Sunday, 6 November 2011

Banking can and should be a moral occupation


Want to know what a hate figure looks like these days? Ask a banker. Anyone donning pin stripes, bowler hats and a haughty demeanour in central London these days risks being tutted at or stared down in the street - the British equivalent of Greek rioting against the country's absurdly unrealistic 'rescue' package.

Everyone from Ed Miliband to David Cameron seems to be saying that there's something seriously wrong with the 'casino mentality' of the sector.

Occupy London, of course, is at the forefront of these demands - though it's far from certain that ordinary people find their views congenial, driven back as many citizens have been on more prosaic demands for better schools, hospitals and public transport.

The former chairman of Lazards Investment Bank, Ken Costa, has gone even further, calling for the City of London to rediscover its 'moral compass' - which presupposes that the financial services industry has lost it somewhere. Surveys of city workers themselves accept that something is seriously wrong - though they propose to do little to actually change their ways.

There is no doubt that something has to change. Very high salaries in this part of the economy add to the grotesque inequality which is not only harming our society, but turning western capitalism into a plutocratic network of internship and merit point connections, stifling opportunity, innovation and both geographical and social mobility. The banking sector's behaviour in the run-up to the Great Recession was, by definition, catastrophically misguided.

But banking itself should be an honourable, powerful, well-respected profession. Lending spreads opportunity, wealth and the ability to back oneself and ones intutions. The importance of cash itself is that it allows us to make decision, one against the other, with the same unit of value. Making good decisions with shareholders' money is actually boosting all our pension funds. Investing in companies' ideas boosts productivity and growth.

The tragedy is that a previous generation of 'gentleman bankers', so derided from the 1980s onwards, understood this all too well - Siegmund Warburg (above), for instance, who arrived in Britain with very little but the clothes he was standing up in during the 1940s, and went on to found the country's most famous merchant bank and the Eurobond market itself. What did he say about banking and morality, as Niall Ferguson pointed out in his St Paul's lecture of 2010? Well, if nothing else about behaviour was ever stuck up above a trading floor, this would serve (the originals now reside at the London School of Economics):

Success from the financial and from the prestige point of view... is not enough. What matters even more is constructive achievement and adherence to high moral and aesthetic standards in the way in which we do our work.

Let's hope that Costa and the fellow members of his initiative 'to reconnect the financial with the ethical', can come up with some concrete proposals - on worker value to match shareholder value, on employee representation, on salary scales.

Because if he can't, the dynamic and creative capitalism that we need to get us out of this mess will be further away than ever.

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