Thursday 24 November 2011

Our own personal greed

The debate about what caused the financial crisis seems to have been settled. Greedy bankers have gambled recklessly with our money and when the bad bets came off, the people had to bail out the financial institutions. This narrative operates with the notion that bankers are motivated solely by greed, essentially placing their actions outside the realm of normal behaviour. 
I have previously argued here that this strikes me as a highly simplistic narrative. It rests on the questionable assumption that bankers are somehow different to the normal population, engaging in high-risk conduct which no ordinary person would condone. My reservation about this account flows from the simple idea that human behaviour across populations at large and across cultures is fundamentally stable, which means that those who argue that bankers are profoundly different to ordinary human beings need to demonstrate how they came to be so different from everyone else. 
A more plausible explanation of the banking crisis may be that reckless behaviour is taking place wherever restrictions and sanctions on what is harmful to society are either vague or absent. In other words, bankers did what they did because they could. And, arguably, few of us would probably have acted differently.
There is however another dimension to the financial disaster that is rarely discussed. It is a deeply unpopular trope because it points the blame at least partially to all of us. Kieran O’Hara hints at this point in his recent book: 
‘The house price bubble, the rise and fall of credit were all engineered by bankers and financiers of course - but were only possible because very large numbers of people wished to spend money they had not earned.’ (p.255) (O’Hara: Conservatism, 2011)
This is a deeply uncomfortable truth. The desire to find better interest rates for investment, to seek out the highest return for savings or the satisfaction that many of us felt when house prices reached stellar heights, is testimony of our own personal greed. Ditto our pension funds, and how much we wanted a decent return for our monthly pension payments when we retire. 
This is of course not a narrative that you are likely to hear from politicians who are only too eager to blame bankers. Yet, the fact remains that our society has lived on borrowed means and many of us were only too happy to turn a blind eye to the reckless way in which wealth was created out of thin air. 
Better regulation of the banking sector may produce more stability for our financial system in due course, but unless we also come to value hard work again, and stop believing in ever increasing returns through financial wizardry, our society will be a mirror image of the greed in all of us. And for that there can be no regulation; only our moral code and common sense can protect us from seeking immoderate personal gains. 


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  2. Hi Many thanks for your thoughtful comments! Yes, stricter financial regulations may be a tool in the arsenal. I think there are some other things we can do as well, for example strengthen the role of co-operatives and mutuals in the finance industry. Ultimately much more of our inward investments must be paid for in the future by our savings, rather than debt (that goes for government as well as personal lives). Re. role models and behaviour, that's a difficult one. I dont think government should be in the business of behaviour modification but it can certainly support some of the things that we all value more, such as higher savings rates etc. My guess is that families and social contexts are probably more effective in changing people's conduct but we have grown very dismissive of social control in this country. So perhaps we just need to be more assertive in saying the things we dont like when we see them (such as vandalism, anti-social behaviour etc.). Re. the last point, I think we agree. My point is simply that shifting the blame solely to government overlooks the fact that we are just as responsible for our actions as 'government'. In the end, we as a society decide what we want government to do. There is a connection between society and rules that we need to reinstate and which needs to function well above and beyond a regulatory framework. I think you make a similar point when you say that other countries have not fallen for the credit craze as the UK. Well, I suppose that is where values and social controls come into the picture.

  3. Re-posting my comment down here:
    You are making a good point here and I mostly agree with you. Still, a few questions linger without answers:
    - apart from better and stricter financial regulations, things will continue the same way until those who failed us are made responsible - many CEOs that brought about the current crisis were indeed made redundant but with huge payouts;
    - how can we change this behaviour if the above sort of people continue to act as role models for the rest of the population? shouldn't we try to change what we aspire to become? (not all 99% aspire to become or get as rich as the 1%);
    - mostly, a life on credit card is an American and British way of life - Europeans, as you know, have not fallen so badly for this - and it goes back to the point above re role models and type of life we aspire to.
    - who did actually turn a blind eye? aren't we supposed to have authorities whose job is to ensure nobody commits fraud, nobody bends the law, nobody acts out of personal greed?

    warm greetings from London :)