A lesson in the virtues of moral markets from a very small ‘c’ conservative
Last week Jesse Norman delivered the third part of a series of lectures to commemorate Demos think tanks’ 20th Birthday. It was not an illustrious turn out considering the intriguing and relevant title of the debate as well as the calibre of cerebral talent that had been lined up for discussion. Norman had been asked to deliver his talk on the subject of morality and markets. The panel included Andrew Lillico, Managing Director of Europe Economics and Hayekian disciple, Mariana Mazzucato, economist and RM Phillips Professor in Science and Technology Policy at the University of Sussex, and John Milbank, University of Nottingham. The choice title is timely and prevalent because it can be found at the root of most political and philosophical discourse today. The financial crisis, public service reform, social inequality… to name a few. Do markets, traditional or modern operate in a moral fashion or not.
The MP for Hereford begins his dialectic by drawing a line under neoliberal attitudes towards free markets and developing the work of Michael Sandel, the Harvard based rock star of modern political philosophy. Sandel argues that money is an inherently corruptive force, and market incentives often crowd out ethical incentives. He argues that yes, markets should be free and flexible but in recent years commercial markets have invaded our society, and we now inhabit a society where goods and services previously considered sacrosanct have been commoditized. We have gone from having a market economy to being a market society. Norman believes that the neoliberal conception of free market absolutism has collapsed and while some may see Sandel’s philosophy as that of a ‘leftie’, he really interprets it as small ‘c’ conservatism.
Norman then goes and draws on the ideas of his great mentor and hero Edmund Burke. Burke, he said, championed the idea of institutional strength and solidarity, acting in the interest of society, its employees and customers. He was the archetypal enemy of crony capitalism. This is really a reiteration of something Norman has been talking about for a while, but it is an important point to make when discussing the role and nature of private enteprise. Whether the case involves bankers paying themselves big bonuses, or street vendors selling dodgy products, a well-run business should be motivated not by profit and short term shareholder satisfaction, but a wider set of aims. A company should aim to maintain the image of professionalism and integrity, responsibility and quality, its financial stability is more important than its financial success. Norman wrote an article in the Telegraph early this month entitled ‘Profit has never been a company’s only duty’ in which he points out ‘there is increasing evidence that people exposed to purely financial stimuli become more greedy, more short-term and more individualistic… really effective management is about inspiration and teamwork over the long term’.
Norman’s point is concluded by pointing out some home truths that are so often crowded out of the debate on markets and capitalism due to the cringe worthy and unfair examples of a small minority. He points out that, for markets to operate effectively, they require moral behaviour. The vendor must produce a reliable product, advertise it accordingly, and act responsibly in the process of sale. The same must be said of any consumer. If market components act immorally, the market for the product collapses and ceases to exist. Secondly, proper businesses are not rent seeking, profiteering, amoral machines. An entrepreneur and businessman is motivated to produce a service or product that beats the competition and has inherent value for his customer. He says in the Telegraph article; “monetary incentives often undermine, rather than reinforce, success.’
Norman’s real academic conquest though is to reinforce the Burkean concept of a conservative institution and fuse it with Sandel’s ethics. Its risk averse and socially aware, operates free from state control but as a slave to its shareholders and stakeholders. This is the face of modern morality fused with free market economics. Are markets moral…yes, but provided they meet the correct criteria. I’ll finish with a long winded quote from that same Telegraph article by Norman, which I believe beautifully outlines his feelings towards the issue; ‘This insight demands a shift of perspective, from the language of law and economics to one of stewardship and ownership. It is a shift with profound consequences. Within companies, it implies a long-term focus resilient enough to resist market pressures just to meet quarterly earnings targets. It implies a sense of personal responsibility – indeed, contrition – from management that has been largely missing from recent arguments over tax, or the causes of the banking crisis. It also demands a degree of modesty in how directors and managers reward themselves. And it invites companies to reconsider the privilege of limited liability, and the connection – which existed from the earliest chartered companies on – between corporate activity and the public interest.’
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