Research Article
Volume 1 Issue 1 - 2019
Ethics and Finance: The seventh commandment: “THOU SHALT NOT STEAL”
Bocconi University, Via Roentgen, 20135 Milano, Italy
*Corresponding Author: Fabrizio Pezzani, Bocconi University, Via Roentgen, 20135 Milano, Italy.
Received: September 16, 2019; Published: September 24, 2019
Abstract
The time has come to understand that we are facing an anthropological and not economic crisis as it is reductively defined; it is the failure of a socio-cultural model that has erased the fundamental human rights inscribed in 1948. The response to the crisis as anthropological is in understanding the cultural and historical path that has brought us to chaos, overthrowing the dominant paradigm, to place man and society at the centre of our interests as an end and to bring economics back to its natural role as a means. The technical culture, master of the world has unnaturally transformed economics as a social science into an exact science; in the exact sciences we study.
The relationships between measurable things to define universal laws, but in the social sciences, such as economics, we study relationships between men where human subjectivity does not allow defining universal laws. Von Hayek in his Nobel acceptance speech in 1974 denounced the serious mistake that would pave the way for rational finance and speculative markets distant from the real world; Von Kayek defines economy as social science and the human nature is emotional and not rational. The emotions drives his choices in economy but he remained unheard against the evidence The rational finance will arrive in 1995 with the Nobel award to Robert Lucas "for having developed and applied the hypothesis of "Rational Expectations and thereby having transformed macroeconomic analysis and deepened out understanding of economic policy" The man became "rational "against his nature and financial markets never wrong in wealth allocation because the traders having the same information’s decide, always (!!!) , at the same way. This is totally illogical and this Nobel is against Von Hayek. Where’s the truth? We have two Nobel Prize totally asymmetric but “A” can’t be at same time “Not A” as Aristotle says, as second rule, in Nicomachean Logique.
In this way the economy ‘word changes totally and everything changes and the neoliberal model taken as an end justifies unlimited personal accumulation and the legitimisation of human aggression. Everything becomes finance and pure speculation in virtue of a paper currency that, detached from finite bonds and the real world, becomes infinite and would turn into "macro-usury" capable of keeping companies and entire countries in check. Infinite finance without constraints can be studied with exact mathematical models generating the false idea that financial markets are rational and never err in the allocation of wealth. The study of finance-economics severs the ties with the humanistic sciences, becoming a pure arithmetic calculation far from reality but assumed as incontrovertible truth thanks to the many Nobel prizes assigned to economics, unfounded but serving higher.
The pursuit of maximum personal gains justifies the normalization of illicit behaviours, everything is played in a short or very short term logic in an infinite exchange at high speed where computers decide according to algorithms based on the nothingness of infinite finance, without anything underlying it. Stock exchanges become infinite casinos without rules or maximum profit in an amoral logic because those deciding in finance never pose themselves the problem of the consequences of their actions, and since it is always man who engages in illicit behaviours they become a practice of life that extends to young people who lose their identity in the confusion of value, becoming plankton at the mercy of the waves. Society without values and a humanistic culture become territories in which it is difficult to live and the individualism pursued as an end eradicates the first impulse that dictates the human spirit, that of aggression and lack of attention to others; "societas" understood as an alliance is transformed into the monster of the "bellum contra omnes", the war of all against all, and everything becomes lawful. The ethical problem begin the first problem and we forget the seventh commandment “Thou Shalt Not Steal ". Redefine the deep sense of the world “Ethics " begin a great problem.
Ethics in the time of finance: what doesn’t it means?
The terms ethics and finance define very different concepts. The former is a matter of values in relation to the behaviour of man in individual and societal life, the latter instead indicates an instrumental activity in relation to trading movable assets. The difference is sizeable as the term ethics differs from science in the strict sense inasmuch as the contents there in expressed are to be found in the emotional sphere of man and cannot be measured in quantitative terms but in qualitative terms to deliver an ethical/moral judgment. The term finance expresses an activity whose essential condition is dependent on its measurability and can also be studied quantitatively with the use of the exact sciences. In essence, as finance constitutes technical knowledge, it is not in itself neither good nor bad because making a qualitative judgment requires an ethical evaluation that is able to attribute a good or bad judgement to technical knowledge. Attributing a positive or negative, a good or bad judgement to a financial activity is dependent on how the ethical principle deviates over time, namely, which elements enable judging the activity in relation to its ends or purposes.
The terms ethics and finance define very different concepts. The former is a matter of values in relation to the behaviour of man in individual and societal life, the latter instead indicates an instrumental activity in relation to trading movable assets. The difference is sizeable as the term ethics differs from science in the strict sense inasmuch as the contents there in expressed are to be found in the emotional sphere of man and cannot be measured in quantitative terms but in qualitative terms to deliver an ethical/moral judgment. The term finance expresses an activity whose essential condition is dependent on its measurability and can also be studied quantitatively with the use of the exact sciences. In essence, as finance constitutes technical knowledge, it is not in itself neither good nor bad because making a qualitative judgment requires an ethical evaluation that is able to attribute a good or bad judgement to technical knowledge. Attributing a positive or negative, a good or bad judgement to a financial activity is dependent on how the ethical principle deviates over time, namely, which elements enable judging the activity in relation to its ends or purposes.
We recall here that the very etymology of the word ethics comes from the ancient Greek "ethos" meaning "accustomed place" intended as the place where man realizes his happiness and well-being. Also connected to this term in ancient Greek is "tekhne" meaning technique, also in the sense of art, the practical realization of the good of man? In this sense, it is very clear that "ethos" defines the ends or the meaning to be attributed to happiness and represents moral knowledge, while "tekhne" is the technical-instrumental knowledge needed to realize the former.
Over time, the two terms have profoundly changed with respect to the evolution of social and financial systems to the point where their roles have been exchanged and finance has assumed the ends while ethics has become its corollary.
The ethical value of an action depends on the qualitative judgment related to the concept of good or evil. In former times, a behaviour was considered ethical when man was put at the centre of social action and the common good was achieved. Today, in a society that has become extremely individualistic and anti-egalitarian in the redistribution of financial wealth, happiness is associated with the creation of physical well-being in the short term even at the cost of normalizing illegal behaviour that places the common good in second place to the pursuit of the individual good. It thus gave way to the ancestral greed of man and became our world’s dominant intrinsic value. Paradoxically, it could be argued that Madoff, the instigator of the most impressive financial default of our times, is representative of ethical behaviour in respect of this meaning of value
The End of « gold exchange standard «: The drama of infinite paper-money detached from finite bonds and real world.
The History
In 1945, after the drama of war, rules were defined to stabilize markets and exchange rates; the printing of paper money that has no value in itself was tied to a defined quantity of a real good and the "gold exchange standard" was launched-36$ for every ounce of gold. In that period that lasted until the beginning of the 70s, we had a fixed exchange rate system that favoured unprecedented economic and social growth. In 1971, the point of maximum social cohesion in the US coincided exactly with the point of lower inequality in income, providing evidence that the two aspects are closely related and that only a cohesive and just society can lead to solid economic development.
In 1945, after the drama of war, rules were defined to stabilize markets and exchange rates; the printing of paper money that has no value in itself was tied to a defined quantity of a real good and the "gold exchange standard" was launched-36$ for every ounce of gold. In that period that lasted until the beginning of the 70s, we had a fixed exchange rate system that favoured unprecedented economic and social growth. In 1971, the point of maximum social cohesion in the US coincided exactly with the point of lower inequality in income, providing evidence that the two aspects are closely related and that only a cohesive and just society can lead to solid economic development.
The separation of paper money from the real finite created two incompatible systems: the infinite and non-measurable of currency that would be totally deregulated, and the finite and measurable of the real world that became fictitiously subordinate to the former. Everything changes and the neoliberal model taken as an end justifies unlimited personal accumulation and the legitimisation of human aggression. Everything becomes finance and pure speculation in virtue of a paper currency that, detached from finite bonds and the real world, becomes infinite and would turn into "macro-usury" capable of keeping companies and entire countries in check. Infinite finance without constraints can be studied with exact mathematical models generating the false idea that financial markets are rational and never err in the allocation of wealth. The study of finance-economics severs the ties with the humanistic sciences, becoming a pure arithmetic calculation far from reality but assumed as incontrovertible truth thanks to the many Nobel prizes assigned to economics, unfounded but serving higher interests.
Another aspect that has contributed to this changing role of finance in economics and societal life is linked to its progressive detachment from the real economy to which it should be if not subservient then at least connected. Finance has taken on a global dimension in terms of the values expressed, absolutely incomparable to the real economy - derivatives amount to just over 20 times the world GDP per annum - and has taken on a life of its own that seems independent from the real economy and not representative of the values on which it rests. Indeed, money and thus finance have a fiduciary value, paper money itself states, "I promise to pay the bearer on demand the sum of .... “With the advent of electronic systems, money has become more and more virtual and this contributes to money assuming a dimension that is independent of the actual value it represents; if all bearers were to collect, we would probably face a global default. The immense liquidity injected in the market has altered the real value of goods from their financial value that determines the former and it therefore becomes easy for those who are able to govern finance to use these values as a tool for the realization of interests that go far beyond the markets.
Furthermore, the context in which finance operates is likely to amplify human weaknesses. In particular, the detachment from the real economy favours the propensity to euphoria, depression and, as the reality has shown, renders financial markets inefficient that seem to accurately anticipate future events while the expectations of future events regulate the markets; but expectations are not knowledge. The markets therefore become very different to what they would be if they rested only on knowledge. The approach to financial analyses based only on exact sciences gave the illusion of a governance of the system detached from the real world, knowledge has become self-referential and has induced the studies to become enamoured with models in a type of "rationality mirage". The detachment from the emotional world of man has gradually affirmed models that are unable to interpret reality, unable to predict the evolution of events until they are close at hand, the crisis is a clear manifestation of this and of seeking the remedies afterwards.
In short, finance operates in an amoral context because those who make the decisions do not pose themselves the problem of the social consequences - as instead is the case of those operating in the real economy - driven by the maximization of short-term results to the detriment of collective interests that require a long-term horizon. In this way, finance has become a way of pursuing personal enrichment as quickly as possible and a sort of artificial paradise that, as seen, attracts an increasing number of workers. Working in the world of finance has become a "must" for the younger generation that will be dramatically deluded.
But why have we come to this point and what are the real problem we face? Does the crisis that we have endured for years have its origin in finance and in the role it has taken in our lives and in our society or do the roots go further back to the failure of socio-cultural models that in exclusively focusing on economics and finance prevent us from understanding? How can we understand the current historical phase and respond adequately to the problems we face? Let us try to outline an analytical path that enables a better understanding of the state of the art.
The development of finance assumed a significant dimension in the eighteenth century when the clashes of the Napoleonic wars required huge resources to finance the war campaigns and supporting the currency was necessary to sustain the armies.
With the industrial revolution the credit and financial systems became increasingly extensive and decisive in societal life to the point of determining not only economic but also political and social choices because money was often used as an intimidating deterrent in international relations between States. Fast forwarding to our time, two specific moments of our history can be identified to understand the current context. The first was in 1944 and in particular the Bretton Woods agreement under which the exchange rates of various currencies were anchored to the dollar in turn linked to its convertibility into gold and granting relative stability to the financial system in the subsequent period. The second was in 1971 when Nixon unilaterally declared the decoupling of the dollar from gold thus infringing a period of cooperation. The US Treasury Secretary John Connally declared to the world "the dollar is our currency but your problem". An era thereby ended and an entirely different one began in which finance started to assume its current dimensions.
The collapse of the Soviet empire enshrined the idea that the economic and financial model that had been affirmed was the solution to all social and economic ills, and its cultural models became unquestionable truth. This path of finance as a means of rapid enrichment was legitimized by the Academy of Sciences that assigned financial studies a leading role and legitimized its diffusion; its self-referential use created tremendous damage but suited a minority and thus generated the most imposing transfer of wealth recorded in history.
Attention to the development of financial studies influenced the fields of study of American universities. Indeed, the number of graduates aspiring to work in the financial world at Harvard alone went from 5% in 1970 to almost 40% of graduates and 30% of female graduates in 2008 before the crisis broke out in September. Almost exclusive attention to finance conditioned economic and social development choices, thus proceeding to increasingly relocate manufacturing activities to countries with low labour costs, affecting local governments and progressively reducing employment prospects in the manufacturing sector that has now become the real criticality of the Western world and of Anglo-Saxon culture in particular.
Those working in the world of finance know that "small is beautiful" does not work and the expansion of finance is therefore associated with its increasing concentration in the hands of the few institutions that are now able to determine global hegemonic policies up to creating, as Noam Chomsky noted, a virtual senate of the world because finance replaced weapons in the exercise of power.
James Carville, the head of the presidential campaign in the first hundred days of the Clinton presidency, caused a sensation with his statement, "I used to think that if there was reincarnation, I wanted to come back as the president or the pope... But now I would like to come back as the bond market. You can intimidate everybody". The power of the bond market, as we see today, is the ability to sanction a government and by increasing the cost of its debt creating a domino effect. In fact, the rising cost of debt increases both the debt and the deficit and investors raise their guard selling the securities of this debt by decreasing prices and raising the interest. To recall Niall Ferguson’s (2008) observation in his book "The Ascent of Money: A Financial History of the World", Mr. "Bond" became more powerful than the character penned by Ian Fleming and has a license to kill.
The existing financial collision can be understood in light of these considerations, we saw it in the 2010-2012 campaign that constituted a form of exercising financial hegemony and even international policy with which the world was confronted at a time of momentous changes and functional to figuring out whether the term "democracy" could still be used or whether it was likely to become a mythological term.
Returning to the initial considerations asserting that finance is not in itself good or bad but depends on the interests to which it is subservient, and if reverting to its role as technical knowledge we must observe the evolution of the socio-cultural model underlying this development. Perhaps in this way we can understand that the current crisis is not economic and financial but a crisis of values that led to the formation of a highly individualistic and anti-egalitarian society in the redistribution of wealth that put self-interest and the individual before social interests. A socio-cultural and materialistic model has affirmed that is driven by the truth of the senses: truth becomes what you see, touch and measure. The prevailing culture becomes pragmatic and suggests responding to the question "how can it be done?" while the question "what is it?" remains in the background and thus attention to the means prevails over attention to the ends that are given.
Economics and de facto finance became self-referential sciences, independent of reality as in the exact sciences, forgetting the fact that intrinsic human emotion is a variable that always affects choices; people buy and sell stocks based on expectations and not knowledge. Liberalism of the strongest has affirmed and generated, as mentioned above, the most imposing transfer of wealth in human history as we see:
The society became a great problem with reactions and social disasters:
Another behavioural aspect that characterizes the evolution of society as a result of the diffusion of this cultural model is the gradual reduction of the tension and the moral order as we see in daily scandals because exclusive attention to profit and results overshadows attention to ethics, often considered a value to be recovered. The idea that "truth" should be measurable confines the sphere of metaphysical values - ethics, solidarity, equality, happiness, morality and so forth - expressed as feelings that cannot be measured in a context where the boundaries are no longer clearly defined and therefore opaque and not immediately applicable to everyday behaviour. As a result, society today has difficulty understanding the essence of things and doing what is right; this is the sense of justice that Plato described as the epitome of human duty.
The seventh commandment: “THOU SHALT NOT STEAL”
The seventh commandment “Thou shalt not steal” is the one destined to surpass all others in importance not only today but conceivably also in the future.
The affirmation of finance as a sacred truth has helped to completely skew many regulations governing the markets which have represented an equilibrium point since the industrial revolution and underlie the antitrust laws. Among other things, the fact of having saved the big banks with public money to avert a possible systemic risk represents a total lack of consideration of the anti-monopoly legislation.
The world of finance has changed the nature of wealth, which now no longer consists in the accumulation of goods but in the infinite expansion of debt, subject to endless proliferations thanks to an approach that is completely detached from reality (subprime mortgages have gone from being real property to personal property).
“In the era of finance, property has become dematerialized into a symbol or a number, and this has totally transformed the large corporations which have seen a process of deconstruction, while their assets, accumulated through dicey transactions and market manipulation, is now of uncertain composition and ownership. […] In this same vein, the definition of a joint-stock company has gone from that of a corporate body to a ‘nexus of contracts’, i.e. a patchwork of contracts, in reality disconnected, between shareholders, managers, creditors, employees and every other type of stakeholder, person or entity with an interest in its activities. [...] The nexus of contracts has done away with real or symbolic property and with it the boundaries between the legal and the illegal; ultimately, it has generated a separation between ownership and control by blurring the meaning of the seventh commandment: “Thou shalt not steal”.
In the intentionally uncontrolled financial revolution there is an abandonment of the concept of theft which, from misappropriation of an asset, has become a reduction in collective wealth not due to any specific object nor to an identifiable absolute right of ownership.
This socio-cultural model is now questionable because the only technical-rational thought that supports it has stifled the creative thought that alone, as history shows, can carry society forward with the free association of ideas. Further, the exclusive focus on technical sciences leads to thinking only in terms of the future and thus impedes reading the times of history.
Paradoxically, man has created the means - economics and finance - and continues to increasingly maintain these autonomously and independently from himself and in satisfying the proposed needs creates new and more sophisticated and individual needs, which are aimed at satisfying continually changing personal and short time needs. However, economics and techniques must remain endowed with sense, their activities must have a standard, a hierarchy of values, an awareness of which needs can be considered right and which wrong, requiring the correct economics of living otherwise an infinite system of desires is created that affirms its absolute freedom to satisfy these desires. A continually growing economy based on the ability to meet needs by creating more needs cannot be considered a creed as instead is the case today and perhaps it is time to rethink which development model is more consistent with the need to put man at the centre of economics and restore a more accomplished sense to the values expressed by terms such as ethics, morality, solidarity and equity.
Conclusions
Angelus Novus (Paul Klee, 1920): toward the future, as Klee and Benjamin though, or now toward the past because the future it’s scary? Returning to Hobbes? Doctor Jekyll or Mister Hyde? From Utopia to Retrotopia (Zygmunt Bauman, 2017)?
"A Klee painting named Angelus Novus shows an angel looking as though he is about to move away from something he is fixedly contemplating. His eyes are staring, his mouth is open, and his wings are spread. This is how one pictures the angel of history. His face is turned toward the past. Where we perceive a chain of events, he sees one single catastrophe which keeps piling wreckage upon wreckage and hurls it in front of his feet. The angel would like to stay, awaken the dead, and make whole what has been smashed. But a storm is blowing from Paradise; it has got caught in his wings with such violence that the angel can no longer close them. The storm irresistibly propels him into the future to which his back is turned, while the pile of debris before him grows skyward. This storm is what we call progress.”(Walter Benjamin, 1921).
But now " Angelus Novus " seems to see the past not the future as positive time for the life , because the future seems without hope so we can define this whit the world " Retrotopia " , as a return in good times balancing between the past and the future in indefinite and situation
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Citation: Fabrizio Pezzani. (2019). Ethics and Finance: The seventh commandment: “THOU SHALT NOT STEAL”. ES Business Management and Accounting Studies 1(1).
Copyright: © 2019 Fabrizio Pezzani. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.