Morals and the market

PUBLISHED : Tuesday, 17 April, 2012, 12:00am
UPDATED : Tuesday, 17 April, 2012, 12:00am


Peter Turkson is not a name that's readily recognised on Wall Street, the City of London, Hong Kong's Central financial district, or Tokyo's Marunouchi district. Neither would he be instantly recognised if he walked into Silicon Valley, Germany's Ruhr industrial heartland, Toyota City, or a sweatshop in Guangdong.

If I add that he would stand out in any of the above locations because Turkson is a Ghanaian and a Catholic priest, there may seem to be even less reason for the world's top financiers or industrialists to know - or care - about him. But in the last few months Cardinal Turkson has promoted not one but two timely documents which pose essential questions about the troubling way that modern capitalism is developing.

In October, Turkson took aim at global financial markets and condemned 'the idolatry of the market'. He backed a tax on international financial transactions, and called for the establishment of a 'global public authority' and a 'central world bank'. The demands were in a document issued by the Pontifical Council for Justice and Peace, of which Turkson is president.

Its title laid out its concerns: 'Towards reforming the international financial and monetary systems in the context of a global public authority'. Its message is clear: 'The economic and financial crises which the world is going through calls everyone, individuals and people, to examine in depth the principles and the cultural and moral values at the basis of social coexistence.'

It claimed that the financial crisis 'has revealed behaviours like selfishness, collective greed and the hoarding of goods on a grand scale'. It condemned 'neo-liberal thinking', advocating technical solutions to economic problems and called for an 'ethic of solidarity' between rich and poor nations.

Otherwise, 'if no solutions are found to the various forms of injustice, the negative effects that will follow on the social, political and economic level will be destined to create a climate of growing hostility and even violence, and ultimately undermine the very foundations of democratic institutions, even the ones considered most solid'.

At a press conference launching the document, Turkson added his own, rather mild, admonishment. 'The people on Wall Street need to sit down and go through a process of discernment and see whether their role managing the finances of the world is actually serving the interests of humanity and the common good,' he said.

Turkson's latest document, 'Vocation of a business leader: a reflection', offers a handbook for a modern business executive. It presents a set of principles for running a business that is both sound and moral, and spelling out the risks of unethical practices.

Far from damning the idea of profit-making business, the document begins by asserting: 'When businesses and market economies function properly and focus on serving the common good, they contribute greatly to the material and even the spiritual well-being of society.'

However, it immediately warns that: 'Recent experience, however, has also demonstrated the harm caused by the failings of business and markets. The transformative developments of our era - globalisation, communications technologies and financialisation - produce problems alongside their benefits: inequality, economic dislocation, information overload, financial instability and many other pressures leading away from serving the common good.'

Although issued by the Pontifical Council for Justice and Peace, the document on the vocation of a business leader was written by a group of American and European academics, including religious and lay people. For a secular audience, it suffers from being interlaced with references from the Bible and papal statements on economic matters.

There is a rich history of papal statements on the economy and justice going back to Pope Leo XIII's encyclical 'Rerum Novarum (Of New Things)' back in 1891 where he vividly depicted the plight of the urban poor and condemned unrestricted capitalism. Turkson might consider reissuing both documents with their specifically Christian references reduced to footnotes. This would emphasise the appeal to morality and the importance of the common good in business and financial decisions.

The advice to business leaders offers much sound guidance. It cannot provide an answer for a world where some business corporations are vastly bigger than many national economies and some countries are so poor or lacking in opportunities that their best and most energetic people go abroad, thus further undermining their economic prospects.

But its warnings about the downside of globalisation are timely. Capital has acquired a new freedom, 'as if economic power had acquired an extraterritorial status. Companies are able to react to profit opportunities quite independently of their national authorities and in so doing they play a key role not only in the organisation of the economy - but of society'.

The revolution in communications technology is also producing beneficial and adverse effects. Being connected is good, but 'the urgent can drive out the important. Every message becomes a priority when instant communication insists on our attention. We seem to have no time for well-studied and thoughtful decisions on complex matters'.

The document also issues a useful warning about profits, pointing out that profit is necessary to sustain a business but is not the only indicator of the true health of a business. 'Profit is like food. An organism must eat, but that is not the overriding purpose of its existence. Profit is a good servant, but it makes a poor master.'

Above all, Turkson's documents offer a holistic view, placing human dignity and the common good at the front and centre of business activity, including the need for careful stewardship of all resources, including human, environmental and capital.

This is not a voice crying in the wilderness. Indeed, the Vatican's advice to business leaders is far less radical than critics like George Soros, Joe Stiglitz and some powerful voices in the blogosphere who scream that the global financial system is broken. The document points out that financialisation has given millions of people better access to credit for consumption and production, helped to leverage capital to make it more productive, and derivatives offer a way of spreading risk.

Turkson is worth hearing precisely because he is above the daily fray of decision-making and academic argument, who has a moral voice and a concern apart from this quarter's or this year's profits or dividends, far beyond narrow national borders and looking further ahead than this generation only.

The document for business leaders also has a 'discernment checklist' that could be usefully offered to all political and business leaders to get them to check how they are doing today. Among the questions:

- Am I creating wealth, or am I engaging in rent-seeking behaviour?

- Is my company making every reasonable effort to take responsibility for unintended consequences of its activities (such as environmental damage or other negative effects on suppliers, local communities and even competitors)?

- Am I making sure that the company provides safe working conditions, living wages, training, and the opportunity for employees to organise themselves?

- In all countries where my company is engaged, is it honouring the dignity of those indirectly employed and contributing to the development of the communities hosting these operations? (Do I follow the same standard of morality in all geographic locations?)

- Am I seeking ways to deliver fair returns to providers of capital, fair wages to employees, fair prices to customers, and fair taxes to local communities?