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St Paul’s and the protesters Can global capitalism be reformed? Geoff Moore.

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1 St Paul’s and the protesters Can global capitalism be reformed? Geoff Moore




5 We are the 99% GROW THE REAL ECONOMY: love, energy, care, skills, empathy, knowledge, teaching, wisdom, watchfulness, learning, experience



8 Idealistic? Incoherent? and yet ….

9 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

10 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 stagnation Rise of giant corporation at beginning of 20 th Century and intertwining of banks Financialisation 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%

11 Speculation, bubbles and debt  USA total debt as % of GDP – 160% in 1975, 330% in 2005 Market 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

12 “… 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

13 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 Directors Individual 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.

14 “Not so much a market reward for achievement, as a warm personal gesture by executives to themselves” J.K. Galbraith

15 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 agencies Credit default insurance available The bubble burst in 2006 as interest rates rose Whereabouts of toxic assets not known Banks stopped lending to one another

16 September 2007 – Northern Rock (UK) September 2008 – Lehman Brothers & AIG (USA) Banks holding securities off-balance sheet had to bring them on-balance sheet Refinancing / part-nationalisation of banks Impact – USA-originated assets written down by $2.7 trillion 1.3% decline in world economic activity USA Japanese style malaise? 30-50 million increase in unemployment 200 million in developing countries pushed into poverty

17 Rotten apples? Rotten barrel? An excess of depletion over replenishment in the moral basis of capitalist society could lead to a crisis

18 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

19 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, fairness Ethics without governance Moore (forthcoming)

20 4. The effects Recession Unemployment Poverty exacerbated



23 2011 – 2.62m; 16-24 1.02m


25 Number of years to reach GNI threshold for LDCs Gross National Income (GNI) per capita, three year rolling average, target $1,086 LDCs that have met11 LDCs that should reach it by 2020 7 LDCs that should reach it in long term27* * 3 unknown, range from 10.2 years (Bangladesh) – 112 (Malawi) Most of the LDCs likely to miss MDGs Source: UNCTAD, 2011

26 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)

27 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

28 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)

29 ‘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’

30 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.’

31 Rowan Williams (2010) Economic exchange is one of the things people do Economy 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

32 Higginson (2011) and forthcoming Christianity is a positive influence when it: 1. Stimulates enterprise 2. Reduces poverty 3. Promotes integrity 4. Ensures sustainability 5. 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, 26 th Nov. 2011

33 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)

34 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)

35 Source:

36 Geared towards ecological transformation: Increased energy and resource efficiency Renewable and low carbon technologies and infrastructures Public assets Climate adaptation Ecological 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


38 “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

39 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

40 References Brown, M. (2010), Tensions in Christian Ethics, London: SPCK. Church of England (2011), ‘The Church and Capitalism. Reflections and Resources’, available at Higginson, R. (2011), ‘Look for hope beyond the US’, Church Times, 18 th 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 33718?l=english 33718?l=english Pope Benedict XVI (2009), Caritas in Veritate, available at In-Veritate.pdf 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 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.

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