Should Markets Respect Societal Bounds?

As you know, I frequently rely on the British press for news and political analysis.  I was delighted to find a link on Dr. Mark Thoma’s Economist’s View to the BBC’s broadcasts of the Riech Lectures for 2009.   Dr. Michael Sandel, Harvard Professor of Government,  delivers four lectures on the prospects of a new politics of the common good in this series.   Dr Sandel argues that we need  “a politics oriented less to the pursuit of individual self-interest and more to the pursuit of the common good”.  I was most intrigued by the series on financial community norms (as pointed to by Dr. Thoma) and the idea that even in markets, “norms matter”.

The series is presented and chaired by Sue Lawley.

Sandel considers the expansion of markets and how we determine their moral limits. Should immigrants, for example, pay for citizenship? Should we pay schoolchildren for good test results, or even to read a book? He calls for a more robust public debate about such questions, as part of a ‘new citizenship’.

US Secretary of State Hillary Clinton receives Nobel laureate Prof Muhammad Yunus at her US State Department office in Washington DC Wednesday.

I have worked with and studied under one of the foremost authorities on Islamic Banking which are finiancial institutions developed with the idea of a “common good” so I know that in some areas of the world, this is possible.  Again, in Dr. Hussan’s Bangledesh and other countries respecting Islamic law, banks do not charge interest because the Q’uran forbids usury.  This is also true of  the banking system used by Orthodox Jews. This is viewed as a financial system that works for the common good in lieu of exploitation of one side of the market.  The banks are frequently mutually owned. Again, one of the best development vehicles in poorer countries is the microfinance banking community that developed with the inspiration from Bangledeshi Economist,  Muhammad Yunus, who won the Noble Peace prize for his role in developing the idea of microcredit and the Grameen Bank.  (This means of course, I have to make a shameless plug for Kiva my favorite place to invest in  humanity’s future where I place money as dakinikat@aol.com).  I know from this work that it is possible to create market driven systems where something other than over-the-top profits can motivate a market.

So, I’m going to return to Dr. Sandel’s exposition on what it means to have markets which value a poltics of common good. I’ve bolded the areas that I highlighted while reading the speech.  (Yes, I know, old university habits die hard.)

A new politics of the common good isn’t only about finding more scrupulous politicians. It also requires a more demanding idea of what it means to be a citizen, and it requires a more robust public discourse – one that engages more directly with moral and even spiritual questions. And so in the course of these lectures, I’ll explore the prospect of a new citizenship and I’ll be asking what a more morally engaged public life might be like.

If we’re to reinvigorate public discourse, if we’re to focus on big questions that matter, questions of moral significance, one of the first subjects we need to address is the role of markets, and in particular the moral limits of markets. Which brings me to the topic of this first lecture. We’re living with the economic fallout of the financial crisis and we’re struggling to make sense of it. One way of understanding what’s happened is to see that we’re at the end of an era, an era of market triumphalism. The last three decades were a heady, reckless time of market mania and deregulation. We had the free market fundamentalism of the Reagan-Thatcher years and then we had the market friendly Neo-Liberalism of the Clinton and Blair years, which moderated but also consolidated the faith that markets are the primary mechanism for achieving the public good. Today that faith is in doubt. Market triumphalism has given way to a new market scepticism. Almost everybody agrees that we need to improve regulation, but this moment is about more than devising new regulations. It’s also a time, or so it seems to me, to rethink the role of markets in achieving the public good. There’s now a widespread sense that markets have become detached from fundamental values, that we need to reconnect markets and values. But how? Well it depends on what you think has gone wrong. Some say the problem is greed, which led to irresponsible risk taking. If this is right, the challenge is to rein in greed, to shore up values of responsibility and trust, integrity and fair dealing; to appeal, in short, to personal virtues as a remedy to market values run amuck.

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