Sunday 2 October 2011

What's wrong with greed?

According to the Christian doctrine it is one of the mortal sins. You may think that with the decline of christianity as a lived doctrine, talk about sin becomes less fashionable as well. Yet, greed is back and since the financial crisis in 2008 it dominates headlines and public debate whenever people talk about bankers and their behaviour. 
The main accusation is that those who were dealing with our money (pension funds and the like) were guided only by instant monetary gratification. Enormous bonus payments were the motivation for their actions, rather than any concern for sustainable banking practices. What makes ordinary people so angry is that, while the bonuses were still being paid, governments all over the world had to foot the bill for dubious banking deals that carried little actual value. It seems, so people believe, there was a dissociation between what bankers did (allegedly in the interest of their clients) and the result of their actions. 
If you ask ordinary people, they may say that greed appears to be the primary motivation of what bankers did every day. And their indignation may be spurned by a vision of a lost society where work contributed to the wealth of the nation as a whole, not just a few. But did we really just have ‘the wrong bankers’?  
There are two strange assumptions that lie at the heart of this idea that all is the fault of the greedy bankers. The first is that the outcome would have been different if we had had bankers with a stronger moral compass. Second, that our economy would be better if there was no greed. Both assumptions I think are questionable.
For Christian theology greed is one of the mortal sins and so those acts that are motivated by greed are condemnable. However, as theologians tell us, greed is not something we can simply shed off in the morning as we get out of bed. In fact, the doctrine of original sin articulates the opposite notion, that we are all prone to commit sins in our life. Christians are adamant that there can be no person who stands outside this circle of potential misconduct. While not all may share the Christian doctrine of original sin, this narrative tells us an important insight into humanity: to think that some people are innately morally better than others, is bound to disappoint. 
Scientists who study large organisations use a different language to theologians but their claim is very similar: individual actions may have intended consequences for the whole system. Pinning blame on individuals who operate within the rules is hardly helpful. Specialisation and rationalisation of processes in large companies lead to a fragmentation of tasks. Marx’s ‘process of alienation’ for the worker still echoes faintly in this idea. 
If they are right, then it must be foolish to think that we only need to get ‘moral’ bankers to have a better banking system. Blaming the banking crisis on ‘sinful’ bankers fails to recognise that everyone may have done the same in their position: to get the best results within the parameters set by current regulations. There is nothing greedy about this. We do what we are told to do, and some of us do it very well indeed. That does not exonerate people from the consequence of their actions. It does, however, shed some light at the way in which presumably innocuous behaviour can have unintended consequences for the whole system. 
The second questionable assumption is that economic relationships should be marked by morality, not greed. Ed Milliband’s recent comments on ‘bad’ and ‘good’ entrepreneurs at the annual Labour conference publicly rehearsed this idea. 
I believe he is wrong on two counts. First, it suggests that to be moral makes a better entrepreneur. But how can we judge this? What is the benchmark for morality in economic transactions? Are we supposed to examine the immediate actions of entrepreneurs or their ultimate consequences? If a company relocated their production line to overseas to cut costs and jobs are lost in the UK, yet in the process becomes more efficient and manages to expand its research and development section, hence creates other jobs here, should we condemn this? On Milliband’s simplistic terms, such a company acts ‘immorally’. Yet, judged by the outcome of their actions, the company is very moral indeed. In other words, we get into deep philosophical troubles if we try to interpret utilitarian economic exchanges with the benchmark of inter-personal morality. 
Second, injecting morality into the economic arena may lead us to misunderstand the need for regulation in the first place. Big companies do engage in social responsibilities schemes but their motivation is arguably not to be ‘morally good’ but to create a positive brand identity. It’s just part of the daily competitive struggle in the market place. If we thought all we need are company directors that are cut from our own moral cloth, we overlook that the purpose of envisaging economic relationships outside the moral domain is to highlight the need for a stable and compelling regulative framework. 
It is our responsibility as a society to define what we want the economy to achieve within the framework of free and fair market exchanges, yet it is the task of entrepreneurs to be successful and contribute to the wealth of the nation. While we should set the regulative framework for economic transactions, it is up to them to freely engage in the market place to pursue their economic interests. To conflate morality with the economy is to absolve us of the most difficult task: to define what wealth creation is for. The answer to this cannot be found in the economy, no matter how moral we want our entrepreneurs to be, sinners or no sinners. 


  1. in my opinion, there is a fundamental difference between somebody who commits a sin (we all do) and somebody who persists on committing the same sin recklessly, knowing well enough how profound the outcomes were for some parts of the population. In addition, there is a generally accepted definition of what morality consists of, and bankers did not seem to show at any time, before or after the financial crisis, any boundaries. Economy based on free market is not a licence to kill.
    N from london ;)

  2. That's an interesting distinction, and I think I agree with it. The point I was trying to make is that within complex systems, individual actions have unintended consequences, beyond what any single person can envisage. Selling and buying on the stock markets for example may be done to maximise immediate gain. However, it may also lead to share collapse or share rises far beyond the individual action. James Surowieki once called it the wisdom of crowds, which admittedly, in the stock market may more appropriately be called the daftness of crowds. The epistemological point however remains: individual actions may result in unintended results. My argument about the banking crisis was therefore that it may not be very useful to talk about 'sinful' bankers, when their 'sins' were a product of the aggregation of individual actions. Rather than talking about 'greed' we may focus more helpfully on mitigating the consequences of actions that have enormous impact on us all. More targeted regulation seems a better call than hoping to recruit 'good' bankers.