YESTERDAY, I heard an interesting take on the financial crisis from Roger Steare. This revolves around the idea that, since the world’s resources are finite, mankind is foolhardy to expect economies to keep growing year on year.
Steare, a visiting professor of organisational ethics at Cass Business School, believes that our obsession with perpetual economic growth lies at the heart of the current financial crisis.
Given that real wealth is in short supply and since most real natural resources are finite, Steare believes that it is unreasonable for individuals and governments to assume that they have an automatic right to a higher standard of living / a bigger economy every year.
However governments worldwide seem to have bought into the philosophy that growth is good, irrespective of environmental and social costs and whether it is really affordable. They have convinced themselves that, unless they can grow their countries’ GDPs by 2%-3% a year, they will be deemed to have failed and deserve to be kicked out of office.
The assumptions are shared by the vast majority of ‘dismal scientists’ around the world. Steare however believes it is time they were properly challenged. He said: “The major issue that we’re facing is that we have a closed system on this planet, with finite resources, and yet we have an economic philosophy which says that growth is good, and that growth can be infinite. The [mismatch] is something which our modern political and economic philosophy refuses to accept.”
Steare, author of Ethicability and founder of Roger Steare Consulting, believes that delusional thinking along these lines lay behind the growth of the credit bubble, which as everyone knows gave rise to Ponzi-like housing market bubbles in countries including the US, United Kingdom, Spain, Ireland and the United Arab Emirates.
It was their faith in self-correcting markets and their belief that economic growth is intrinsically good that persuaded the likes of Federal Reserve chairman Alan Greenspan and UK prime minister Gordon Brown to turn a blind eye to the fraud and dysfunction which enable banks to advance gravity-defying loans to people and corporates who were unable to afford them.
From about 2000 to August 2007, this combination seemed to work alright. Governments and citizens of the world’s richer nations enjoyed a mirage of wealth, with some believing they had reached a form of economic nirvana. To the naive, it seemed that financial risk had been banished, credit would remain cheap and bountiful forever and asset prices would never again fall. Brown — whose mantra as chancellor from 1997 to 2007 was that New Labour had banished “boom and bust” — was perhaps one of the most deluded of all.
During the credit bubble, banks around the world had no qualms about bending the rules, including gaming regulations on capital adequacy through the use or exotic derivatives, to conjure up money out of thin air. Borrowers used the money to further inflate already dangerously over-stretched asset price bubbles. If anything, Brown and his new Labour cabinet colleagues egged them on, further dismantling financial regulation and acting as cheerleaders.
Speaking on BBC Radio 4’s the Moral Maze, Steare said: “Our [the majority of the world population’s] philosophy, in terms of economy, is the philosophy of the cancer cell, which is growth for its own sake.
“If you look at cell division, it is a normal biological activity, but if you look at unlimited cell division then we see growth for its own sake and I think that our planet and our species is suffering from a terminal disease. Now we have a choice …
“This banking crisis is symptomatic of a wider malaise, and that malaise is that we have an economic system and a financial system which really only accurately measure about 25% to 30% of real value in the real world.”
Steare also commented on the lack of ethics within the banking and corporate worlds, saying: “My own research and experience of people in financial services who are struggling to do the right thing, is they need to stop and think about what’s right, and to look at it not just in purely monetised or economic terms.”
He believes we won’t be able to extricate ourselves from the current economic mess until individuals within banks and other financial institutions “stop and think why they are doing what they are doing.”
“We also have to challenge leaders of corporations — the boards of directors — and ask them why they make the decisions they make and how they can justify building corporate entities which seek to suck out the lifeblood from our world.”
Steare concluded by saying: “We have the capacity to do good, as we have a capacity for evil, and I am actually incredibly optimistic about the opportunity we find in this crisis for us to stop and think about the lives we lead …
“I think the solution has to be that to remember as well as being greedy and fearful we also have the capacity for great kindness and love and hope and for me that is the solution.”
Steare has undertaken integrity tests on more than 700 financial services executives in major firms. The results indicate that, as a group, they score lower than average in honesty, loyalty and self-discipline than the population at large. In an earlier in interview with the BBC, he said “There’s a systemic deficit in ethical values within the banking industry. This will not change by hanging a few people out to dry.”
This blog post was published on 19 October 2008.
This is a hopeful and necessary conversation. Asking why rather than blindly trusting in a system of economics. The system needs to be controlled and it needs to account for the value of the natural systems on which it depends.
Pingback: It’s another morning in the empire of consumption… connecting dots? « OPENUPtheSUN
I think people really need to get out more and find out how big the earth is. It is true that the planet has finite resources, but we’ve tapped about 1/1,000,000th of it, and we’ve not even left to find resources outside the planet. This kind of nonsense has been repeated since the 19th century and every single time it is proved not just nonsense, but embarrassingly humiliating nonsense. There’s nothing wrong with being responsible stewards of the world we’re given, and it is unethical to not care for our resources wisely, but this kind of argument is simply ignorant and absurd.