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  1. Wealth
February 16, 2009

Morally Spent

By Spear's

For the last decade, the pursuit of money has been seen as a moral good by the world’s financial classes. It’s about time their values were brought to earth, says William Cash

For the last decade, the pursuit of money has been seen as a moral good by the world’s financial classes. It’s about time their values were brought to earth, says William Cash

Among the emails I receive from David Cameron (I am on his vast weekly mailing list) was one recently addressing the subject of how we should be encouraged by the government today to make money in a ‘moral way’.

He said that the government should waste no time in introducing a National Loan Guarantee Scheme that underwrites £50 billion of funds made available to small businesses in the UK.

In a foretaste of Cameron’s subsequent call for global ‘moral capitalism’ in various January speeches, the M word was used twice in his email, first in the following sentence: ‘We recognise that they [small businesses] make a difference by not just creating wealth, offering employment, and paying taxes to fund public services but by making their money in a moral way, treating their employees right, strengthening communities and playing a positive role in society’.

And then a few sentences later he was writing again that the government should lead by being ‘prudent with the public finances’ and by being ‘as moral and responsible with the public purse as we expect business to be with consumers’ cash.’

Cameron seems to be making a similar point here to Rowan Williams, the Archbishop of Canterbury, who lambasted the Prime Minister on the Today programme, saying that his reckless, gambler’s attitude towards public spending was like ‘the addict returning to the drug’.

Williams also seemed to encourage people to ignore Brown’s remedy of spending their way out of the recession — as if one had some patriotic duty to max out one’s credit card. He added that he thought it might be a good idea if people spent money in a ‘good, human way’ — in other words, a moral way.

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But is there such a thing as spending money in a moral way? And is it the job of the Archbishop of Canterbury to be meddling in our shopping habits as well as giving economic advice to the Prime Minister who presided over so many years of economic growth as the Iron-Fisted Chancellor who declared boom and bust dead?

The answer is that, in the absence of any sense of moral leadership or responsibility from the government when it comes to spending, Williams is surely right to step
forward and remind people of the dangers of the unsustainability of any economic system that is fuelled by debt.

The Archbishop and Cameron are both perfectly right to make the point that Britain cannot survive as an economy if it is over-dependent — co-dependent, to use the addict analogy — on property and financial services as the means to growth.

Both sectors are going to face real difficulties this year, with repossessions in the UK rising to 200 a day and prices already down 25 per cent from the market peak of August 2007. Williams said the country was ‘going in the wrong direction’ by relying on financial speculation to generate wealth, rather than ‘making things’. This is another point that Cameron has also recently made.

Public borrowing rocketed to £16 billion in November, a new record — worse than that of the deficit crisis of the mid-1990s. Like a spending addict who has just got a new credit card with no limit, Brown and Darling have lost fiscal control.

It is impossible for the maths to add up — they cannot continue the high levels of public spending as well as putting more money in consumer pockets and hope that the public will go out and recklessly spend again. The opposite is actually true — now is the time when people are starting to feel the effects of their financial hangover and debt splurge.

Debt has certainly been allowed to spiral out of control in the UK. A recent Bank of England report, Lending to Individuals, revealed that the public owed £1.457 trillion — £1.219 trillion of that being tied up in our homes, which are plummeting in value.

Surely what will happen now is a reassessment of our values, in particular our addiction to the cult of money and consumerism. Behind this cult has been the need for the financial classes and a new growing middle class to buy the toys of success. Most hedgies’ wives hate their husbands for enslaving themselves to the pursuit of money — as if money is the only way of keeping score.

Labour is simply going for a quick-fix, hair-of-the-dog remedy (or a cheap pre–election bribe before the economy really starts to develop into a full-blown recession) to the nation’s economic woes, effectively trying to bribe consumers back to the shops in order to find a way to pay for the black hole that is being created in the public finances with the reduction in VAT and the scary figures that have emerged about the scale of public debt.

While countries such as Germany restored some fiscal order to their country during the boom years, Britain always stayed in the red, even when the economy was doing well. The downturn of 2008 has shattered Labour’s record on tax and spend.

But the real problem is that for the past ten or fifteen years we have lived in a consumer-obsessed society that has lost touch with our parents’ sense of what things are worth. At least our parents knew where they stood in the world with their finances. Their homes were not bought to be flipped and sold as a form of financial speculation. They were places to live in.

The credit crunch may be bruising for those who have overspent money they didn’t have, but it hardly compares to fighting through two world wars, seeing our empire
being ground into the dust, and then being taxed to death in the 1970s with a three-day week, blackouts and the country on its knees.

I brought up the M word at the beginning of this piece as it is key to understanding the root cause of much of the problem with Britain’s financial classes who profited so much from the decade-long golden era of finance in London — making London the new financial capital of the world (a title it is in great danger of now losing).

The recent financial renaissance in the UK — with London being dubbed ‘Switzerland–on–Thames’ — has been fuelled by the American notion that money is a moral good; that the pursuit of money (in particular financial speculation) is synonymous with the pursuit of happiness. At Spear’s WMS, we have long argued that Europeans have never regarded money as a moral good and that our values are much the better for such scepticism.

I have no problem at all with the Archbishop of Canterbury turning into an economist — he’s there to provide moral leadership — or telling people how to spend their cash. At least he is not suggesting that people — or the country, for that matter — get even more into debt in order to stimulate an economy that has become both financially and morally bankrupted. Spending to get out of debt is a form of madness that will punish future generations and will further drive a wedge between rich and poor in the UK.

Part of the problem has been the media, who, in their ignorance of complicated financial instruments such as hedge funds, credit swaps or short selling, have fuelled the myth that the financial classes, in particular the hedge-fund brigade, are secretive Wizards of Oz whose superior brains and intelligence allowed them to strut their egos on the global stage as the new Masters of the Universe, those who raised entitlement to an art form.

Little did the media realise, as shown by the Bernard Madoff scandal, that these so-called financial experts actually knew next to nothing about what they were doing. When the tide went out, they were exposed naked — as Warren Buffett likes to say.

Far from being financial rock stars, as they are portrayed in rich lists and newspapers, they are really just oily salesmen making a mint from simply sending money from A to B and charging a hefty commission for doing so.

Far from really being Masters of the Universe, Britain’s financial classes are really just the financial waiters of the world — fee-receiving servants who have gone off with the family silver from right under their rich clients’ noses.

Of course, Williams is very far from being the first priest, philosopher or politician to point out that what Brown is doing amounts to a moral failing on the part of the government — namely, in spending money that the country doesn’t have, he is putting at risk the wellbeing and prosperity of future generations, who will have to pay higher taxes and will inherit a bankrupted country with limited opportunity for growth.

In his seminal 1970s book, A Theory of Justice, Harvard philosopher John Rawls argued that it was not only immoral but also unjust for governments to spend their country’s inheritance, and that a social contract existed between governments and citizens whereby governments had a moral duty not to gamble away a country’s finances or resources as the money wasn’t actually theirs to gamble away — it belonged to the taxpayer. Brown and Darling, take note.

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