Day 24

I have my first tutorial today.

Here is my first essay:

Note: It was worth a B+ Oxford Standards!!!

Can a capitalist banking system be ethical? Christian? Describe using British examples

Prepared for Dr. Ian Jones

with the SCIO Oxford Summer Programme

By Veronica Schneider

 Introduction:

Since the financial crisis in 2007 multiple questions have been raised about the circumstances leading to such a tragic turn of events. Mainly people want to know who to blame for this financial crisis. Fingers have been pointed in almost every direction. Many individuals blame the government for allowing such a crisis to happen, some blame the church for not being diligent enough, and still others blame the financial sector and the banks. Howard Davies emphasizes that “Those who attach some blame to the Federal Reserve do not necessarily think that other factors – greedy bankers, reckless innovation, and sleepy regulators – were unimportant.”(Ch. 4)

The banks are getting a close review due to risky loaning that was stretching the ethical line and eventually taking a big step over it. One of the main problems in the UK and US was the banks willingness to increase their loan percentage to the subprime market[1]. As we had discussed in class they were mis-selling customer products with the subprime loans. They would put unethical pressure on the client to purchase items such as PPI’s and Interest Rate Swaps that would help them make a profit on the loan in the end.

Cover-ups were happening left and right disregarding policies and procedures in place to help prevent such a crisis. Such greed in the financial sector led to distrust of the Bank of London which was trusted not only by the citizens but by businesses, both local and international. When that trust is broken it is difficult to get it back. After these events occurred it leads us to the question the system as a whole. Can a capitalist banking system be ethical? Can it be Christian?

An Ethical Traditional Banking System and Alternative Banks

There are many phrases to describe the disappointment in the economic system that is in place today. One rather unique quote in looking at this situation was from Billy Bragg a Left wing activist and singer/songwriter. Billy states “Like Frankenstein’s monster Thatcherism has turned on its creators.”(Web) Individuals are no longer willing to trust the system and are looking for solutions

A few things that have destroyed the trust of the citizens of London in their banks were some unethical choices made by groups of individuals on the inside of the banks. David E. Jenkins in the book Church on Capitalism by Eve Poole finds that “detailed study of financial markets suggest that power is effectively being ceded to an industry that makes most of its money out of speculation on foreign exchange rates and secondary markets, ‘gambling’ which Jenkins finds irresponsible, unworthy, and sterile.”(pg. 71)

In order to handle this dilemma and breach of trust Elisabeth Paulet explains that “One can no longer escape the ethical dimension in all domains... even the banks and financial institutions in general, are now fully concerned with the ethical impact of their transactions” (pg. 177) So even the banks realize that the way to regain trust (and customers) is to look at more ethical practices.

            Paulet describes some of the distinctions between Traditional and Alternative (ethical) banks. She states “...A first major distinction to be made is to set apart the strategies of ‘traditional’ banks and ethical banks. For the former, the new ethical fashion is just an instrument for attracting new clients and thus maximizing their benefits” (pg. 194) she goes on to explain that ethical banks have it set up in their code of conduct and mission statements to keep society’s interests in mind when making decisions. In other words they measure profitability not only in financial terms but in social terms as well.

This is not a traditional banking view. You can see the difference when looking at something as simple as the bank’s website. For example when you go to the Barclay’s about us page they mention that they are “a major global financial services provider engaged in personal banking, credit cards, corporate and investment banking and wealth and investment management with an extensive international presence in Europe, the Americas, Africa and Asia...” (Web)  Not once is the word ethic or integrity mentioned in their about us section.

If you look at the alternative Cooperative Bank in the UK you see a different picture is painted. They make sure to state after the description of their services “We are also committed to leading the way on ethical, environmental and community matters. Both the Co-operative Insurance and the Co-operative Bank have unique ethical policies setting out the way they do business which have been developed in full consultation with customers.” (Web) Not only do they mention the ethical aspects but also the social aspects that Paulet had mentioned before in the description of an ethical bank.  If a traditional banking system were serious about changing into an ethical banking system then it appears that they would have to make changes to how they measure profitability.

Yet, traditional banks and businesses are making strides towards fixing their reputations. As Dr. Jones points out in The Role of Business Ethics in Economic Performance “many companies and individual business leaders are actively supporting efforts to promote business ethics, and industry –funded societies such as the Institute for Business Ethics have been formed” (pg. 4) So we know that businesses and banks are willing and progressively advancing to becoming more ethical but is having an ethical capitalist system going to fix the problem or do we need to look at some alternatives?
A Christian Banking System

Morality in the Marketplace written by Brian Griffiths is about the Christian alternative to capitalism (and socialism) in the marketplace. He makes 3 assumptions (based off of fact and belief) 1. Religion shapes cultural values 2. Christianity is the true religion 3. Anything other than Christianity would reveal cultural problems. He talks about how there are crises in the capitalist system because it has the wrong set of cultural values. His argument is that you cannot use Marxism, Socialism, or even Capitalism as our economic structure because the culture supports another structure, Christianity. He explains “...the so called ‘crisis’ of capitalism results from a prevailing set of cultural values, which are alien to those required if the market economy is to survive...” So how does Christianity fit in our financial system which is affected by our cultural values?

            A good example of how a Christian organization handles financial matters is with the Church. Poole talks about how the Synod in determining which companies to invest in, look at multiple factors before they invest the moneys granted to them. One of the main factors is the disinvestment when a company is engaged in questionable activity such as pornography, gambling, tobacco etc. There is a constant battle between the Synod and the central church investment bodies on how much questionable activity a company can participate in before the church will no longer invest in that company. The Commissioners think only if it is a majority of the company’s business should they disinvest while the Synod is not that lenient.

            This example reflects greatly on how individuals who are trying to make ethical, Christian decisions must feel, a constant soul searching and battle within themselves to interpret what Christ’s teachings meant and how to apply them to their lives. Now imagine this on a grand scale of a banking system, a traditional bank that would interpret the guidelines setup in the bible on how they should perform business.

            Ideally this means that banks would ‘Love thy neighbor as thyself’ and ‘Give to the poor’ but in helping thy neighbors and giving to the poor does that mean that the banks would have granted those subprime loans anyway to help their neighbors? And who wouldn’t want their neighbors to be protected with Payment Protection Insurance?

The Christian based bank in the UK called Kingdom bank would argue against that saying “We provide a secure home for savings and only lend to customers responsibly. We manage all the resources we use wisely since everything belongs to God.” Their mission and values focus on the fact that they have a God center and focus ideally meaning that they love their neighbor and will show this through respect and honesty, even if that means declining a client a loan.  

            Can a traditional banking system become Christian though? With the influences from the church and individuals there is a possibility that the banks can become Christian but would the individuals want them to be Christian? In the Christianity and the British Isles Seminar Dr. Sam Brewitt –Taylor explained that Christianity has been declining as the choice of religion over the past 50 years. With the number of individuals associating with Christianity decreasing in Britain would the banks be more likely to subscribe to Christian Ideals? Not if it meant losing customers. Even with the banks subscribing to ethical practices Paulet points out that “This is more of a form of “green washing” or ethical marketing than a real commitment.” It appears that it is up to the consumers to tell the businesses what they will or will not put up through their dollar votes.

Conclusion

            When we look who to point the finger at next maybe we should be looking at ourselves. The interesting thing about a capitalist market is that it is based on a supply and demand theory. The theory is that what consumers demand businesses will provide and when we do not demand an item businesses will not supply that item. For example if enough individuals decide that they do not want to bank with an unethical bank then the bank will either change its ways or go out of business. Either way, problem solved there is no longer an ethical bank.

            If there is too much government regulation involved (if the government bails out that unethical bank) then the supply and demand curve does not work like it is supposed to. That is one of the reasons why Marxism is frowned upon by Brian Griffiths. Well that and the obvious corruption involved.

            One of the problems when working with an economy is that not everyone likes to play by the rules so even the most theoretically sound economic systems will have flaws in the real world because the people implementing them are flawed. There cannot be a perfect system because of our fall. Even if you do have an ethical, Christian banking system if the individuals in the system are corrupt then the system will in turn be corrupt. If you want a more ethical, Christian banking system you need to pour more resources into creating ethical and Christian people.

            As we spoke about in our fifth lecture, you need to work on the relationships in the business. If employers have a good relationship with employees, than there will be a better trust and communication in the corporation. This can lead to a better relationship between co-workers and between employees and customers. It would increase the profitability of the company as well as set a higher standard for the individuals, industry, and quite possibly the world.

If you can invest in your employee’s training and make sure that it included ethical training that would set a foundation that individuals are obviously lacking. As Drew pointed out in class morality ≠ ethics ≠ holiness but if you can work on the ethics as a company you can create an environment that is supportive of ethical behaviors and fosters more ethical actions. You can also start off young with leadership and ethics classes for those in school. Church involvement and support of those young lives is also going to be important.

 If you want an ethical banking system it is not going to happen overnight. You need to plant the seed now and prepare to see results in the future. Individuals and young people have a lot more power and influence than they may believe. As Dr. Jones points out that “Ultimately it is as consumers that we are responsible for the choices which shape the conduct of economic activity.” (pg. 2) If you start making those changes now than you can have an ethical and yes even a Christian banking and economic system.

                                                                                                            Word Count: 2032

The above essay is all my own work: the source of all material used in its compilation has been duly cited, and all help received is acknowledged. The essay does not substantially duplicate material previously or simultaneously submitted to academic staff at any academic institution.’

Signature______________________________________       Date____________________

Works Cited

"About us ." Barclays. Barclays, n.d. Web. 1 July 2013. <http://group.barclays.com/about-

barclays/about-us#about-us>.

"About Us." The Co-Operative Banking Group. The Co-Operative Banking Group, n.d. Web.

1 July 2013.<http://www.cooperativebankinggroup.co.uk/servlet/Satellite?c=Page&ci d=11 66524495174&pagename=Corp%2FPage%2FtplCorp&loc=t>.

Bragg, Billy. "How we all lost when Thatcher won." The Guardian [London, The Guardian,

5 Mar. 2009. Web. 2 July 2013. <miners-strike-thatcherism-billy-bragg>.

Davies, Howard. The Financial Crisis: Who is to Blame. Cambridge: Polity, 2010. Kindle.

Web. 16 June 2013.

Jones, Ian, and Michael Pollit. The Role of Business Ethics in Economic Performance. Great

Britain: Macmillan, 1998. Print.

Paulet, Elisabeth, ed. Financial Markets and the Banking Sector #10. London: Pickering &

Chatto, 2009. Print.     

Poole, Eve. The Church on Capitalism: Theology and the Market. Great Britain: Palgrave

Macmillan, 2010. Print.

"Statement of Ethics." Kingdom Bank. Kingdom Bank, n.d. Web. 2 July 2013.

<http://www.kingdombank.co.uk/index.php?page=statement_of_ethics>.

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[1]See Howard Davies Financial Crisis: Who is to blame? Chapter 6 for more details.