Read the full text of an address given by the Archbishop of Westminster which reflected on the banking crisis and the lack of solid ethical foundations in the financial sector.
2010 Provost Derek Hole Annual Public Lecture
source – www.rcdow.org.uk
Archbishop Vincent Nichols
University of Leicester
Thursday 28 October
Looking back at the banking crisis and discussing the present Government’s austerity measures, Archbishop Nichols said that simply seeking to impose new rules on the economy and society would not be sufficient to create a just society.
In his lecture Archbishop Nichols called for a re-discovery of virtue saying:
”The virtues are not about what one is allowed to do but who one is formed to be. They strengthen us to become moral agents, the source of our own actions. The classical virtues form us as people who are prudent, just, temperate and courageous. To them is added, in the Christian lexicon and life, the theological virtues, those of faith, hope and charity by which we see that our human growth is, in fact, rooted in the gifts of God and, actually, forms us for our ultimate happiness: friendship with God.’
Archbishop Nichols continued:
‘I would like to suggest that an important part of our recovery as a society will be achieved through the practice of these virtues. Then we will build the trust which lies at the heart of human relationships, whether in the family or the neighbourhood. This is the pathway down which institutions also have to travel, in order to restore trust. I don’t doubt that this is what the vast majority of ordinary British people instinctively want. They want to belong to a world in which people care for one another. They are alienated by a selfish society. At a profound level they care more for quality of life than for the value of property. Yet the structures and values built into the way society works often frustrate that deeper and better instinct. We need to find ways of releasing this instinctive generosity, often seen in times of extreme emergency but less so routinely.’
Living the Virtues in a time of Austerity
Recently a new set of phrases have entered into our daily speech: ‘an era of austerity’, ‘a double-dip recession’, ‘swingeing cuts in social services’, to say nothing of the current prediction of losses, in the public sector, of 500,000 jobs. There seems to be no doubt that the next five years, at least, are going to be difficult, with some predicting that the measures announced last week are not stringent enough. The questions which dominate discussions at the moment are heartfelt: where are the new jobs going to come from? How will this reshaping of social welfare work out? How much sensitivity is there for those who will bear its harshest brunt? Isn’t it all down to excessive spending by the last administration?
I am no economist, nor, for that matter, a political commentator. But I am interested in both the roots of this crisis and its wider challenges. So I am glad to accept this invitation to speak with you this evening in this series of lectures dedicated to Provost Derek Hole. As I understand, his great desire is to enhance the exploration of the contribution made by religious belief and practice to the wider issues facing society. That, too, is my hope.
One place to start is to point out, fairly uncontroversially I believe, that one major factor in the economic crisis we face is the recent near collapse of the international banking system and the financial industry itself. This is a major contributor to the burden of £43billion a year in interest payments to be met on the national debt. So a closer look at the causes of that near collapse is very relevant to our appreciation of the deeper causes of our present situation and therefore of factors in our response to it.
I think it is now widely acknowledged that the lack of solid ethical foundations contributed significantly to the crisis in the financial sector. Some of those in leadership positions in that sector have acknowledged this and admitted that new regulatory systems on their own will not bring about the changes that are truly needed.
Just two weeks ago, I found myself taking part in a morning conference organised by the Lord Mayor of the City of London at the Mansion House. The title of the conference was ‘Values and Trust in the City: beyond Law and Regulation.’ The main theme of the day was about the crisis in trust being faced by the finance sector itself. I was there because some of the main participants had found help and insight in some of the statements of Pope Benedict – but more of that later.
The opening speaker, Marcus Agius, Chairman of Barclays, highlighted the problem facing all involved in banking and financial trading. He said:
‘Just now, far too many people believe that the ethical standards of the City are inadequate, inappropriate, or both. Indeed some people wonder whether they exist at all. And by people, I do not just mean commentators, politicians and the media. I also include customers, clients, counter-parties and the man on the Clapham omnibus.’
He was not only reflecting a popular mood, then, but also highlighting the imperative which he believed was facing them: ‘the leaders of our industry must collectively procure a visible and substantive change in the cultures of our institutions – and in the behaviour of the individuals who work in them – so as fundamentally to convince the world once again that businesses which can be relied on are being run by people who can be trusted.’
Marcus Agius’ analysis of the behaviour of the finance sector was blunt. He described how, for understandable reasons, the transactions of the market had gone from being based on the bond of word of mouth – the very motto of the City itself – to the basis of a written legal contract for every transaction. He said: ‘This has led to one other unattractive consequence. It effectively has taken personal integrity out of the equation and ultimately led to the belief that the only questions which matter are “Is it legal and is it profitable?”
‘At its most extreme, this philosophy undermines any concern for the best interests of the customer and subordinates these entirely to the pure self-interest of the seller in maximising profits as an end in itself. It legitimises exploitation and in the end subverts the very basis of trust in the market in which all profitable activity depends.’
In calling for far higher standards in the running of banks he emphasised again and again that the core issue is to change the mentality which asks only those two questions: ‘is it legal, is it profitable.’ His points were simple to state but difficult to implement. He wanted to spell out as clearly as possible that banking and the finance industry have a specific social purpose, a clear social dimension which has to be seen, demonstrated, widely understood and accepted if the sector is to regain trust.
It was fascinating to me, as an outsider, to listen to how that social dimension, that social responsibility, was described. It certainly included the duty to ensure financial stability in the system of banking which does so much to underpin economic activity. It also included the responsible development and sale of financial products, making sure that product and purchaser genuinely matched each other. Nor was it just about the significant contributions made by the sector to the Exchequer such as, in 2006, the tax paid by the UK banking industry which exceeded the cost that year of the entire National Health Service. It was also about the social and community investment made by the banks and the other institutions. It was pointed out that the 5 major banks taken together invested in excess of £272million in community enterprises in a recent year. But Mr Agius concluded on a higher note, calling for a far clearer ethical basis to the operation of finance as the best way for the system to continue to exist.
In the course of the morning, as the discussion developed, there emerged an increasing reluctance to use or explore the word ‘ethics’. In its place there emerged alternative approaches: the restoration of key values, especially trust; the renewal of a ‘culture’ within the organisations making up the sector. In discussing the culture of an institution as the expression of its ethical values (and these remarks apply, I am sure, to a University and certainly to the Church) there were interesting comments about how the character of the people working in an institution, together with the judgements they make and the activities and outcomes of their decisions combine together to create an effective culture. Of course, this not may be the culture the organisation likes to talk about or propose as its own, but it is, in the end of the day, behaviour that creates and sustains, or corrupts and corrodes, a culture. As it has recently been put to me: ‘shaping or sustaining a culture means having a set of shared beliefs that interact with a set of shared values to produce shared norms of behaviour leading to shared patterns of activity.’ But that, of course, leads directly to the question: from where are such beliefs, values and norms going to come?
Another speaker at this Mansion House conference was Hector Sants, the Chief Executive of the Financial Services Authority. His topic was the role of regulation in this quest for renewed trust, confidence and proper culture. He explored the role of the regulator in a way which, I think, surprised some people. His assertions was that it is the role of the regulator to monitor the culture of an institution, seeking to reflect and report on how clear that culture is, how consistent it is throughout the organisation and how appropriate it is for the industry.
This last point, of course, the point about the appropriateness of behaviour in the industry, brings us back to the same difficult question about how the ethical basis for this sector is to be understood or established. In looking at the role of Boards and Directors in shaping the culture of an institution, Hector Sants made the following statement: ‘In my view the outcomes that firms are seeking should be redesigned to align them better with the values supported by society as a whole. This lack of alignment may well be the heart of the problem. I am thus a proponent of the view that the UK should change the Companies Act to further emphasise that directors have an obligation to society as a whole. The current requirement for directors is to promote the success of the company. This is often interpreted in terms of shareholder value. While this does include the need to have regard to, for example, the impact on the community, I do not believe that is sufficient. There must be a stronger and more explicit obligation to wider society. There must be clearer recognition of the need for institutions to contribute to the common good.’
He concluded by saying that determining an ethical framework is for society as a whole, not an unelected regulatory agency. Here again was that lingering reluctance to enter the area of ethics. Somehow it is always someone else’s duty to clarify the ethical or moral basis on which we should be building our common good.
This is the key and important question. Repeatedly in that morning’s discussion the assertion was made that as a society we are somewhat adrift when it comes to being clear about the moral basis for our lives. Points were made about the long, slow withdrawal from a consensus around Christian principles, values and behaviour. But equal concern was expressed in the lack of any alternative, any shared basis for behaviour that can be taught and authentically shared.
This was surely the point being made by Pope Benedict in his remarkable speech in Westminster Hall on September 17th, during his recent Visit to the United Kingdom. He presented the question precisely:
‘Each generation, as it seeks to advance the common good, must ask anew: what are the requirements that governments may reasonable impose upon citizens and how far do they extend? By appeal to what authority can moral dilemmas be resolved? These questions take us directly to the ethical foundations of civil discourse. If the moral principles underpinning the democratic process are themselves determined by nothing more solid that social consensus, then the fragility of the process becomes all too evident.’
It is a fragility which, I believe, many are already feeling.
Pope Benedict went on:
‘The inadequacy of pragmatic, short-term solutions to complex social and ethical problems has been illustrated all too clearly by the recent global financial crisis. There is widespread agreement that the lack of solid ethical foundation for economic activity has contributed to the grave difficulties now being experienced by millions of people throughout the world. Just as ‘every economic decision has a moral consequence’ (Caritas in Veritate 37) so too in the political field, the ethical dimension of policy has far-reaching consequences that no government can afford to ignore.’
He contrasted this present uncertainly with, ‘one of the British Parliament’s particularly notable achievements – the abolition of the slave trade. The campaign that led to this landmark legislation was built upon firm ethical principles, rooted in the natural law and it has made of contribution to civilization of which this nation may be justly proud.’
The argument then advanced by Pope Benedict was not a return to a dominant position for the Christian faith or establishment. Rather he turned to the Catholic position that ‘the objective norms governing right action are accessible to reason’ and therefore the proper focus of reasoned debate and decision. He went on to claim strongly that it is the function of faith, and the gift of revelation, to ‘help purify and shed light upon the application of reason to the discovery of objective moral principles.’ But then he added, in a reciprocal and balanced manner, there is a ‘corrective’ role of reason when applied to faith. This he described as the ‘purifying and structuring role of reason within religion without which fundamentalism and extremism can corrupt a religious belief.
So the Pope drew to a crucial point at which he stated:
‘This is why I would suggest that the world of reason and the world of faith – the world of secular reality and the world of religious belief – need one another and should not be afraid to enter into a profound and ongoing dialogue, for the good of our civilisation.’
This, I believe, was the underlying message that Pope Benedict wanted to offer. During the press conference on the in-coming flight, asked if he expected a hostile reception in the UK he answered that he expected an attentive reception, ‘even from agnostics who, however, are also searching, who want to know, to find, the values that advance humanity.’ He then added that politics and religion shared a common responsibility for the values that create justice, saying that ‘politics is essentially designed to ensure justice, and with justice, freedom. But justice, he added, is a moral value, a religious value. Thus faith, the proclamation of the Gospel, connect with politics in justice. Here our common interests are born.’
Such a concern about justice actually lies at the heart of the argument made by the present Government concerning the present austerity measures. This is the yardstick by which it has asked to be judged. Only time will tell.
We live in a society of continuing and wide inequality. Earlier this year, the National Equality Panel report noted: “How the public finances are rebalanced will probably be the most important influence on how economic inequalities evolve: will the costs of recovery be borne by those who gained least before the crisis, or by those in the strongest position to do so. At least one positive message has been sent in last week’s measures by the fact that the overseas aid programme to assist the development of the world’s poorest people has not been cut.
But the pursuit of justice is not something that a government alone can achieve. Indeed, the prospect of the social change which is going to take place is not something which should be considered as the business of Government only even if there has been a strong tendency to do precisely that in recent years. Indeed, in the last 15 years or so, when we have seen an extraordinary period of economic growth and prosperity, we have also paid a serious human costs in increasing rates of relationship breakdown, loneliness and reduced levels of happiness and contentment. The times we are entering are difficult and will be painful. Of course, joblessness is a grave social ill, and every effort must be made to try and bring about a sustainable economic recovery. At the same time we should, as a society, explore more profoundly what it is that truly makes for a humane and fulfilled life and how each of us has a capacity to contribute to that task.
And so we return to the proposal of Pope Benedict: ‘that the world of reason and the world of faith – the world of secular reality and the world of religious belief – need one another and should not be afraid to enter into a profound and ongoing dialogue, for the good of our civilisation.’
One way of doing this is to explore some of the treasures held in trust by the Christian tradition which fully serve the common good of our humanity. One such tradition is that of the virtues. Reaching back to Plato, here is a pattern of thought which derives from and flowers into practice, which provides clear signposts to much that is humanly good, uplifting and satisfying. This tradition of the ‘virtues’ can be an extremely fruitful point of profound and ongoing dialogue between the secular reality and the world of religious belief. It is one on which I would like to ponder for a few moments because it can serve to pull together much of what I have said thus far: the challenge of changing the culture of financial institutions; the challenge of the social change that lies ahead of us; the identification of what each person has to contribute to the sustaining of our society in a time ahead when familiar and much used means of support diminish.
The meaning of the word ‘virtue’, as understood in the Catholic tradition is this: ‘A virtue is an habitual and firm disposition to do that which is good. It allows the person not only to perform good acts, but to give the best of himself. The virtuous person tends towards the good with all his sensory and spiritual powers; he pursues the good and chooses it in concrete action.’ (CCC 1803)
The classic description of these human virtues numbers them as four and calls them the ‘cardinal virtues’, those on which all else hinges (from the literal meaning of the word cardinal – from ‘cardo’, meaning hinge). They are prudence, courage, justice and temperance. These may not be immediately attractive descriptions. Indeed the very notion of ‘virtue’ may sound a bit old-fashioned or elitist. But it sounds less so when used in a phrase to describe an outstanding musical performance, or that of a dynamic midfielder for your favourite football team: a virtuoso performance: the fruit of the constant repetition of skill and good judgement.
The practice of virtue, then, helps to shape us as people. By the pursuit of virtue we act well not because of external constraint but because it has become natural for us to do so. The virtues form us as moral agents, so that we do what is right and honourable for no other reason than that it is right and honourable, irrespective of reward and regardless of what we are legally obliged to do. Virtuous action springs from a sense of one’s own dignity and that of others, and from self-respect as a citizen. It is doing good even when no-one is looking.
Perhaps what we have seen in our society is an expansion of regulation taking the place of the exercise of virtue. A society that is held together just by obedience to rules is inherently fragile, open to further abuses which will be met by a further expansion of regulation. This cannot be enough. The virtues are not about what one is allowed to do but who one is formed to be. They strengthen us to become moral agents, the source of our own actions. The classical virtues form us as people who are prudent, just, temperate and courageous. To them is added, in the Christian lexicon and life, the theological virtues, those of faith, hope and charity by which we see that our human growth is, in fact, rooted in the gifts of God and, actually, forms us for our ultimate happiness: friendship with God.
What do these human, cardinal virtues look like in practice? Let me try to express their fruitfulness in a simple and direct manner.
The virtue of prudence does not mean excessive or fearful caution. It can mean acting boldly where necessary for it is the virtue of right reason in action. So its opposite is rashness and carelessness. This virtue engages us in considering consequences, advantages and disadvantages. It is opposed to the modern mantra ‘if it can be done then it should be done.’ It means critically weighing up the swell of popular opinion to see if it is actually beneficial rather than merely popular. The exercise of prudence enables us to discern the good in any circumstance and the right way to achieve it. It is rational and intelligent including emotional intelligence. So it does not ignore feelings, but is not overpowered by them either, knowing rather how to weigh the meaning and importance of our feelings.
The virtue of courage ensures firmness, and the readiness to stand by what we believe, even in times of difficulty. It is the opposite of opportunism and of evasiveness. Courage frees us from being enslaved by fear, even fear of death. It is the practice of fortitude in the face of difficulty. It produces heroism in every field, in battle and in social reform. It resists the pressure to conform to the destructive expectations of others and helps us to challenge the assumptions of a culture. Courage is an important element in artistic creativity and it helps those who battle against sickness, injustice or depression.
Justice is the virtue by which we strive to give what is due to others by respecting their rights and fulfilling our duties towards them. It expands our notion of ‘self’ by strengthening the ties between us all. Through justice we discover in practice that those who suffer are bound to us; they are our brothers and sisters. So a just person is one who is alive to the demands of social and international justice, especially towards the poor. A just person will recognise their duties towards the truth, avoid dishonesty and obey just laws. In this way, the virtue of justice is an essential component of democracy, as has already been noted. As Augustine said, a society without true justice is just a gang of thieves. Justice opposes violence and protects human life at all its stages, especially at its most vulnerable. This virtue of justice operates not only towards other people but also towards God. Here, justice is the acknowledgement of our relationship to a creator and gives rise to the ‘virtue of religion’. This not only expresses our duties towards God in prayer and worship but also frees us from the tyranny of false idols. After all, as Chesterton notably remarked: ‘When people stop believing in God, they don’t believe in nothing, they believe in anything.’ This is a lack of the virtue of justice.
Finally, temperance is the virtue which helps to moderate our appetites and our use of the world’s created goods. It is the opposite of consumerism and the uninhibited pursuit of pleasure. It is about learning to desire well. It is about learning the art of true and lasting enjoyment and is opposed to a disdain for the good things of this world. Temperance then can govern our use of the fragile goods of the created world which increasingly need the exercise of this virtue if they are not to be ruinously exploited. Temperance is, indeed, an essential part of a happy life.
These virtues, and the exploration of them, belong to all humanity. They are held in trust for all not least in the Christian traditions of thought and moral teaching. I would like to suggest that an important part of our recovery as a society will be achieved through the practice of these virtues. Then we will build the trust which lies at the heart of human relationships, whether in the family or the neighbourhood. This is the pathway down which institutions also have to travel, in order to restore trust. I don’t doubt that this is what the vast majority of ordinary British people instinctively want. They want to belong to a world in which people care for one another. They are alienated by a selfish society. At a profound level they care more for quality of life than for the value of property. Yet the structures and values built into the way society works often frustrate that deeper and better instinct. We need to find ways of releasing this instinctive generosity, often seen in times of extreme emergency but less so routinely.
But this brings me to my final point. How can this be done? How can we motivate each other to have these wider horizons?
This, perhaps, is the key question at the present time. For so long, both enterprise and politics have been content to assume and exploit the belief that only self-interest truly motivates every person. In enterprise this translates into the profit motive; in politics into the acquisition of power. Yet so many other spheres of life offer contrary evidence. There are so many arenas in which the service of the good of the other is a powerful motive and effective incentive. I think of all that is done out of genuine charity: the desire to help other people. I think of all that is done simply to see another flourish: that strong combination of motivations between school and parents for the present and future well-being of children. These are the arenas that the Chief Rabbi speaks of as ‘covenantal’ for they bring us together around a common interest, a common bond and agreement which takes us beyond the acquisition of profit or of power.
Here lies an important key to the years ahead. Can we allow this model of covenantal activity to spread and flourish? Can we build up a true and lasting sense of service between us all, not because it serves our own individual advancement but because it is a genuine value, a vital search for the good of all, from which alone can all truly benefit. This will have to happen locally, just as the acquisition of virtue begins best within the family.
In a speech made as Pope Benedict was leaving the UK from Birmingham Airport on Sunday 19th September and addressing the Pope directly, the Prime Minister said:
‘People do not have to share a religious faith or agree with religion on everything to see the benefit of asking the searching questions that you have posed to us about our society and how we treat ourselves and each other. You have really challenged the whole country to sit up and think, and that can only be a good thing.’
He also quoted a phrase from the Blessed John Henry Newman when describing the vision that might just motive us all. He spoke of ‘the common bond of unity’ that we all share, describing it as ‘the heart of the new culture of social responsibility we want to build in Britain.’
The years ahead will make clear our need for that new culture. Our financial institutions may just be beginning to recognise it and acknowledge the vital importance of their social role and responsibilities. But only time will tell if we all can translate these aspirations into practice in daily life. And the narrative of the development of mutual social responsibility can readily employ the language of the virtues. But more important than the language, it will be the practice of those virtues in this coming time of austerity which will mark us out as a worthy people, one that is capable of seeing each other through and marking us with the dignity and endurance that some previous generations have borne with such pride.