I enjoyed Andrew’s post below, though I’d dispute the assertion that Adam Smith and the other ‘great theorists’ of capitalism thought it was amoral.

That’s not true, they thought capitalism in general made us more moral, more civilised, though they also saw this wasn’t always infallibly the case. But if you read Smith, Hume, Shaftesbury and the other great theorists, you’ll see they tried to make a moral case for capitalism and commerce.

In terms of the ethical implications of the crisis, the basic ethical point, which others have discussed but which is still unaddressed by governments, is this: our present economic system is palpably unfair, in that the financial services sector is allowed to live by different rules to the rest of the economy.

The financial sector has, for the last 30 years, subjected the rest of the economy to its pitiless attention, privatizing it, stripping off assets, selling off assets, and imposing ‘market efficiency’ (ie job cuts), with an evangelical zeal.

If a company was failing, we were told, it should be carved up,  sold off, or allowed to fail. This was the efficient way.

Now, banks right across the world are failing. But we are told they are too big to fail, they are of ‘systemic importance’, and so they are propped up with our money, and allowed to continue their reckless activities until the next bail out, in a few years time.

The financial sector created a whole new moral lexicon – ‘shareholder value’, ‘rationalisation’, ‘market efficiency’, ‘transparency’ – which we absorbed to an extent we perhaps haven’t realised. Now, this rhetoric has been exposed as self-interested, and hypocritical.

Our societies reward bankers for gambling, often gambling badly, with the highest salaries in the economy, with the possible exception of a handful of equally juvenile Premiership footballers. Meanwhile, teachers, nurses, social workers – people who are genuinely contributing to the public good – are paid a fraction of that.

Our present economic system rewards gambling and greed, and punishes altruism and self-sacrifice.

And we let bankers get away with it – as soon as they go bust, we bail them out, get them back to the poker table, and applaud them for their pluck and acumen when the stock markets go up.

It is, as others have pointed out, a captured system, rigged to serve the interests of those in the financial sector.

A genuinely ethical economic system would value teachers, nurses and social workers as among the most important figures in a society, and they would be paid accordingly, or at the very least better than the pittance they earn today.

Thatcherism has left us a system where we hold the financial services sector up as a paradigm of excellence, a beacon leading the rest of us to  prosperity. It is not. It makes us both spiritually and literally poorer, and if we have to subsidize it because it’s of ‘systemic importance’, that means our system as it presently exists is broken.

The financial crisis has led to a lot of talk about the failure of ethics in the banking sector. Greed overtook wisdom, we’re told. No doubt this is the case. Yet whilst bankers are to blame, it’s hopelessly naïve to suppose that a ‘return’ to some golden age of ethical business will solve all our problems.

There is a parallel with the expenses claims of British parliamentarians. Caught with their hands in the till, some cried out that the system was to blame for letting them get away with it. For all the cheek of that response, there is a lesson in it.

Individuals must take responsibility for their sins. But if we’re serious about making sure that these things cannot occur again, it really isn’t enough to call for more ethics in business. In fact, I’m beginning to suspect that this is a way to avoid having to enact any real change. As the crisis seems to be settling down, the British Chancellor of the Exchequer Alistair Darling has shied away from significant reform of the regulatory system and chose instead to blame bosses for being irresponsible. ‘Don’t worry,’ we seem to be being told, ‘we’ll just ask bankers not to be greedy any more.’ Forgive me, but I had hoped for something more robust.

It must be conceded that in sharp contrast to the plans of the British government, Barack Obama’s planned reforms are substantive and bold. But on a global level, concerns are growing that the opportunity for broader reform that this crisis provides is being missed as optimism returns alongside talk of ‘green shoots of recovery’. The Bank for International Settlements (BIS), often described as the central bankers’ central bank, published its annual report on Monday. According to the FT, the BIS:

said it was vital that thought be given to the ongoing structure of the financial system while the patient was still on life support. Efforts so far, it concluded, had been a “messy mixture of urgent treatment designed to stem the decline, combined with an emerging agenda for comprehensive reform to set the foundations for sustainable growth”.

It highlighted two main risks: first, that not enough will be done to ensure a durable recovery from crisis; and second, that the emergency action to stabilise the financial system will undermine efforts to build a safer system.

The G8, too, is jumping on board the ‘return to ethics’ bandwagon. MBA graduates have set up their own code of ethics, taking inspiration from the medical profession’s Hippocratic Oath. This is welcome. We do need to create a public environment in which ethics and responsibility are more emphasised (and more respected), but to expect a firm whose raison d’etre is the pursuit of profit to apply the brakes is painfully naïve. Business (and politics) should be conducted on more ethical grounds. This year’s Reith Lectures, given by Michael Sandel, address this point well. But in the meantime (between now and hell freezing over), we need rules that acknowledge people’s tendency to ignore ethics, especially in the heat of the moment. The great theorists of capitalism itself, such as Adam Smith, knew well that the system wasn’t moral. But neither is capitalism immoral – it’s simply amoral. If we want a moral system, we have to bring in the morality ourselves. But to expect bankers to do so on their own is to invite a conflict of interest. We do not expect the players at Wimbledon to make line calls on their own shots and, similarly, we should not expect the financial sector to judge the morality or wisdom of its own practices.

This is an important moment, but it’s not a moment of a new ethical kingdom, or of a new form of capitalism. Instead, we need to return to an older scepticism about the role of private interests in our society and the degree to which the doctrine of self-regulation is a realistic solution.

News in the FT today that three environmental groups have filed a suit to make sure the Royal Bank of Scotland does more to promote renewable energy, foregoing its traditional dominance in oil and gas projects.

Ian Leggett, People & Planet’s director, said: “The government now controls RBS and has an exceptional opportunity to drive investments in low carbon jobs and infrastructure, not to repeat the recklessness of the past.”

As I’ve argued before, state-owned development banks have a key role to play in transforming our economies from a high to a low carbon footprint.

Modern project finance – particularly the use of the special purpose vehicle – was of great use in the 1970s to drive the development of the North Sea oilfields. It has been fundamental in creating the hydrocarbon society of the last 50 years.

We now need it to help us develop the post-hydrocarbon society.

While the development of the north Sea oil sector was mainly done by private oil companies and banks, although with some tax incentives from the government, I would suggest the construction of the post-hydrocarbon society is better driven by state-owned banks and retail investors than private banks, because these are capital intensive projects aimed at protecting the public good rather than private wealth.

RBS, with its expertise in project finance, is a good place to start.

We’re so obsessed with Islamic insurgency – see Kilcullen’s The Accidental Guerrilla – that we risk ignoring other types of insurgency. Like the Naxalite Maoist revolt in central and eastern India.

Michael Spacek, at India’s Forgotten War, writes about how the Naxalites recently took control of a large district in West Bengal, albeit briefly – “the Maoists have successfully been exploiting the seething resentments against West Bengal’s communist government and have steadily been increasing their influence in the state”.

I may be going out on a limb here, but like evangelical Christianity, Maoism is going to have a big future in violent and poor places in the 21st century. Maoism and Christianity are revolutionary creeds which have successful and adaptive operating systems. Both have simple but effective messages which speak powerfully to the dispossessed in society. Both have many disciples who aggressively preach and die for the cause. Both exploit local grievances and traditions to the max.

From a new op-ed by Dmitri Rogozin, Russia’s ambassador to NATO, on the “abduction of Europa”:

Today, the identity of the west is being challenged by colossal cultural and spiritual pressure from the south. Nations conquered in the past are now invading Europe, changing dramatically not only its external but also its inner world. Europe can no longer assimilate huge inflows of alien cultures. Misinterpreting the sage principle of ‘tolerance’, the west has abandoned the fight to preserve values inherent in European civilisation. Instead of instilling European culture in their new compatriots, the west’s elites have concealed the problems in closed communities. This cowardly escape from the realities of globalisation will lead to the demise of Europe and its culture.

Western elites have sought to substitute the process of globalisation with plans of salvation for European civilisation. But new projects, such as NATO’s enlargement to the east and the Eastern Partnership, pose a greater threat to Europe than if the west took no action at all. The wider that NATO’s and the EU’s areas of responsibility become, the weaker they become. Taking up the problems and disputes of Europe’s eastern half is wearing out its spirit as a civilisation.

Whether Brussels likes it or not, Russia is becoming the centre of the European tradition. It is steadily imparting European culture to eastern territories. José Manuel Barroso and Javier Solana, who in May visited the grand European city of Khabarovsk in the Russian far east, could see for themselves how outdated is Charles de Gaulle’s slogan of a “Europe from the Atlantic to the Urals”. The Russians have expanded Europe to the shores of Alaska and the Kurile Islands.

Whatever Russia’s developmental problems, they are insignificant compared to the threat to the survival of European civilisation. The west may be procuring eastern European countries for itself, but, in a genuine cultural and spiritual sense, western Europe is shrinking rather than growing.

Thus, the paradox today is that Europe’s western half is shrivelling, while its eastern half is expanding. Russia is now Europe’s spiritual guardian, as Byzantinum prolonged the ‘cause of Rome’ for a millennium after Rome collapsed under the onslaught of barbarians. The writer Fyodor Dostoyevsky argued that, for Russians, Europe is a ‘second fatherland’. Fear of the new Russia is simply unjustified. Russia is the west’s most natural and reliable ally. The sooner the west realises that, the greater the chance of speaking of our common European fate not just in the past tense.

I know that Russia wants to be taken seriously as a great power and all, but it would help if its policy pronouncements didn’t read like they were based on a second-hand copy of the Decline of the West and half a bottle of old-time vodka.

Six years ago I wrote a thriller, “Death Ground”*. Set in a dystopian 2019, the manuscript’s protagonist was Jeff Strangford, a burnt out undercover operative who infiltrates an eco-terrorist cell. This turns out to be an al-Qaeda front operation run by a renegade but hot Frenchwoman. Along the way Strangford is aided by a gifted hacker called Alec Sulco, erstwhile member of a clandestine cyberwarfare team known as “Spectre Force”…

“Spectre was a black ops outfit, an outlandish mishmash of hackers, programmers, cryptographers, financial analysts, safe-breakers and demolitions experts – young whizz-kids and criminals who could spy and skirmish in cyberspace, hack into a satellite,  a corporate database or the computer system of a stock exchange, and take down a country’s grid or a city’s water supply in a matter of hours.”

No publisher would touch “Death Ground”. For years I wondered why. Now perhaps I’m starting to get the picture. The UK government has announced that it plans to set up an Office of Cyber Security and a Cyber Security Operations Centre, to counter cyber-attacks made by hostile regimes, terrorists and criminals. Cyber security minister Lord West said that the government is turning for help to former illegal hackers… (more…)

Next week, Ban Ki-moon reaches the halfway point in his term as UN Secretary-General.  There’s been a trickle of negative stories of late about his performance.  Justified or not, they’ve brought his SG-ship (and what he needs to do to win a second term) into focus.  The debate has also introduced me to the fine word “noodge”.

The trouble began with a piece in the Economist giving Mr. Ban scores out of 10 on aspects out of his tenure.  8/10 for seeing the “big picture” on climate change and food scarcity, but 3/10 for “speaking truth to power” (mainly on Sri Lanka). Then this:

Management skills: 2/10 Mr Ban cuts an isolated figure, cut off by an inner circle of mostly Korean advisers. Communication with senior staff is poor, and since Mr Ban is not a good listener, it is hard to harness their expertise. What is needed is some leadership from Mr Ban and some clear goals to aim at.

Unluckily for the SG, this article came out just before his monthly press conference, and a canny hack asked him to comment. His response (which you can see here) has been described by UN-watchers as “angry” and “robust”.   The sheer passion doesn’t really come across.  But the FT got in on the act a few days later:

The questioning of Mr Ban’s record has become a staple of conversation among staff at the UN’s New York headquarters and of diplomatic chatter among the foreign missions that crowd midtown Manhattan.

So I doubt that the SG feels that well-disposed to the British quality press (times change: Kofi had a number of former FT journalists in his executive office). The Korean press has been complaining about the articles’ apparent anti-Asian bias.  The worst was to come from the US this week. Here’s Jacob Heilbrunn at Foreign Policy on, er, “the World’s most dangerous Korean”:

It’s not that Ban has committed any particularly egregious mistakes in his 2½ years on the job. But at a time when global leadership is urgently needed, when climate change and international terrorism and the biggest financial crisis in 60 years might seem to require some-any!-response, the former South Korean foreign minister has instead been trotting the globe collecting honorary degrees, issuing utterly forgettable statements, and generally frittering away any influence he might command. He has become a kind of accidental tourist, a dilettante on the international stage.

And so on. This time, it was Ban’s Chief of Staff Vijay Nambiar who got to strike back:

Heilbrunn’s account of United Nations Secretary-General Ban Ki-moon in Foreign Policy’s July- August issue abounds in innuendo and patronizing commentary instead of serious analysis. Where others have seen Ban Ki-moon’s commitment to “big picture” issues such as climate change and the global food crisis, Heilbrunn only sees smoke and mirrors. Where others see the soft-spoken but tough-minded Secretary General speak out forthrightly amidst the rubble in Gaza, the author sees a “nowhere man”, and a “dangerous Korean”.

Hm: it looks like Ban’s team has filleted the Economist‘s reference to the “big picture” but let other parts of its critique drop. Well, you can’t blame them for a bit of spin. And Mr. Ban will welcome a profile in The Nation that is far more sympathetic to his style:

Ban feels most comfortable and useful in the role of global noodge and pivotal player among nations and nongovernmental actors. A genial man given to informality who has been known to break into ditties or self-deprecating humor at sedate dinners, he is neither a charismatic figure nor a spellbinding speaker. He tries to cement his position a little wonkily through issues, with the world financial crisis sharing the top of the priority list with global warming.

Admittedly, the piece does go on to criticize the SG’s management style, but the battle for his reputation remains open.  What’s striking about the entire debate is that everyone (bar Heilbrunn) accepts that Ban’s tenure will be defined by climate change, on which he’s staked a huge amount of political capital.  Stuff like Darfur, high on his agenda in 2007, is out of the equation.  If the Copenhagen negotiations go well (which Ban may affect but cannot control), he’ll be able to draw a line under a lot of criticism.  If they prove unsatisfactory, there’ll be a lot more negative stuff.  For all his wonkiness and noodgity (if that’s a word) the SG seems to be a gambler who likes big stakes…

UPDATE: Stephen Schlesinger has weighed in with a broadly favorable profile of Ban for the Huffington Post.  And Ban has responded – in a typically measured fashion – to media criticism in a weekend interview.

UPDATE #2: But it’s not over.  Inner City Press (which is pretty virulently anti-Ban) implies that the Washington Post and NYT may swing in soon.  Even Al-Jazeera has got a dig in.  But Ban has doubtless taken comfort from a poll showing him to be the world’s most trusted statesman after Obama.

In the light of ongoing events in Iran (which sadly seem to be in danger of being utterly overshadowed by the other thing), various commentators have been focusing on why exactly it is that the regime reserves its greatest hatred for Britain? Surely America is the ‘great satan’? Why are we taking the flak all of a sudden? Of course, it’s historical. You can look at pretty much any world trouble spot, rogue state or basket case, and find the legacy of the British Empire behind it somehow. (more…)

Yesterday, David picked up on a fake tribute to the late Michael Jackson from “David Miliband”. Here are some tributes, culled by the New York Times, that appear to be real:

Venezuelan President Hugo Chávez called the star’s death “lamentable news,” though he criticized the media for giving it so much attention.

Turns out that “Thriller” was actually pretty popular among autocrats:

The former Philippine first lady, Imelda Marcos, said she cried on hearing the news. “Michael Jackson enriched our lives, made us happy,” she said in a statement. “The accusations, the persecution caused him so much financial and mental anguish. He was vindicated in court, but the battle took his life. There is probably a lesson here for all of us.”

Which is, presumably, that the rule of law is a bad and dangerous thing? Imelda should know: she was acquitted on 32 graft charges last year, but has another ten to go. Anyway, not everyone is vindicated in court – and it can get pretty crazy in jail:

Jackson fans lit candles at a spontaneous memorial in Hong Kong, while in the Philippines, a dance tribute was planned for a prison in Cebu, where Byron Garcia, a security consultant, had 1,500 inmates join in a synchronized dance to the “Thriller” video. “My heart is heavy because my idol died,” he said.

Fair enough. My heart would get a bit heavier because I was treating 1,500 human beings as prancing automata, but that’s a matter of taste. Could a tribute come from a more depressing source? Er, yes:

Fellow singer Celine Dion said in a statement, “I am shocked. I am overwhelmed by this tragedy. Michael Jackson has been an idol for me all my life.”

Last year I highlighted a particularly depressing and lightweight evidence session held by the Defence Select Committee on national security and resilience. This session has been well and truly surpassed by the following evidence session. Sean O’Neill, Crime Editor at The Times describes the scene from the committee room:

So hard being an MP these days, so much to remember. Where did I put the receipt for those silk cushions? What’s the name of that moat-cleaning firm again? There’s hardly any time to get oneself ready for the dreary day-to-day stuff like, say, the appearance of SOCA’s big cheeses before the Home Affairs Select Committee. So we were treated this morning to the usual string of half-baked, ll-prepared questions without anyone landing a glove on Sir Stephen Lander and Bill Hughes. Best of all was – “These Afghan money-launderers, Sir Stephen, were they British?”.

In the midst of it all, your humble correspondent (who has written the odd story about SOCA) was referred to as Sam while SOCA’s chairman was variously called Mr Lander and even Saint Stephen. Meanwhile, the confused picture of organised crime in Britain emerged even more confused. SOCA, it seems, is happy with ACPO’s assessment of 2,800 criminal gangs active in the UK but it prefers to use its own figure of 4,000 individuals involved in organised crime. Even by our maths that’s fewer than two people in every gang.

Bismarck once noted that “laws are like sausages: it’s better not to see them being made”. Were he around today, he might add that both laws and sausages are, in the US at least, based mainly on corn.

As I’ve just mentioned in a separate post, today is crunch time for the Waxman-Markey climate bill in the House, and so everyone’s watching the few remaining undecided Democrats, many of whom have big coal interests in their states. One set of Democrats that’s firmly in the ‘decided’ column, though, is the farm-lobby – who will be busting out cold beers and chucking ribs on the grill this weekend if the Bill passes. 

Not long ago, the farm lobby were adamantly opposed to the bill, which they feared could increase their input prices, especially fuel for on-farm energy use. Moreover, the mighty corn lobby was especially unhappy that it wasn’t invited to the cap and trade party, as National Corn Growers Association President Bob Dickey made very plain on May 18th:

“After reviewing the legislation, we can see the bill does not clearly provide for a mechanism by which corn growers can sell carbon credits on the market. We strongly believe the bill will increase input costs without specific opportunities to offset those additions. We cannot support the American Clean Energy and Security Act in absence of the provisions that we have explained in some length to the Committee.”

Well, that was then. The bill now includes an amendment submitted by House Agriculture Committee chairman Collin Peterson, which will:

• create a market for agricultural offsets that allows the sector to take part in cap-and-trade;
• have this market regulated by the US Department of Agriculture, not the Environmental Protection Agency; and
• explicitly exempt agriculture from having an emissions cap of its own.

Oh dear. (more…)

The Waxman-Markey Bill will go to the floor of the House today or tomorrow, so Obama and Pelosi are on a determined bid to round up the few remaining undecided Democrats (mainly from rust belt coal states). US environment NGOs have (apart from Greenpeace - quelle surprise) saddled up for a massive mobilisation, and staking every last cent of political capital on leveraging the outcome: the League of Conservation voters went so far as to write to House members saying,

“In light of the tremendous importance of this legislation, LCV has made the unprecedented decision that we will not endorse any member of the House of Representatives in 2010 election cycle who votes against final passage of this historic bill.”

If recent polling data is accurate, then the US public seems to be behind the case for tough action: a Washington Post-ABC poll conducted June 18-21, for instance, has nearly twice as many people approving of Obama’s handling of global warming as those disapproving at 54% vs 28% – a touch down on late April, when the ratio was 61% vs 23%, but still robust.

Better still, 75% of people thought the federal government should “regulate the release of greenhouse gases” vs 22% ‘should not’ – and wierdly, if the question is adapted to include “What if it raised the price of things you buy”, then the ratio widens to 80% vs 18%. That said, on cap-and-trade specifically, the numbers are far closer: 52% support vs 42% opposed, as compared to 59% vs 34% in late April.

But the really stand-out finding for me is about how American voters regard international cooperation on climate.  The question put to them on this was as follows:

Do you think the United States should take action on global warming only if other major industrial countries such as China and India agree to do equally effective things, that the United States should take action even if these other countries do less, or that the United States should not take action on this at all?

Answer: 18% think the US “should not take action at all” [i.e. irrespective of what other countries may or may not do]; 20% think the US should “take action only if other countries do”; and 59% think the US should “take action even if other countries do less”.  Last time that question was asked in this poll was July last year, when the same numbers were 13% / 18% / 68%.  So there’s weakening, sure – but considering that last year was before the credit crunch really kicked in, what’s interesting here is how well the numbers have held up.

Update: I wondered last night where Breaking News had picked up its David Miliband quote.  Turns out it was from the Foreign Secretary’s own Twitter feed. The Guardian and Telegraph have both now picked up on the story. Just one problem – @David_Miliband is not actually written by the man himself, but by some bloggers linked to the UK Independence Party. Oops. My bad. Expect an embarrassed retraction from the papers soon as well. This, by the way, is what verified accounts are for.

Michael Jackson’s death was confirmed within the past hour – but already the foreign policy community is digesting the news. According to Breaking News, [fake - see above] David Miliband has consoled the world. “Never has one soared so high and yet dived so low,” he commented, transcending at a stroke Tony Blair’s “people’s princess” tribute to Diana.

The Twitter user, badjournalism, meanwhile, brings a much-needed a military angle, ”Rumours circulating that General Sir Mike Jackson to do the 02 gigs,” he says.

In Washington, Iran isn’t about Mousavi, Khamenei or Neda, it’s about Obama. It’s a pincer movement. The establishment media behaves as if there’s some Geneva Convention stating that all international crises must have the American president in the starring role.

The right, meanwhile, see a golden opportunity to prove that a cuckoo has inveigled its way into the White House – and a Muslim-loving cuckoo at that. Take Andy McCarthy, a commentator at the National Review, who believes that as “a man of the hard Left, Obama is more comfortable with a totalitarian Islamic regime than he would be with a free Iranian society.”

It would have been political suicide to issue a statement supportive of the mullahs, so Obama’s instinct was to do the next best thing: to say nothing supportive of the freedom fighters. As this position became increasingly untenable politically, and as Democrats became nervous that his silence would become a winning political round for Republicans, he was moved grudgingly to burble a mild censure of the mullah’s “unjust” repression – on the order of describing a maiming as a regrettable “assault,” though enough for the Obamedia to give him cover.

Now, both sides have a smoking gun. Obama, the Washington Times tells us, has been writing love letters to the Supreme Leader himself, pleading for better relations, nuclear negotiations and an Iranian takeover of Kansas (I made the last bit up).

On Twitter, the paper’s national security reporter, Eli Lake, appears to have wet himself in excitement (as well as using the opportunity to suck up to his editor big time). She, Barbara Slavin, is putting “more Iran heat than Persian narcos” (eh?) with her bold exposé, he tweets.

Big news, eh? Except that we knew that a letter from Obama to Khamenei was being written in January. And that it was being sent in March. So why the surprise now? Because, whatever else is at stake, the most important thing we can do now is keep the spotlight on the demonstrators fuel another solipsistic partisan Washington squabble.

Update: Reagan managed this with more style, it must be said. His missive to the Iranians, at the outset of the Iran contra scandal, was a bible with a handwritten verse inside. Oliver North took a key shaped cake made by an Israeli baker.

Update the second: To be fair to Slavins, she has an email exchange with National Review’s K-Lo where she makes a great deal of sense.

Slavin: Apart from my paper, most journalists still write about Iran as though it is a theocracy. What we have been seeing is the raw exercise of force on the part of the government and people power in the streets. The clerics have had very little to do with it.

Lopez: What has been most surprising to you about the White House response to the election protests there?

Slavin: I haven’t been surprised by the White House response.

Lopez: Are there any lessons from history Obama ought to heed?

Slavin: I think Obama has learned from the mistakes of past U.S. administrations in dealing with Iran and has put the emphasis where it should be, on the legitimate aspirations of the Iranian people. The U.S. has no embassy in Iran and few levers it can pull to impact events there. Aggressive action through the military or more sanctions will probably wind up helping the government, unfortunately.