1st August 2012
This certainly appears to have been the position of many on the American right. As Charles Murray, the author of "Coming Apart: The State of White America, 1960-2010" and the W.H. Brady Scholar at the American Enterprise Institute, wrote in the Wall Street Journal:
"Historically, the merits of free enterprise and the obligations of success were intertwined in the national catechism. McGuffey's Readers, the books on which generations of American children were raised, have plenty of stories treating initiative, hard work and entrepreneurialism as virtues, but just as many stories praising the virtues of self-restraint, personal integrity and concern for those who depend on you. The freedom to act and a stern moral obligation to act in certain ways were seen as two sides of the same American coin. Little of that has survived."
Although he doesn't cite any particular examples, Murray could have been referencing the history of Barclays bank. Its Quaker roots have long been cited proudly by the institution as evidence of its ethical integrity. Indeed John Freame, the founder of the bank, once claimed that "a sense of piety and virtue…would prove more advantageous to children than getting a great deal of riches for them".
Far from providing comfort, however, this proud history has helped throw the part Barclays played in the Libor fixing scandal into even sharper focus. Though Bob Diamond, its former chief executive, described the behaviour as "reprehensible" the scandal made clear that the company has drifted some way from its original incarnation.
Of course, Barclays is not alone in having fallen foul of their own ethical codes. With accusations of money laundering, PPI misselling or Libor fixing recent months have heaped additional woes onto the banking industry.
For a sector trying to rebuild trust after the worst financial crisis since the Great Depression these rolling revelations could not have come at a worse time.
So what went wrong?
For many opportunities to turn a profit during the heyday of the economic boom years were far too tempting for ethical constraints to function. Yet this reflected a broader shift in these communities from a position where ethical frameworks were a crucial part of the decision making process to one where they became an issue of compliance after the fact.
That is, they lost their relation to the individual making a decision and became just another regulatory burden to be bent or circumvented if they were seen as an impediment.
"Regulation is of course incredibly important but it can insulate people from ethical responsibility," says Neville White, senior socially responsible investment analyst at Ecclesiastical Investment Management. "People must be allowed to take responsibility for their decisions."
Viewed in this way the ethical lapses by these companies formed part of a culture where individuals were absolved of accountability for their actions providing them stuck within certain parameters. This in turn meant that the individual could forgo their own ethical impulses when making decisions.
"I think it goes back to the difference between European and American business models. American models have tended to be rules based, while European companies have traditionally been principle based," White says. "What we need to recognise is that what's going on with banks is a failure of the hybrid model that tried to sit between the two."
Can there be ethics without religion?
One of the most interesting things to come out of the financial crisis has been the growth of interest in Islamic banking. These new entrants to the sector provide Sharia-compliant products that forbid the payment or receipt of interest and refuse to invest in "unethical" industries such as the gambling, pornography or the tobacco trades.
While many of its critics claimed that the model would struggle to compete with mainstream banks they continue to frustrate their detractors. Last month, for example, the Islamic Bank of Britain (IBB) launched a competitive 4% expected profit rate for its two-year fixed account to coincide with the start of Ramadan.
John Plender, writing in the Financial Times on the history of Barclays, cites a pertinent lesson from history:
"Bartlett Gurney, an 18th century member of one of the Barclays founding families, had a pithy take on this. "A little business with a little profit and an entire regularity," he said, "is happiness sterling to the true merchant; while a large business, expecting large profits, but in confusion and disorder, may be flattering but creates much anxiety and little comfort.""
Preaching restraint may have fallen out of vogue in the heady markets of the past decades, but in the post crisis world it is creeping back into common parlance. In itself, however, it is unlikely to restore sufficient confidence in the banks to spur a recovery. For that these institutions will have to address the vulnerabilities in their corporate culture and engage the public in the debate over ethical values.
If, as it increasingly seems, people are looking for a similar ethical grounding to the one which helped fuel the success of the Quaker bankers three centuries ago then these reforms will have to be thoroughgoing. Does this demand, however, suggest that ethical systems cannot sustain unless they are tied to larger faith structures?
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