Saturday, June 30, 2012

The Moral Roots of Crisis

The LIBOR scandal is getting plenty of attention in Britain, but most of the American media haven't figured out yet how much it means for average US borrowers. Floating rates tend to be linked to dollar LIBOR, which is a number as close to the heart of finance as you can get.

The British banks are also reeling from other new scandals about ripping small businesses off with inappropriate interest rate swaps, and a huge breakdown in RBS's payment mechanisms. The press is full of stories like couples having to cancel their honeymoon because the bank incompetently did not clear the money in time.

This is all also stirring some deep moral angst. Here's a former archbishop of Canterbury sensing that something much deeper has gone wrong morally. This is interesting.

You might think it ill-behoves a retired Archbishop to comment on economic matters about which I have no expertise, but the banking crisis is not merely a matter for the markets. The banking sector is an important part of the network of institutions which build a civil society.Thus evidence of corruption in our banks, and the resulting collapse of public trust in them, affects our very democracy.
It is not an exaggeration to say that the sort of widespread alienation we are now witnessing among the public towards these multi-billion-pound behemoths can lead to civil unrest.
And it is not just banks in which public confidence is at an all-time low. For over the past five years, we have witnessed an unprecedented public crisis in the great pillars of state: the banks, the police and Parliament.
Why? Because in more and more cases, naked greed seems to have been the driving force for many self-serving individuals in these institutions. That said, the real crisis we are facing is not a financial but a moral one. And it is a direct result of the something-for-nothing culture which is poisoning our society.
Western elites don't just look greedy and self-serving. They look like failures. The euro crisis is another example - largely self-inflicted by pro-integration elites.

In many ways the crisis genuinely isn't a matter of economics, but of ethics and behavior. The Archbishop is right.

That doesn't mean a populist response is justified. Property speculation and unsustainable pensions and welfare came from broad popular enthusiasm.

Is it just another cycle? Societies tend to go through periods of laxity and sternness. Or sometimes they lose their powers of self-renewal.



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