Time for some morality trades

Is our present financial crisis the result of a mistake or a crime? Is it evidence of incompetence or of corruption? Is its remedy to be sought in committee rooms or in individual consciences? When Rowan Williams, the archbishop of Canterbury, worried aloud this week that the government’s stimulus package “seems a little bit like the addict returning to the drug”, he revealed that we are fudging these questions.

The public has no settled idea about whether the global finance system seized up last summer because it was mismanaged or because it was, in a moral and metaphysical sense, wrong. The archbishop’s intervention was a bold one. Much as prelates in centuries past praised Jesus’s expulsion of the money-changers from the temple, we pat ourselves on the back for having driven the priests from the bourse. Morality has little purchase on economics nowadays. Maybe it ought to have more.

In 1926, R. H. Tawney, the great Christian socialist and economic historian, argued that we were wrong to be so complacent. His history of the Reformation, Religion and the Rise of Capitalism, described the origins of the idea that “business is business”, that the economy is a separate compartment that ought to be quarantined from other spheres.

At a time when most encounters were face-to-face, it was possible to lead a moral economic life simply by extrapolating from the injunction to love one’s neighbour, but a revolution in manufacturing, finance and trade made this extrapolation less possible. “Granted that I should love my neighbour as myself,” Tawney wrote, “the questions which, under modern conditions of large-scale organisation, remain for solution are, ‘Who precisely is my neighbour?’ and, ‘How exactly am I to make my love for him effective in practice?’ To these questions the conventional religious teaching supplied no answer, for it had not even realised that they could be put.”

Tawney, an activist in the Labour party, believed the period between Machiavelli and the English Revolution had a lot to teach his own time. Maybe it has more to teach ours, since it was marked by a “sweeping redistribution of wealth” and an “orgy of interested misgovernment”, not to mention its “reassertion of the traditional doctrines with an almost tragic intensity of emotion”, in the face of a world that was rendering them irrelevant.

Contrary to what one might expect, it was over credit, not wages, that the new capitalist classes clashed most violently with the economic morality that prevailed on the eve of the Reformation. Medieval economic morality centred on abhorrence of usury. This abhorrence is a bit embarrassing to modern Christians, who learn about it through the hounding of Shylock in The Merchant of Venice. We tend to view it as a shabby outlet for xenophobia and anti-Semitism. The main moneylenders in the period Tawney discusses were Spanish, Portuguese and Lombard Catholics, abetted by the Church and the Armada. Public outrage was not as benighted or unfocused as it looked. Large enterprises and royal courts borrowed without much difficulty, so preaching against usury did not unduly clog up the financial system – although businessmen claimed that it did. What troubled economic moralists was extortionate lending to desperately poor (we would call them “subprime”) borrowers. But the term usury also covered “the man who buys [a thing] in order that he may gain by selling it again unchanged” (which we would call speculation).

Usury was a general term meaning “taking advantage”. We dismiss those who were obsessed with it at considerable peril to our own business ethics. “If the medieval moralist was often too naïve in expecting sound practice as the result of lofty principles alone,” Tawney wrote, “he was at least free from that not unfashionable form of credulity which expects it from their absence or from their opposite.” In this light we can see that Fairtrade, promoters of socially responsible investing, activists for sustainable development and the micro credit movement are all groping towards a workable, tolerant, enforceable modern doctrine of usury.

Tawney showed that the religious revival of the 16th and 17th centuries ushered in its opposite – an individualism untethered from any social contract. As people grew firmer in their conviction that salvation could be had through God’s grace, it became a much less pressing matter whether the public sphere was run on Christian principles. There was a transvaluation of values and with them, of institutions. So feudalism, “once an engine of exploitation, was now hailed as a bulwark to protect the weak against the downward thrust of competition”. (Our own attitude to jobs in heavy industry has undergone a similar transformation.)

Tawney was not the first to make such arguments but his explanation is uniquely subtle. To simplify, Calvinism both glorified the entrepreneurial virtues and kept them under strict watch. But it turned out you could not do both. Those virtues could only be exercised if they were not universal. “How would merchants thrive if gentlemen would not be unthriftes?” One is reminded of the hedge fund mogul Andrew Lahde who, this autumn, having taken short positions on subprime real estate, wrote a crowing letter to the Ivy League hotshots at Bear Stearns, Lehman Brothers and elsewhere “stupid enough to take the other side of my trades”.

“An organised money-market has many advantages,” Tawney wrote. “But it is not a school of social ethics or of political responsibility.” Competition, he added, is not a substitute for honesty. We do not at present have any non-economic ways of discussing economic and financial matters. It appears we are due to get some.

The writer is a senior editor at The Weekly Standard

More columns at www.ft.com/christophercaldwell

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