is founded in human activity ‘labor,’ (in the broadest communal sense of the word) and in the social relations brought about by this activity” (See: Berger & Luckman, 1966:6). Therefore, to treat the economy of a society in terms of dollars and cents alone is to overlook its foundation, human interaction.

The future of money and ideas of money will not remain static, as the past 100 years have shown. The concept of money and how much money is needed to live a “normal” or “acceptable” life will continue to change with consumption patterns. The relativity of money will continue to change with increasing technology and expanding markets. Whether or not society will ever see a universal system of “money” will be worth watching for as globalization continues and ideas of consumption spread across the globe. Would a universal form of money lead to universal ideas of income and class? Probably not, but globalization and the spread of capitalism will add to a more systemized belief system about what is “needed” to live the “good” or “normal” life across the globe. In all of this, we can more easily understand what Veblen advanced in his sociological studies; that is, “This suggests that the standard of expenditure which commonly guides our efforts is not the average, ordinary expenditure already achieved; it is an ideal of consumption that lies just beyond our reach, or to reach which requires some strain. The motive is emulation — the stimulus of an invidious comparison, which prompts us to outdo those with whom we are in the habit of classing ourselves. Substantially the same proposition is expressed in the commonplace remark that each class envies and emulates the class next above it in the social scale, while it rarely compares itself with those below or with those who are considerably in advance.”

Carmine L. Calabro Jr.

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