Bishop of Durham: more prophet; less profit
Last week the Bishop of Durham The Right Revd Justin Welby (widely tipped to be the next Archbishop of Canterbury) addressed a conference of financiers in Zurich. He spoke of the issues which face the financial community as it decides whether to 'repair or replace' existing systems of control.
Bishop Justin sits in the House of Lords and is a member of the Banking Standards Commission which was established to investigate the culture and performance of banking in the United Kingdom, and to make recommendations for the new banking act which will be brought before parliament next year. With a background in business, the Bishop is perhaps uniquely placed in the Episcopate to comments upon the behaviour of the financial markets. He observes:
In the case of the financial markets and infrastructure of the world, what has been obliterated is not physical, plant, property and equipment, but confidence. There is no longer confidence in banks as safe, in banks as virtuous, or in bankers as being part of the same world as the rest of us and with the same values and desires as the rest of us. That loss of confidence may be unfair, in many cases I would argue that it is, but it is a reality.According to the bankers, the finiancial crash was brought on by 'an unfortunate moment of carelessness'. According to the people, the only response is 'à la lanterne' (a reference to the French revolutionary lynching of the nobility and the clergy from a lamp post). Whatever the reaction and wherever the truth, the Bishop is of the view that 'too much effort is going into putting Humpty back together again, and it can't happen'. He expounds his own observation of the cause:
Activity without purpose is anarchy. It may not look like anarchy, it may in fact be very well organised anarchy but unless it has a serious and clear purpose activity is merely random. One of the biggest faults in the pre 2008 financial markets was essentially they were exponents of anarchy in this sense. They involved wild and frantic activity, often by exceptionally intelligent people, working very long hours, but they had no socially useful purpose. The industry was referred to as financial services, but in fact it served nothing. In the UK, where most of it was housed, SME's (small and medium-sized enterprises) still struggled to find finance, although they were based within close reach of the largest financial centre in the world. Martin Wolf, the Financial Times columnist, said in 2009 that the UK suffered from having a 'mono crop economy'. By that he meant, that like Nigeria with oil the UK had finance. Far from being the goose that laid the golden egg, it was in fact the cuckoo in the nest that pushed all the other fledgling industries out to die. The same can be said of much finance in other places around the world. Certainly, it was true of the hedge fund industry in the United States, and of much dealing activity across Europe and in the Far East. Finance had become a feature of its own, rather than anything with intrinsic value.This is good stuff: Mammon has been worshipped above God, and the material has supplanted the spiritual. Bishop Justin asserts that 'there is a need for socially useful purposes for banking and financial services'. And, quoting Pope John Paul II, he reminds us that a company is 'a community of persons in service', and financial services have 'huge potential as vehicles of the common good in order to unite increasingly autonomous and disparate societies'.
The primary question is 'what can be done in the financial markets to bring them back to being tools for human flourishing and development, and for uniting deeply divided societies and parts of societies?'
The Bishop rails against one of His Grace's favourite themes of justice when he observes that our banking culture has 'socialised losses and privatised profits', (indeed, His Grace made the same point three years ago). But Bishop Justin goes further:
Our bit has concentrated banking only where transactions provide large rewards to the banks and ignored areas where relationships are needed to unite communities and help lift them out of poverty.This is Phillip Blond / Red Tory stuff: in Cameron's 'Big Society', local banks might have served their local communities, helping to alleviate poverty by investing in local businesses and serving the people. Thus does banking become a cohesive force for good in society, redistributing surplus savings at modest rates of interest in order to draw people together for the common good of all. But this shouldn't be achieved through stifling regulation, but by community inspiration, rather after the fashion of what David Cameron once told us he was about.
Of course, the Prime Minister lost his way: his vision perished. Despite his best efforts to 'decontaminate' the Tory brand, he has recontaminated it by poorly communicating his philosophy, acquiring a reputation for U-turns and incompetence, and permitting the narrative of 'cuts' to permeate the public consciousness. Into this vacuum of government, enter the Church. Bishop Justin lucidly proposes:
• Government support should be limited only to those banks and financial institutions that have a clear and explicit social value. At the same time they must be allowed to fail, the process of defining resolution is if anything more important than defining regulation.He acknowledges that these are 'merely ideas in the mist', but His Grace likes what he hears. Of course financial recklessness must be permitted to result in failure: by bailing out profligate banks, we stoke moral hazard. When we do not bear the consequences of our actions, there is the creation of a false sense of security, which only encourages more reckless behaviour.
• There must be formal banking qualifications which are required for anyone involved in investment or commercial banking who is dealing in more than minimal amounts of money.
• Banks that demonstrate social purpose could receive an easier tax regime and a lighter regulatory touch. The reverse could be true for those who do not fit these principles.
The Bishop is of the view that 'we cannot repair what was destroyed in 2008, we can only replace it with something that is dedicated to the support of human society, to the common good and to solidarity'. These are eternal Christian themes of justice and compassion, and they exalt a nation. We might pray that Bishop Justin soon finds himself in a position to reify his 'ideas in the mist'. Financial services are indeed crucial to human development, 'but they only do their job when the work they carry out is done in a way that is truly a service'. It is time to depose Mammon and return to the old paths of righteousness and holiness.