The Values of Money: No Time to Pause
by The Revd Andrew Studdert-Kennedy
Posted: 8 Jul 2011
'How much has the banking crisis cost the UK economy?' This seems to be an instinctive question to ask, whilst at the same time a hopelessly na´ve one; instinctive because we want to put a figure on costs, na´ve because economies move fast and net costs don't stay still.
But if financiers could not agree on economic data, there does seem to be a recognition of the need for change in the way banks and financial markets operate. No one denied that things went wrong, but what has been learnt from it? In the wake of the banking crisis has the opportunity been taken to reflect on the bigger questions of value and purpose?
I put this question to a city-based lawyer who paused briefly before replying 'No'.
He went on to suggest that this missed opportunity was less a wilful decision and more a consequence of the way financial markets work. 'Credit speeds things up', he said, with the implication that people as well as money are in a hurry. Quarterly returns, the incessant pressure on the bottom line, the obligation to maximise assets, the mere existence of so many competitors were all factors that discouraged taking a longer view and focussing instead on the short term.
A consequence of this can be that the culture of a firm doesn't take into account the way humans develop over time, of how their needs and priorities change. The place for reflection is squeezed out as the need for profits is enthroned ever higher.
Related to this, as both cause and consequence, is that the average age of traders is 31, and it is traders who tend to generate a lot of the income. Furthermore, turnover is quick so the trading floor stays 'forever young'. One former trader told me the combination of youth and sheer adrenalin means that the immediate was always going to have precedence over the long term. 'The roar from the floor when trading opens', she told me, 'is a thrilling sound'.
During our own twenties most of us lived lives of action rather than reflection and so it remains. Although obvious once pointed out to me, I had not taken into account the role that such basic human forces will play in the market itself.
Reflection on the bigger picture does take place and there is a lot of discussion about the best way to regulate financial activity, but it is important to realise the varied forces at work, including our own human nature, which ensure that the short term is likely to get the upper hand.
Next, it will be time to explore some of those other forces
This piece is part of a series by Revd Andrew Studdert-Kennedy exploring the role of the financial sector and how we might come to understand it better.
The opinions expressed in this article are those of the author, and do not necessarily represent the views of St Paul's Institute or St Paul's Cathedral.