Financial Crisis


Abba thought it was all about money. The MC in Cabaret sang that ‘money makes the world go around’. And Der Spiegel poses the key question on its front page this week: money rules the world… but who rules money?

At least this question reminds us that, despite the technology that now drives financial transactions across the world, it is still real people who are responsible (a) for the system we accept, and (b) the values that shape our acceptance of that system.
 
It seems to me that this is actually the bit of reconnection that needs to be made today. Politicians seem to think that more of the same systems that have created our current distress will get us out of the mess we are now in. Where, we ask, is the political or economic imagination – the vision of an economic system that puts people back at the heart of the enterprise? Where is the vision that re-grasps the only dynamic that can ever have integrity: that money exists for people and not people for money? Which is subject and which is object?

These questions might be inevitable and acute right now, but they are not new. Jesus quietly slipped in the notion that if we want to know where your values really lie (and what really drives you and your choices, etc) we’ll need to see your bank statement. Heart and money lie closely together – at least for those who have money to love.
 
So, Spiegel‘s front-cover question is a deeper one than it appears. Markets do not drive the world, money does not behave as if personified, the economy cannot be ascribed personality or moral competence. People make systems, people are driven by values and assumptions about what (and who) matters (even if there is a discrepancy between what they think and what the evidence suggests), and people decide on the ends the systems are intended to achieve – and in whose interests.

I know I bang on a bit about the linguistic incompetence of the English, but toady I read something on the train to London that pushed all my prejudice buttons.

In today’s Guardian Jonathan Freedland has a good go at the (usually untested) arguments for the massive pay differentials in some of our businesses. The usual rationale has something to do with the assumption that our ‘best’ talent would go abroad if we brought what the boss of Barclays called the ‘compensation’ levels down to something that resembled ‘earnings’. In other words, we would be left with second-division executives who lack the ambition or the hunger to up sticks and emigrate.

He responds to this by recognising that rare skills can legitimately demand rare salaries – but also that the skills of those who earn huge amounts are not exactly rare.

?… Our objection to telephone-number salaries goes deeper. What it comes down to is desert – a notion so deeply ingrained that, yes, even a seven-year-old can grasp it: the belief that people should deserve the rewards they get.

… Most people have long accepted that there will be a differential in pay that, in the hoary example, the brain surgeon will earn more than the dustman. People understand that some skills are rare and therefore command a greater premium. They even accept that this can result in extreme outcomes, with the likes of Wayne Rooney trousering £250,000 a week. But none of that logic applies to the current state of corporate pay.

Rooney is truly a one in a hundred million talent; there might be just two dozen people in the world who could match his skills. But with all due respect to Bob Stack, that is not true of him. Nor can it possibly be true of the 2,800 staff in 27 UK-based banks who, according to the Financial Services Authority, received more than £1m each in 2009. Whatever these people are able to do, it’s clearly not rare.

Ah, comes the reply, but these are the cream of the international crop, among the very best bankers in the world. The commission report blows a hole in that tired argument, revealing there’s hardly any cross-border poaching of corporate talent. Not many of our monolingual high earners could work abroad and even fewer would want to. They like it here and do not have to be paid lottery jackpot money to stay.

Notice the (almost) aside? ‘Monolingual’ high earners? We consistently underestimate the economic cost of our linguistic incompetence – to say nothing of the cultural and experiential deficit.

So, those are the buttons Freedland pressed for me: critique of the absurd and unjustifiable differentials, a sideswipe at our linguistic incompetence, and some myth-busting about the ‘market’.

And beneath all the fun a serious question about how we value people, what they do, why it matters, and how we need to recover some connection between work and reward.

Croydon is often thought of as a modern (i.e. post-war) town. The plethora of new building in the post-war years has served to hide some of the glories of the place and obscure a fascinating history.

Addington PalaceCroydon used to be the home of Archbishops of Canterbury. What is now the Old Palace School was where Cranmer had his library while writing the Book of Common Prayer. In those days you could sail from the Old Palace down the River Wandle to the Thames and along to Lambeth Palace. A couple of miles away Addington Palace (built in the 1770s) was the country home of the Archbishops from 1807 – bought by an Act of Parliament and financed by the sale of the Old Palace, it being “in so low and unwholesome a situation”.  Six archbishops lived at Addington Palace; five of them are buried in St Mary’s churchyard. The Palace was sold in 1898.

I was at St Mary’s, Addington, this morning. I always find it a little unnerving to be presiding at Communion while standing next to the tomb of a dead Archbishop of Canterbury. Facing the congregation, I looked to the right and read the inscription on the tomb of Archbishop William Howley (1766–1848) – I’d never heard of him before and I know nothing about him. What I noticed was that he died on 11 February 1848 – and that got me thinking about ‘time’ again, especially in the light of today’s great crises (tomorrow will bring something else to preoccupy us).

Communist-manifestoHowley died ten days before the publication by Karl Marx and Friedrich Engels of the Manifest der Kommunistische Partei – the Communist Manifesto. It was the year of revolutions in Europe, with the earthquake of the French Revolution reverberating across national boundaries. There were epidemics (cholera in New York, for example) and ferments among groups that were eager for political and economic change. The Enlightenment project was working its way through the psyche of European societies, challenging the status quo and received ways of understanding the world.

So, just as Howley was dying – and probably thinking the whole world order was collapsing in front of his eyes anyway – the world was moving on. Howley never saw (and probably could not have imagined) the world that would develop after his demise: the Communist revolution in Russia, two World Wars, the beginning and end of European colonialism, the explosion of technology, etc. Locked into the possibilities of his own world and his own experience, he would have needed a good eschatology to keep his faith going in the wake of the threats to the world order going on around him.

I wonder if this sense of perspective is needed now? We always think that what happens in the world now is the most important and the ultimate reality. But, the truth is that whatever happens now, life will continue and will develop in the light of what has gone before. Leaving aside for a moment the ecological crisis and the nuclear threat (!) – which do have the potential to bring an ultimate end to things – the banking crises and political crises of today will be the topics of historical discussion and curiosity of our great-grandchildren’s generation. The seriousness with which we take some matters now will probably look rather curious in 100 years time. How we ever allowed the fantasies of the late 20th/early 21st century banking and debt cultures to develop will be a source of incredulity – especislly while half the world starved. Capitalism might one day look like a blip in the world’s economic history – as transient as the USSR and the Marxism-Leninism that seemed so powerful for so many decades.

This makes me look back to the Old Testament prophets. While things were looking good (politically, economically, militarily and religiously), no one would listen to the warnings of the prophets that God would not be taken for granted and security would be shaken if change did not come soon. The prophets had the insight to spot the medium to long-term consequences of political alliances and social injustices, but their warnings (rooted in a long-term view and a long-term perspective) were not heeded by people who could not see beyond the ‘today’ and their own immediate interests.

William-HowleyWe cannot predict what the world will look like for a our great-grandchildren. But we can be sure that they will read our story and our choices with more than simple curiosity – because the challenges they will face will derive from the decisions we have made and the challenges we have ducked.

I almost wish I hadn’t noticed the tomb of Archbishop William Howley.

I missed the sheer joy of watching the Darling Budget yesterday because I was in meetings all day. So, I tried to catch up on it today and found so much contradictory stuff around in the media by way of response. The budget is good or bad, inevitable or reckless, cause for analysis or cause for punning headlines.

What is amazing is that the figures being thrown around are staggeringly huge – yet we hardly blink any more. Only two years ago we were being told that £5 billion was too much money for the entire developed world to pay to educate every child on the planet: it would simply not be feasible to use such an enormous sum on such a risky venture.

Now we talk about ‘trillions’ of dollars and don’t lose a wink of sleep. Is this because we are too far removed from the ‘reality’ of what this all means? Or is it because ‘this’ is all unreal? I went back to the ‘Two Johns’ and was amazed to think that their conversation (note for Americans: it is ironic satire) was recorded only six months ago, yet seems to come from a different age. (When you have watched it, look for Part 2 on Youtube. The best explanations of all this esoteric financial stuff are to be found in the mouths of the satirists and anything by the Two Johns is worth watching.)