The Market for Virtue
Banking scandals were once rare events confined to shady back street dealers. Now they are frequent affairs involving main street brands. US and UK regulators have just imposed a $4.3bn fine on six such banks for manipulating foreign exchange rates. This follows in the long wake of scandals associated with sub-prime lending, the manipulation of Libor, money laundering, the mis-selling of endowment schemes and forms of protection against credit card fraud.
It all confirms the suspicion of many that business and commerce – the market itself – is unable to act as a moral agent in society because it’s inevitably indifferent or hostile to virtue. Opinion formers often appear to agree that the market appeals to such low motives, like greed and selfishness, that it cannot but dissolve the moral fabric of society. It is, therefore, the duty of the state to impose ethical behaviour on business, by means of regulation.
The state does indeed have a regulatory role – libertarianism is only alive in textbooks. As the leading Cambridge economist John Maynard Keynes (1883-1946) is famous for having argued, the invisible hand of the market needs assistance from the visible hand of the state. The state must, for instance, try to prevent certain markets emerging (such as those in dangerous drugs, prostitution and slavery), and to keep business away from those areas of human life in which it has neither legitimate role nor competence. Regulation is necessary for human beings to be able to exercise freedom, including the freedom the market brings.
But as the rafts of regulation imposed in recent years begin to prove ineffective, we are faced with a dilemma. The more regulation is imposed, the more mistrust; yet the more mistrust, the more regulation is imposed. While based on sound research, this is no academic dilemma. It reflects a moral crisis stemming from our loss of confidence in articulating and affirming what is good in people and in the institutions they create (as implied by the exhortation in Philippians 4:8).
We need a renewal of virtue, rather than of compliance, as the modus operandi of society, including the social sphere most widely associated with vice – business. If we deny business’ positive role in nurturing character and moral cultures, we will continue to find it lives up to its reputation. Many companies are leading this renewal, far exceeding the requirements of regulations. It’s time to shine a light on them, appreciate them, support them, and celebrate them.
Peter Heslam Director of Transforming Business, Cambridge
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