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Towards a post-crisis moral political economy?

Recent calls for economic justice, and particularly intergenerational justice, suggest a new post-crisis moral political economy could be emerging

Adam Standring, Universidade Nova de Lisboa, Portugal

It was once said that the Church of England was ‘the Conservative Party at prayer’. Those days, however, seem long gone and the ideological distance that has grown between those two venerable British institutions was clear for all to see in the fallout from a recent speech the Archbishop of Canterbury gave to the Trades Union Congress (TUC). Provoking the ire of Conservative MPs and commentators, Justin Welby took the opportunity of the TUC’s 150th anniversary to condemn some of the more ‘unjust’ features of the modern economy.  The fault of rising inequality and instability was placed squarely at the door of a system for which ‘the profit motive [leads] to the weakest being given the most risk and the strongest the most protection’. Welby expressed particular concern over features of the economy which have increased precarity and trapped many in a cycle of poverty and debt: the gig economy, zero-hours contracts, and aggressive pay-day lending.

Understandably, given his position in the established church, Welby’s diagnosis of the current ills of the economy are suffused with moral overtones. Tax avoidance, and aggressive tax management, were symptomatic of an ‘absence of a commitment to our shared humanity’ while the gig economy is ‘the reincarnation of an ancient evil’. It is a tone which chimes well with a growing call for ‘a new moral purpose to define the goals of economic policy’ which has been a strong feature of recent reports from thinktanks such as the IPPR and the Resolution Foundation. Not content to tinker around the edges of the economic system, what these reports have in common is to challenge the very foundations on which the economic system rests.

The idea that the economy rests on moral foundations is hardly new – Weber on work and capitalist formation, Nietzsche on the morality of debt, Adam Smith on the ‘greater good’ are some of the more notable examples – but the financial crisis, and subsequent government responses, have refocused attention and critique on what our current system can, or perhaps should, stand for. Morals work as cognitive shortcuts, allowing us to assess actions according to pre-agreed rules and norms, thus making the actions of ourselves and others more predictable. These shortcuts are aided by the consequences inherent to any moral order – break the rules and you’re punished, abide by the rules and you’re rewarded.

One of the consequences of the crisis was that this simple equation was exposed as a sham: no punishment was forthcoming for those responsible for the crisis, indeed many of those whose risky deals had jeopardised the financial system and the global economy were now being bailed out at the expense of the taxpayer. Profits on capital are often justified in terms of risk: the higher the risk an investor has of losing their money, the higher the interest or equity share they will take. The crisis helped break the connection between risk and profit, not merely by failing to understand risk but, through a process of securitizing loans of different risk together, by obscuring it. Financial risk was socialised as the concept of ‘too big to fail’ undermined the very idea of moral hazard, allowing greater risks to be taken without the costs falling on the investors. Under such circumstances the moral order was left open to challenge from both the right and left, with systemic critique expressed in populist or nativist sentiment – reflecting back on to socially marginalized groups, particularly immigrants but increasingly the disabled, the un/under-employed and the young – as well as through a reinvigoration of progressive ideals, centred around solidarity and a moral critique of intergenerational inequality and precarity.

Is capitalism moral?

In what ways can, or should, capitalism be considered moral? Typically, that question has been approached in two different ways, one centred on narrowly defined economic practices of actors, usually focused on business or the financial industries, and the second looking at the morality of the economic system in broad terms – what are the moral requirements for the public support of capitalism?

The amorality of the financial industry was classically embodied in the fictional character of Gordon Gekko, whose ‘greed is good’ mantra from Wall Street became emblematic of the excesses of the 1980s. Such sentiments can be seen as merely a logical extension of earlier arguments, advanced by Milton Friedman and other neoliberal economists, that the only responsibility of a business or CEO was to the shareholders and the substance of that responsibility was to maximise profits. This topic provided the subject of a recent conversation between Peter Turchin, Branko Milanovic, Herb Gintis and Bob Frank. Milanovic is cynical of the role of morality in economics, ‘I might like the guys who are nice and ethical, but when it comes to economics I really do not expect them to be so’. Morality in economic circumstances can be considered, in Milanovic’s terms, as being ‘outsourced’ to a society which constructs the fences around the economic sphere – comprising laws, etc. – but within those fences, anything goes. Frank begs to differ, arguing instead for the numerous social and economic advantages businesses gain from acting honestly and morally, not least in the competitive advantage they gain in recruitment – moral business make happy employees.

It was Weber’s claim that the emergence of capitalism itself was presupposed by a moral relationship, beginning in the Reformation and connected to a Protestant focus on the temporal, between humans and work: religious practice and duty was exercised in the course of people’s occupation. Not only did this provide a justification for capital accumulation – understood as the fulfilment of a religious vocation – but it also helped to motivate and discipline an increasingly urbanised workforce which carried with it the potential for unrest. Weber’s contention, that people require powerful moral reasons to support capitalism, has been built on in successive decades as capitalist practices have evolved. In contemporary capitalism, entrepreneurship and competition between individuals are naturalised as moral values and, in Boltanski and Chiapello’s critique The New Spirit of Capitalism, embedded in flexible labour systems and networked working practices. Running parallel to this is the increased marginalisation of losers and loss, manifested around the stigmatisation of poverty and debt. Individuals, or often families, are held responsible for the systemic failings of the capitalist system.

‘Geiz ist Geil’

Moral orders cannot simply be proclaimed and expected to be believed but rather are embedded in complex, often contradictory, sets of cultural norms and practices. Countries such as the USA, Germany and the UK claim a particular moral aversion to debt which framed much of the immediate crisis discourse. Debt was seen as not merely economically irresponsible – stifling economic growth, raising borrowing costs and interest payments on it eating up the national budget – but it was morally irresponsible, saddling future generations with the consequences of this generation’s overspending. For those taking perverse joy (or horror) in large numbers there was a proliferation of ‘debt clocks’, spinning round at apparently alarming rates and showing not just how much the country owed but how much ‘YOUR family owes’.

In the UK, Conservative political rhetoric was infused with a sense of moral purpose in order to justify austerity measures. The moral political economy of crisis was one in which ‘we’re all in it together’, one which would favour ‘hard working British families, benefit the ‘striver’ over the ‘skiver’ and one in which growing debt was seen as a result of profligacy rather than a necessary corollary of bailing out the banks, leading many to proclaim ‘we reaped what we sowed’.

The effects of the Eurozone crisis often took on overtly moralistic overtones which helped to create a clear divide between the (fiscally) responsible countries of Northern Europe and the spendthrift counties of the periphery – with their generous pensions and a lax approach to paying tax. This story of the ‘Northern Saints vs. Southern Sinners’ was instrumental in avoiding a common recovery mechanism for the Eurozone – ‘why should we pay for their excess?’ – as well as in justifying the harsh austerity measures meted out to countries risking default. Even in those countries subjected to the austerity measures, as I have written about previously in the case of Portugal, political discourse often framed cuts in explicitly disciplinary terms – penance for sins of the past or ‘fiscal waterboarding’.

Angela Merkel was a particularly adept advocate of the moral framing of the crisis. Not only was she regularly depicted as the thrifty and responsible Swabian housewife but she had a deep cultural history of German economic conservatism on which to construct her vision of the crisis. Germans have long seen thriftiness as a moral imperative, dating back to even before the trauma of 1930s hyperinflation; a recent exhibition at Berlin’s German Historical Museum entitled Saving – History of a German Virtue explored the theme. The cultural proliferation of slogans such as Geiz ist Geil (‘Thriftiness is Sexy’) helped to produce a national discourse that valorises monetary conservatism but also which serves to obscure the moral hazard of German economic policy – its surplus. While Germany was chastising its neighbours over their unbalanced growth and overspending this was merely the corollary of Germany underspending.

A capitalism without capitalists?

A succession of crises have exposed cracks in the moral basis of the current economic order leading to the undermining of public trust, focusing attention on systemic failings and increasing demand for genuine alternatives. Europe-wide polls have shown significant changes in popular understandings of the causes of poverty. Pre-crisis, in 2007, 37% of Europeans claimed poverty was caused by social injustice while 20% attributed it to personal failings. By 2010 these figures had shifted dramatically, with 48% blaming social injustice and just 15% blaming the individual.

There is increasing concern that the promises on which the moral foundations of liberal capitalist democracy rest can no longer be lived up to. While employment figures in the UK are at record highs, wages struggle to keep pace with the cost of living and, as Welby contended, the gig economy has increased the precarity of work and in-work poverty. Combined with the housing bubble, this means that many, particularly the young, have little to no hope of ever owning their own home. As Thatcher’s dream of constructing a property-owning democracy to act as a bastion of capitalism – embedding moral support of property rights – looks an increasingly distant prospect, it poses an interesting question: who will defend capitalism when the people own no capital?

In response to these challenges there have been attempts to shore up the existing moral order, amplified and aided by Brexit, which has seen the virtues of competition and entrepreneurship extended beyond what are seen as the confines of the EU, to position the UK as having the potential to be, once again, a great global trading nation. Immigration too has been framed in moral terms, with affected concern over the effects of emigration on Eastern countries and the cultural and economic effect immigration has on British communities. This, however, represents the evolution of a pre-crisis moral order rather than its replacement.

One of the most potent sources of a new moral order comes from another factor Brexit served to amplify: a growing economic and political intergenerational divide. Not only did the Leave/Remain vote differ drastically according to age group but this is reflected in subsequent electoral maps which show very different pictures depending on whether we look at voters aged 18-24 or the over-65s. As millennials stand ready to endure lower living standards than their parents, it appears another promise of capitalism has failed and alternatives are sought. The emergence of a new post-crisis moral political economy has been characterised by the call for economic justice, and particularly intergenerational justice and has been a shared concern of the two largest parties in the UK.

Despite claims to the contrary, recent Labour conferences have been awash with new ideas as The World Transformed conference has run parallel sessions with a range of figures from academia, activism and the media speaking on topics as diverse as urban regeneration, democratizing the media and the future of trade unions. Ideas have bled through to the main stage with Corbyn providing the strong critique of ‘greed is good capitalism’ and John McDonnell more of the substance: the promise of employee ownership riffing on Thatcher’s idea of creating a shareholding citizenry. These ideas are not revolutionary but they do suggest a radical departure from the status quo and speak to broader calls for a new foundation for the economy, built on democracy and justice.

Much of the talk at last week’s Conservative conference was about diagnosing the problems without having strong ideas about what to do next. Faced with internal divisions there was a tendency to trot out tried and tested lines to appeal to business and an increasingly aged base but even here there is a surprising break in Conservative ranks with the CBI coming under attack from hardliners for its opposition to Brexit. In this context Theresa May’s speech was disappointing, heavy on attacks on Labour with little new to add and while she acknowledged the sacrifices of austerity, lifting it was framed as dependent on gaining a good deal from Brexit. Figures such as Lee Rowley, George Freeman and Philip Hammond have all been asking important questions regarding the future of capitalism and its moral foundation but as a movement they are still caught between reforming capitalism and defending it.

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