Ever since the financial crisis hit last October, rarely a day goes by without another article being published suggesting how we must all develop a greater social conscience when it comes to economic affairs.
That word “conscience” is an interesting one, both for its quasi-religious overtones and for the fact that use of the word in the last, let’s say, 25 years, when free- market capitalism was accorded near mystical status, could assure you a life sentence with hard mockery.
Take for example what the sociologist Amitai Etzioni recently had to say about the good life, and how to achieve it in the shadow of the global economic crisis. Lamenting consumer voracity in the capitalist system, he observed: “Only after we come to see that additional goods add precious little to our happiness; that pursuing them is Sisyphean — the more we gain, the more we seek; and that deep contentment and human flourishing rise out of spiritual projects and bonding with and caring for others, shall we be able to come to terms with much that bedevils us.”
These are doubtless noble thoughts, and who can deny that the financial crisis was, in large part, a result of a system that didn’t know when to put order in the increasingly rickety credit edifice, because the rising profits were too alluring. However, what is galling in absolutist pontifications like those of Etizioni is that they seem to imply that everything about capital expansion in the past decade and more, and even the capitalist system in general, has been about greed. Certainly greed played a large part of it — but then again, what is the motor of an expanding economy except a desire to accumulate, therefore a certain kind of greed?
And it was not all about unalloyed greed. The expansion of sub-prime mortgages in the housing market allowed those who, hitherto, could not purchase a home, to do so. The market ultimately collapsed, the regulatory framework was a shambles, but the rationale behind the loosening of credit conditions was in many ways defensible. There was more money circulating in the market, so why not allow more people to benefit from this? In this period of rapid change, economies grew, spurred on for most of this period and until last year by low oil prices, pushing consumption up and allowing countries like China and India, with their large populations, to expand employment and reduce poverty.
Nothing odd here; these are the normal tropes of an expanding economic order. Of course, the critics have more often been loudest in their censure of the poorly understood market for derivatives, whose value in connection with palpable economic benchmarks was always dangerously vague. However, when one calls for “spiritual projects and bonding with and caring for others,” that is an implicit attack on the very foundations of the capitalist economy, sounding warning bells that the backlash against that economy may be even more excessive than its unquestioning defense.
What is disturbing in the sudden onrush of moral sanctimoniousness in the markets is the increasing effort in many societies to go overboard in legislating morality — or more perniciously, in legislating day-to-day behavior on moral grounds. Why is this a problem? Largely because it is often unclear who decides what is virtuous in the marketplace. It need not always be the state, but can be a vocal minority, which, because of its effectiveness, can ultimately impose its will on a majority. This seems to have been the case, for example, with anti-smoking crusaders who over the decades turned the debate over public smoking into largely a moral one, managing to transform smokers into pariahs banished to the sidewalks of most Western cities.
But let’s assume for a moment that it is the state that legislates virtue. How does it effectively do so in the markets? Certainly tighter regulatory frameworks can be introduced to protect investors and prevent destructive market meltdowns; certainly too, more public money can be put into socially meritorious projects, or into, let’s say, more foreign aid to countries in need. However, nothing can or will alter the essential greed at the heart of capitalism, and nothing should. When states take onto themselves the duty of creating more righteous orders, this becomes social engineering, and the dangers to society only multiply.
There are many lessons to be learned from the financial crisis, not least that this may be as close as we will ever get to a bottomless pit of capital loss. That the markets will need deep reform in the coming years is obvious. But we should get a grip. We’re not on the verge of a new ethical metamorphosis when it comes to the nature of capitalism, nor should we welcome such a thing. In difficult times people become extreme. And nothing is more extreme than an overdose of morality in a financial system that, by definition, demands healthy amorality.