There's an excellent article by Justin Welby on the banking crisis and our response to it, summarised in the Independent yesterday. He makes several good points (quotes in blue):
- The free market has failed, and always will, because it's got people in it (it is clear that rational market theory and its relatives have been undermined by the events of the past five years. Adam Smith’s general cynicism about the tendency of any group of business people, when meeting together, to create a cartel and ensure maximum profitability, has been shown to be justified, both in its own terms and as a general reflection (which he understood well) of the susceptibility of human-made systems to human failings.)
- we had an economic blind spot to financial services, and came to rely on them too heavily. When you realise that betting shops are included as a 'financial service', that should ring a few alarm bells.
- Financial services have served only themselves, and lost sight of a wider social purpose. Welby notes the failure of financial services to enable society to flourish -- what in Catholic social teaching is known as the “common good.” Much of the financial-services industry became essentially self- regarding, and one result was that small and medium-size businesses as well as poor areas were neglected, often unable to obtain credit.
Welby's prescription includes:
- see banking as a utility (separated from investment banking) like water or gas, and treat it as such.
- avoid complex regulations - they tend to be hard to enforce, hard to follow, and serve as a job creation scheme for lawyers but not much else.
- have professional qualifications for the financial sector, including an ethical dimension: qualifications that enable people to reflect on their own conduct and examine their own consciences as a matter of self-discipline, in the same way as they seek to balance their book at the end of a trading day.
There are no simple answers to the current crisis in banking, but there are simple principles. They come down to saying that financial services must serve society, and not rule it. They must be integrated into the economy, not semidetached. They must recognize human fallibility, not assume the effectiveness of human imagination.
These three principles would work well for most organisations, including the church. A church which serves society, which is integrated into it, which recognises its own fallibility and doesn't assume it's right.