The Language of Reformed Capitalism
by Robert Gordon
Posted: 23 Jun 2014
The narrative of global financial reform was ready for another shake-up, and it arrived in the guise of Thomas Piketty and his data-driven polemic on the inherent flaws in modern capitalism. When coupled with the eye-opening research conducted by Oxfam, along with the sustained resonance of public indignation, excessive wealth concentration and the systemic issues that might be facilitating it are firmly on the agenda. Since the Great Recession emerged many have called for viable alternatives, and now we're beginning to see the first true contenders for consideration.
When discussing collective modes of being the language we use tells us a lot about the traction certain ideas are gaining and the rhetorical devices being used to convey them. Amongst all the discussion there are a number of terms that will be familiar to many of us: words such as inequality, trust, purpose, culture and justice.
At the recent conference on Inclusive Capitalism, Christine Lagarde continued a linguistic phrasing heard often by highlighting the pressing need to restore trust in the system. Using familiar language, she posits that we 'need to turn our attention to the culture of financial institutions' and rediscover 'the social purpose of the financial sector'. In many ways, her speech is a useful synopsis of where the reform debate has settled over recent years.
Mark Carney focused on social wellbeing over private gain - where 'a sense of self must be accompanied by a sense of the systemic' - and by doing so conveyed the crux of reformed capitalism. He recognised the need for 'distributive justice' that promotes relative equality and encourages investment in social capital alongside economic capital, alongside a call for a genuine answer to the question 'Who does finance serve?' that draws capitalism away from being 'an end in itself'. The importance of this speech should not be underestimated, as it displays a tonal shift from the top that will hopefully be received loud and clear.
Having said this, at a different event I attended recently a senior banking representative (tasked with internal cultural change) laid out clearly that the bank had a duty to meet the needs of 'stakeholders, shareholders, customers, clients and society'. When an implied hierarchy of priorities can place society last in this manner (even if only unconsciously), it should cause us to ask: what is currently missing from the language of reformed capitalism?
As indicative as the Inclusive Capitalism conference was of recent dialogue on economic reform, I remain intrigued by the phrases and terms we don't hear as much as those we do. There is something all-together too convenient about much of the rhetoric surrounding this debate, primarily because in order to prove palatable to key audiences relatively small modifications are favoured over paradigmatic change. Systemic shifts are too daunting or threatening for many, and so we rest upon incremental paths that are easier to convince and implement in the short-term but run the risk of falling foul of some of the same systemic problems in the future.
Alongside this, discussions on culture and purpose necessarily rely on broad terms of reference whilst those using such phrases often blame predecessors and defer responsibility onto a loosely defined future period. Antony Jenkins' well-known statement that 'it will take several years - probably five to 10 - to rebuild trust' is just one such example, with the Archbishop of Canterbury adding that it could take 'a generation'. Changes of this kind take time, that is certainly true, but as a result it means that those making the promises are generally able to avoid being held accountable for the end results - particularly in an environment where average CEO tenure rests between 5 to 8 years.
Overall we should be optimistic because it seems like some key messages are being taken seriously and broadly embraced. However, there are terms missing from the reform lexicon that it might be worth seeing whether or not we can realistically introduce...
Can we reinvigorate an understanding of discernment? Mark Carney touched on this with ideas of personal vocation and meaning in the workplace. On a systemic level we often rush towards answers that seem rhetorically pleasing (purpose, culture) without a notion that such terms require a depth of integrated understanding and interdisciplinary thinking that we have not yet properly mustered. The forms of discernment with the most impact are not those that are only reactionary, but rather showcase a degree of insight that can lead to proactive responses to problems yet to arise.
Can we create space for the exploration of recompense? Not merely the kind of forced compensation that follows the PPI scandal, LIBOR rigging, or numerous other regulatory fines - but the notion that the financial sector owes society a very great debt and this must be paid back in non-financial (systemic) capital. Restorative justice that brings a sense of closure to both victim and perpetrator depends on open and attentive dialogue with those who have been wronged, rather than the victim being told what is best by those who committed the injustice in the first place.
Can we acknowledge the need for sacrifice? That the financial sector cannot adequately implement true reform without also accepting that it will negatively impact the bottom line. This is not about profitable change. This is about reigning in a set of business practices that are environmentally unsustainable and inherently anti-social, and to do so will mean a commitment to lower (but perhaps less volatile) financial returns in order to shift cultures and restore trust. It also means, on an individual level, the willingness to forgo many of the excesses of modern consumer society and recognise the extent to which we might ourselves be complicit in facilitating resistance to systemic change.The language we use to articulate reform is the bridge between abstract principles and real-world practice. We have found momentum recently with inspiring rhetoric, backed by a number of hard-hitting structural and regulatory changes, and we should be optimistic as a result. It's important, though, that at this pivotal moment we consider carefully the use of language and rhetoric and its impact on lasting change.
Anthony Sperryn - Posted: 23 Jun 2014
Carmel McNaught - Posted: 24 Jun 2014
David Dewhurst - Posted: 13 Jul 2014
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.