It seems we have gone all moral.
In today’s Guardian, Billy Bragg said he will withhold paying tax unless the government stops bonus payments for RBS staff. And to that he is greeted with cries of hallelujah.
Now a report from the Word Economic Forum has found that over two-thirds of people believe the current economic crisis is also a crisis of ethics and values.
It seems we have been changed. There’s a growing chorus of voices saying we need to ditch reliance on economic growth, and measure things like happiness instead.
The new age of economic morality is all very interesting. But isn’t there an even more important point here?
According to the World Economic Forum two-thirds of people believe the current economic crisis is also a crisis of ethics and values. But only 50 per cent think universal values exist.
What a savvy, modern thinking group the World Economic Forum is. It conducted its survey of world opinion via a poll on Facebook. 130,000 people responded, right across the world from France, Germany, India, Indonesia, Israel, Mexico, Saudi Arabia, South Africa, Turkey and the United States.
Almost two-thirds of respondents believe that people do not apply the same values in their professional lives as they do in their private lives. When asked whether businesses should be primarily responsible to their shareholders, their employees, their clients and customers, or all three equally, almost half of the respondents chose the option of “all three equally”.
When asked to identify the values most important for the global political and economic system, almost 40 per cent chose honesty, integrity and transparency; 24 per cent chose others’ rights, dignity and views; 20 per cent chose the impact of actions on the well-being of others and 17 per cent chose preserving the environment.
Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, said: “Our present system fails to meet its obligations to as many as 3 billion people in the world. Our civic, business and political cultures must be transformed if we are to close this gap.”
Moving away from the World Economic Forum report, which is after all plugging the next big meeting of the great and good at Davos, you may have noticed that the economics of happiness is becoming more popular at the moment.
The following is taken from Bubbles and Wisdom, co-written by Michael Baxter, the investment and Business News editor:
“Two of the leading lights in the field of the economics of happiness are Richard Easterlin, Professor of Economics at the University of Southern California, and Richard Layard, a founder-director of the Centre for Economic Performance at the London School of Economics.
“It seems there is a welter of evidence to suggest that there is little or no link between income and happiness.
“Professor Easterlin concludes that health and marriage are more important. Richard Layard sees the roots of the problem as lying in uneven distribution of income, and that a fairer society would lead to a happier society.
“Not all agree. In 2007, the Institute of Economic Affairs published a report by Helen Johns and Paul Ormerod which questioned the core assumption about rising income not leading to rising happiness.19 Most surveys designed to study happiness typically ask people to decide whether they are ‘not happy’, ‘fairly happy’ or ‘very happy’, so that there are three discrete grades. Economic growth, though, does not jump in round numbers. Growth is typically seen in terms of two or three per cent. It seems unlikely that people would indeed change their happiness rating at all, just because they are very slightly better off.
“As for the argument that a more even distribution of income would promote happiness, it seems we are surely more worried about keeping up with our next door neighbours, the metaphorical Jones’s, than the Buffetts, Gateses and Windsors. We often live in quite isolated pockets, and our perception of wealth is determined by the living standards of others in that pocket. So someone living in, say, Chelsea, who can only just afford their flat and run a mid-range BMW, may feel poor relative to the people who own the penthouse upstairs and leave their Ferrari parked outside. In turn this may lead to a feeling of inadequacy, perhaps even failure among the poorer neighbours, even though, in terms of earnings and wealth, they may well sit in the top 10 percentile.
“Maybe status is more important in driving our happiness. Status is a relative concept. We can’t all have high status, so if status is a factor that helps determine happiness, we can’t, therefore, all be happy.”
But the economics of happiness is not the only New Age idea proving popular at the moment. An increasing body of opinion argues we need to stop our emphasis on growth altogether.
The anti-growth brigade may have a point, but equally, it could be argued the problem is not the desire for growth, rather it is the way growth is measured. Perhaps we should borrow from the practice of accountants, and draw up a balance sheet, with the world’s natural resources listed as assets. Every time we use up some of these resources, we should see a change on the balance sheet which would be reflected as a charge on the world’s profit and loss account, or GDP.
But there is another point, which is perhaps more important.
Sure, the economic crisis has started making us more moral – until the next boom, that is. But Investment and Business News is a tad cynical about this move away from greed. The eighties was supposed to be a decade of greed. Then we were told that in the ‘90s we had become more moral. Yet the ‘90s saw the laying down of the foundations for the credit boom.
So, the crisis has also focused attention of the economics of happiness, and the sustainability of growth.
But none of these arguments bear much relation as to why we had a crisis in the first place, and they probably bear little relation to the causes of the next crisis.
The real cause of bubbles is us. It’s group behaviour. It’s our tendency to run with the rest of the pack. So investors pile into the next craze, often for no better reason than that everyone else is doing it.
When people act as a crowd, the errors that can follow can be calamitous. This can occur even when every member of a crowd is a genius. There is actually research to back this claim up. Consider this quote, taken from “How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies”, by Professor Scott E Page. “Groups made up of intelligent people who are inwardly diverse – that is, who have different perspectives, mindsets and ways of solving problems – can make more accurate predictions and solve problems more effectively than groups of ‘experts’.”
If we want to avoid future cataclysms, the answer is to celebrate diversity of thinking, welcome people whose ideas diverge from the rest of us, and ignore all media who just jump on each bandwagon, vilifying left-wing politicians one moment then bankers the next.
© Investment & Business News 2013