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For finance that serves the common good
The current financial turbulence is systemic in nature. It is a symptom of steadily increasing pressure that is undermining the material, social, and intellectual aspects and ethics of the liberal socio-economic system. In a recent report*, the Observatoire de la Finance carried out an extensive analysis of this transformation. More emphasis will deflect the market economy from its principle vocation, that of promoting the dignity and well-being of humankind.
Society is never set in stone; it is characterised by an on-going quest for the arrangements best adapted to a given time. Today is no exception. During the last thirty years, finance has constantly increased not only its share of economic activity but also of people’s world view and aspirations. We call the greater practical and conceptual role of finance “financialisation”. The Observatoire de la Finance dedicated its last report1 to the analysis of the multiple dimensions of financialisation. The report shows how financialisation has transformed both our economy and our society by increasingly organising it around the search for financial efficiency. Today, pushed to its extremes, this tendency is coming close to its breaking point.
1. The diagnosis
rement benefits to investments that depended on
sustainable liquidity. The long-term viability of this model is dependent
on the profitability of financial instruments. At the same time, other
savings instruments were developed. This progressively exposed the rest
of the productive economy to the vagaries of finance, thereby producing
an increasing need to devote more and more of the added value to the remuneration
of the savings thus invested and more and more self-nourishing complexity.
Pressures on the companies from stock exchange and from private equity
fund have been translated into other pressures in three complementary
directions: on their staff to achieve ever-increasingly improved performance;
on consumers, who came under increased pressure from sophisticated marketing
techniques; and on the companies’ suppliers and larger distributors
as well as on many SMEs (small and medium-sized enterprises) in both the
North and the South to achieve increasingly unsustainable results.
Though initially financial, the demand for financial
results has trickled down through the entire economic system and become
an omnipresent part of the culture of everyday life. This evolution has
now resulted in a paradoxical situation for Western societies. The system
of capitalisation and shareholder value, by imposing demands for the future,
has compromised the present. This “radiant future” is proving
to be as much of an illusion as the communist utopia.
This process of “financialisation” has been facilitated by
the political appeal of deregulation, as well as by “laws”
and other “theorems” postulated by Nobel prize-winners. The
“ethos of efficiency” has also been allegedly validated by
“scientific” truths, and has progressively overcome moral
and ethical resistance.
After over thirty years of “financialisation”, the state of the economic and social system is worrying on more than one count:
“Financialisation” has led to the almost total triumph of transactions over relationships. Contemporary finance has prevailed because it has carried to its ultimate the search for capital gains and instant results. At the same time, patience, loyalty, enduring relationships, and trust have been undermined leading to increased distrust. The liquidity of financial markets is nothing more than a mechanical substitute for interpersonal trust.
2. Possible lines of action
This analysis suggests that the fundamental values of free judgement, responsibility and solidarity - which form part of the common good, and without which a free and humane society cannot exist – are under threat. The Observatoire de la Finance proposes three lines of action:
3. Appeal
The above text aims to alert men and women of goodwill to a serious threat to the economic and political freedom we treasure. This threat is the result of having succumbed to the illusion that private greed could contribute to the common good. While private greed may give the impression of increasing economic efficiency, this is at the cost of the very basis of society: trust, respect and solidarity. It has now become indispensable to take our future in hand - to walk out, to slam the door of the apparently golden prison of financial promises, to free humankind from the illusions of “financialisation”, and to set it to work for the betterment and dignity of all.
The Finance & the Common Good/Bien Commun reviews, as well as the Observatoire de la Finance’s website, are at your disposal. Please send your contributions to manifeste@obsfin.ch.
You can send your reaction to: manifeste@obsfin.ch
