Ann Pettifor was invited to take part in a debate asking “The City and the Common Good: What kind of City do we want?” organised by St. Paul’s Institute and CCLA. Speakers included economic historian Lord Robert Skidelsky, Tarek El Diwany of Zest Advisory LLP and Paul Sharma of the Prudential Regulation Authority. The debate was chaired by BBC Economics Editor Stephanie Flanders and attended by over 900 people.
The second of a series of three debates, last night’s event examined the moral underpinnings at the heart of the UK’s financial system. It is clear that money is no longer just an objective measure of value and a token of exchange – if it ever was. But what has it become? Is its social purpose in danger of being lost? Do we control money or does it control us? Is there such a thing as “good” and “bad” money?
The event’s keynote speech was given by Lord Skidelsky. Borrowing from J.M. Keynes’ Economic Possibilities for Our Grandchildren, he distinguished between ‘the love of money as a possession’ and ‘the love of money as a means to the enjoyments and realities of life’. He argued that despite the ancient wisdom of Aristotle, the Koran and Vedic texts condemning usury, or the making of money from money, the modern banking has carried it to new heights. The result is the monetization of economic life; we increasingly think of activities not devoted to money making as carrying an ‘opportunity cost’ in terms of money foregone.
Turning to the City, Lord Skidelsky cited that in the years leading up to the crisis bank loans to the real economy increased by 50% while they grew by 260% to the financial sector. In other words, banks were increasingly lending to themselves, a good example of money breeding money. He sums up the charges against the bankers made by reformers: 1) that bankers are paid too much for the services they provide and therefore caps must be placed on bonuses, and 2) banks are actually inefficient at allocating capital, and the Bank of England must provide regulation. These reformers, he critiques, only want to improve the efficiency of financial services in meeting human desires without addressing the moral quality of those desires.
Lord Skidelsky asserts that “good money” should not only be honest and efficient, but also directed towards good ends, such as health, respect, harmony with nature, and security. He cautions that the worship of money as a possession rather than as a means to the ‘enjoyments and realities of life’ is socially damaging, and reminds us that the challenge is to create a social system which is efficient both economically and morally.
(All photos (c) Graham Lacdao, St Paul's Cathedral)