Bonus Points

Capitalism is supposed to give the public what they demand, the public is demanding that the big banks stop handing out multi-million pound bonuses, but somehow that isn’t happening. This is not a failure of capitalism; it is a failure of the public. Redressing this problem is far from impossible but consumers will need to be a little more business savvy.

Forcing Morals:

I have written previously about the possibility of the evolution of morals in capitalism. The thrust of the idea is that if we have the guts to humanise our demands then companies will be forced to follow. This is already starting to happen in practice:  ‘green’ and fair-trade products are perfect examples of where we have demanded more from the products we buy. Now we can do the same with services. There are some huge food suppliers who will only use fair-trade produce in their products and soon perhaps some of the big banks will refuse to invest in risky ventures, will give investment to small businesses and will even pledge to cap their own bonuses.

Asking the right questions:

Consumers currently demand a range of financial services, but they do not control how the providers distribute their profits. We demand these services and then once they are delivered we return and say ‘oh, by the way, please use the money wisely’ by which time it is too late (and time moves pretty quickly in the world of finance). The power that we, as a group of consumers, exercise over corporations consists solely in our choice of providers and once our money is in their till we have revoked all control.

The answer to this problem is simply to demand a different kind of service. Instead of saying ‘I want secure, affordable banking – and please don’t be greedy along the way’ we must include our ethical demands in our classification of the service. I want secure, affordable, fair banking. Once our ethical demands are part of the product they cannot be compromised. In short, all of our demands must be laid down to begin with (before we part with our cash) and if we want companies to use their money in a specific way then that must become part of the product/service that we demand.

Vote with your feet:

Unfortunately, if you walk down to your local branch of Barclays and threaten to close your account unless Bob Diamond gives up his bonus you will probably leave without an account. But the beauty of capitalism is that you won’t need to stay account-less for long. If the size of the Chief Exec’s pay packet is important to you, then keep this in mind when you are looking for your next bank. Alternatively, why not open an account with Charity Bank? This decision might end up costing you a little more, but if you think of nothing but money when you open an account you are no better than the Chief Exec that thinks of nothing but money as it provides your account.

What the public really needs is full transparency of earnings in the banks (which is partially provided by the recent Equality Act). With this information we could choose our bank on the size of the bonuses they give as well as on the size of their interest rate. In the meantime we must do a little research of our own. I have already mentioned Bob Diamond and it is not too difficult to find out how much some of the other banks are paying their top dogs. If you are one of the millions of people who is angry about the size of bank bonuses then the answer is simple: do your banking with whoever gives out the lowest ones.

Humanist Capitalism

I believe in the strength of an analogy between the evolution of personal aims at an individual level and the aims of business. Our evolution has made us into moral beings and one day the same morality will become central to capitalism.

The Demise of Savagery:

Over the course of a few thousand years human aims have evolved. In the time of ‘savages’ individuals were fighting for two things, namely survival and reproduction. Through the evolutionary benefits of living in groups, humans developed more complex moral systems, building empathy and altruism into our evaluation of worth. The more basic aims of survival and reproduction remained, but they became subconscious as society became central to human life (for the subconsciousness of base human desires see Love-cynics? Feed them to the lions). I recognise that this is a very  brief overview of an intensely complicated topic but I think it is enough to make my point.

The Rise of Humanist Capitalism:

The aims of business in a capitalist world are almost identical to those of the savage; survival and expansion (now measured in financial profit) replace survival and reproduction.  The savage nature of capitalism is an unhappy truth but it does allow for the very happy possibility of capitalist evolution. Just as a modern individual who aimed only for survival and reproduction, without even the pretence of human morals, would be shunned by society and would probably fail in at least his second aim, perhaps in the future businesses driven purely by the search for profits will become socially unacceptable. Many large corporations already see charity work and green initiatives as a vital part of their PR work but hopefully as the world population (who ultimately decide the fate of any business) start to demand more of the companies they buy from these social aims could become more central to the aims of business. It might seem ridiculous to predict that future businesses will have a powerful moral conscious but I think that Homo erectus would have laughed at the idea that people would one day have the complex morals that we now take for granted (assuming you could even explain such a system to them). The move towards incorporating social worth into an evaluation of business success has already begun: Not for Profits.  And businesses have already started to reassess how they measure their own success: Global Business with Prof Michael Porter.

 But Don’t Forget to Ask:

One break in the analogy is where the impetus for social change comes from. For man: Living in groups provided safety, this society then required a moral system to work, these morals then became subsumed into the individual consciousness and we became moral beings. For business: Consumers demand ethical business, it becomes financially beneficial to be ethical, business morals are born and become subsumed into the capitalist consciousness. The ‘selfish gene’, in its search for reproduction, had to allow for genuine moral feeling. Now the selfish capitalist business, in its search for profits, will have no choice but to allow for moral feeling also. Over time (possibly a very long time) the selfish drive for reproduction/profit recedes into the subconscious and our daily understanding of society is only intelligible in moral language. However, for all this to happen the first step is vital and the first step in the evolution of business morals is the consumer demand for ethical business. Whether or not capitalism develops something akin to human feeling is dependent on our demand for it. For our own good we must make such a demand.