The financial crisis has prompted a rethink about the values that should underpin our global economic system. This was the theme addressed by the prime minister, Gordon Brown, and Australian prime minister Kevin Rudd yesterday, at an event at St Paul's Cathedral. The first in a series of debates on the theme of "money, integrity and wellbeing", the prime ministers were invited to speak on the subject of "My word is my bond? Rebuilding trust – the G20 and beyond."Stephen Beer: We need values to underpin the way we conduct market activity | Comment is free | guardian.co.uk
That London Stock Exchange motto – "My word is my bond" evokes visions of a golden age. Perhaps people have in mind the world described in a series of BBC documentaries made in 1964. Trading itself still takes place on this underlying principle, albeit with better checks and regulations. Problems arose from what was actually traded and how it was marketed: the risks taken were so extreme that they threatened the entire financial system. Moreover, there appeared to be a growing gap between rewards and sustainable performance. A part of the financial sector seemed to be detaching from the rest of society yet has since required billions of dollars of support.
The prime ministers were speaking on the eve of the G20 London summit and against a backdrop of a deteriorating world economy. For example, on the same day the OECD published a new set of economic forecasts. These predicted GDP would fall 4.3% on average across OECD economies this year, with the US down 4.0% and the UK down 3.7%. Both PMs acknowledged this immediate economic crisis and the human costs. Their contributions encouraged some hope while also illustrating the challenge that faces any attempt to remake the world economic order.
In his speech, Gordon Brown outlined his belief that "Our financial system must be founded on the very same values that are at the heart of our family lives, neighbourhoods, and communities." Families do not reward the taking of irresponsible risks. Most private businesses also understand responsible risk-taking, which is very different from the bets which nearly brought down the financial system or the rewards associated with them. These values found in families and much of the private sector must be brought to the market.
Brown identified the relevant values as hard work; taking responsibility, being honest, and being fair. A global ethic is possible, he argued, because "a single powerful moral sense demanding responsibility from all and fairness to all" runs through the many traditions and faiths. Loving your neighbour as yourself (and the equivalents across faiths) means we also have a responsibility to help the poor and deal with climate change.
Prime minister Kevin Rudd noted that "something almost audibly cracked" in the public's trust in financial markets last September. A rebuilt economic system is required in which all can have trust. A proper balance between markets and government has to be restored. Values such as security, liberty, and prosperity have to be combined with the values of equity, sustainability, and community. We will avoid a 1930s-style depression if we rebuild a values-based system and have the courage to act together.
Talking about values is the easy part. Actually agreeing on which values matter and putting them into practice is more difficult. Faith groups can certainly help find common ground. Ultimately, we all need to think about what kind of society we want in future. It is less about obtaining a balance between government and markets than ensuring a more equitable participation in the market system and working against inequalities. Inequality and poverty have declined in general during periods of globalisation (including open markets and more trade) but where serious inequalities arise they should not be ignored. We need to rediscover RH Tawney's point that people need economic freedom alongside civil liberty. Power, whether political or economic, needs to be accountable in some way.We should be encouraged that Brown and Rudd are talking about markets and values going into the G20 meetings.
We should be realistic about the challenges involved in restructuring the global economy but not cynical. It is right to make the attempt to reconnect markets with values. Once we have agreed on which values matter, regularly referring to them (like a stock exchange motto) and acting upon them would be a good start.