When the good don't speak out against the bad

The rest of the world would respect Islam more if it more often heard decent Muslims condemning Allah-invoked murders of innocents. There is a lesson in that for those who value capitalism.

The human purpose of religion is to bind humans in harmony, to make value in an otherwise valueless existence. Terror and murder is the antithesis of that. Those acts invite retaliation and regulation, which diminish all our lives, as we find at airports where we are treated like criminals, made to prove our goodwill in X-rays.

To function well, human society needs an agreed moral and civil order. The alternative is anarchy and atomism. Upholding the first and averting the risk of the second is the principal role of governments. In a liberal democracy, that requires broad agreement on the rules and their fairness.

Capitalism is anarchic and essentially amoral. (That is, lacking a morality, not immoral.)

While it can be argued that to be effective in business in a fully competitive free market requires empathy to win and keep customers, markets are only to varying degrees free and many are dominated or greatly influenced by a limited number of corporations with quarterly reporting imperatives who win and keep customers through product satisfaction, persuasive marketing and brand rather than empathy.

Still, capitalism is the most efficient means so far devised of improving material welfare and, with that, individual and social welfare. But there is a tension between capitalism’s amorality and a coherent society’s need for an agreed moral order.

Hence the mid-twentieth-century “mixed economy” in “western” societies: capitalism made us richer and state regulation kept capitalism mostly within the moral order. Wealth and opportunity were shared enough to generate a sense of belonging, even despite large inequalities.

That “settlement” came under strain from the late 1960s: a rising generation worshipped individual freedom and chafed at the constraints of the moral order; cheap oil ended (for a time); the post-1945 order of fixed exchange rates collapsed and with that came “stagflation” (high inflation and low or zero growth); the east Asian “tigers” competed for jobs; economies became increasingly interdependent, with widely varying cost structures and capabilities which led to large transfers of production; the proportion of well-waged organised industrial workers declined.

The answer, widely adopted — with special zeal here — was to de-mix the economy: cut regulation, allow markets to find their levels and thereby promote productive efficiency. The state became more an occasional referee than a player.

That worked a treat. But it carried a big risk. It depended on those running capitalist enterprises self-regulating. Most do. Too many don’t.

So we got leaky homes, a mine where safety was an optional extra and finance company sharpies who stole life savings — human-made disasters which make nature seem tame. Plus a lot of less dramatic slyness, legal but at odds with moral order.

In the United States brilliant — and now staggeringly rich — “bankers” dreamt up schemes to bundle, chop, repackage and “insure” high-risk loans to people who couldn’t meet the payments. They pumped a huge financial bubble, which sucked in many other countries’ banks and investors. Its bursting has diminished, damaged or destroyed the livelihoods of large numbers of innocent civilians. That damage is continuing as we move into phase 2, the European phase, with maybe more to come.

The response has been to re-fight the 1930s Depression war. Generals do that in each new war until they figure the war is different and governments, central banks and international institutions haven’t figured yet the nature of this war.

We are some distance from a new “normal”. All we know, if we set aside econometric models and old textbooks, is that the old normal isn’t normal.

What is likely is some re-mix: capitalism with tighter supervision. Capitalist irresponsibility and civilian hurt are the drivers.

Here we already have re-regulation of financial markets, new safety rules for mines and new environmental rules for offshore oil explorers, for example. Regulation recognises that an amoral wealth-creating system needs to be managed in a society where moral rules are needed for it to function well.

Those who run companies justifiably complain that regulation makes them less efficient and leaves the public less well off than it needs be.

But how many times did a good company leader castigate wayward capitalists in the de-mixed era? By their silence they left the field to the critics and let all capitalism be tainted by the actions of a few. In effect, they invited re-regulation.

Re-regulation means less new wealth to go round but also less damage to innocent people. Capitalism’s anarchism is curbed. And the moral order society needs is firmer.

Fine capitalists (like fine Muslims) have a duty. It turns out ultimately to be to themselves.