A Profoundly Moral Issue

Is paying out Big Bonuses the “Christian” thing to do? If you happened to be present in the Anglican Church on London’s Trafalgar Square a few nights ago, you might believe it to be so.

Barclay’s Catholic CEO, John Varley, addressed a captive church audience, “If we fail to pay or are constrained from paying competitive rates then that talent will move to another employer.” Nothing is odd about that statement coming from a banking executive except that Varley was justifying bonuses on purely Christian principles.

In Varley’s view “Christianity and capitalism are compatible” because, “The injunction of Jesus to love others as ourselves is an endorsement of self-interest.”      

Okay. Is he seriously tying Self-Interest to the Golden Rule? I wonder if Mr. Varley would have liked his 85 year-old mother to be tricked into a 30 year adjustable mortgage?  I can’t be certain, but I don’t think predatory loans were what Jesus had in mind.

Varley’s speech is part of a concerted effort by London’s Christian Association of Business Executives to quell the growing rage against bankers. Also making the church rounds were Goldman Sachs’ International adviser Brian Griffiths and Lazard International Chairman Ken Costa.

Following a lecture at St. Paul’s Cathedral, a member of the congregation said, “People are very, very angry at the gross iniquity of rewards in society.” Griffiths responded with, “We have to tolerate the inequality as a way to achieving greater prosperity and opportunity for all.”  He really said that? It’s kind of like the modern equivalent of “Let them eat cake.”      

This week, Lloyds Bank and Royal Bank of Scotland received 31.3 billion pounds ($50bn) in additional funds from the British government, after receiving 37 billion pounds ($58bn) last year. Executives are concerned about public backlash for bonuses and the increasing call to separate investment and retail banking. Varley’s argument that failing to pay “talent” would harm banks falls hollow in the wake of the newest rescues. How much talent does it take to lose $100bn?

Yet the moral argument is not whether or not people should get paid for what they do. The more crucial issue is whether bankers are really “public servants” since the bailouts and should be paid accordingly?   If bankers acting as quasi-private citizens get paid the big money, at what cost does that come to the public who supports it?  In other words, whose hard-earned wages are garnered to pay incompetent bankers the big bucks? Therein lay the inequity.

The issue of rich vs. poor is not causing the public outrage so much as the official act of paying people who have royally screwed up at the expense of ordinary folks. People by the millions on both sides of the Big Pond have lost their livelihoods because of the schemes and scams of banking “talent.” Yet these same individuals feel entitled to further payoffs and are even crazy enough to say it in a church. One disgruntled congregant exclaimed, “It’s terrible to say things like that in a church. He should be condemned,”

Yet the issues of the morality of wealth and capitalism are separate. Is it morally acceptable to be rich? If we define “rich” as having more than we “need,” I say yes with a caveat. Not at the expense of others. Be as rich as you want. That is the American, if not the British way. But don’t get there on the backs of the struggling masses.

Barclay’s Varley echoed this sentiment in his Anglican speech, “The pursuit of profit must not come at the expense of society. We have an obligation to behave as a responsible employer.”

This remark encapsulated the core conflict—“profit must not come at the expense of society.” If pursuit of profit does hurt society, what must be done to rectify this moral transgression? Varley seems to suggest we ignore the act and go on as before. Yet Bishop Chartes of St. Paul’s reminds him, “To those to whom much has been given much will be required.”   

Lazard’s Costa spoke more candidly in another church lecture, “Bankers became too obsessed with short-term gains in a financial crisis that is a profoundly moral issue.”

The issue of banking bailouts and big pay for those who were personally responsible for the collapse is a profoundly moral one.  Here is the moral conundrum: How much do we pay for failure?

The genuine conflict is not capitalism, not wealth, not banks. The dust kicked around these issues has obscured the fundamental questions. How much do we reward people who—knowingly, deliberately—caused society irrevocable and serious harm? Why would we reward those who not only caused great personal suffering, but endangered our entire economic system and future prosperity?

If someone harmed society by starting a fire in a public building, we would hunt them down with every power we have to rectify the injustice. Yet when the national and global financial systems are set on fire, we are not only asked to put the fire out with our own liquidity, we are also asked to pay the arsonists. Whatever the reasoning, one cannot defend it by invoking the doctrine of Adam Smith.

Bailing out the banks may have been inevitable; it may have even been sensible under the circumstances—but it was not capitalism. The core tenet of pure unadulterated capitalism is private ownership—not state assistance.

The angry backlash is not around “capitalism.” The anger is based on the absence of capitalism—the two tiered economic system we have created with the bailouts. One system is based on “public assistance” for financial institutions and their employees—a kind of socialized banking; the other system is for everyone else who is struggling with a raw survival-of-the-fittest capitalism. The public is being forced by law to financially support its own economic destruction. 

What we have really created is “survival-of-the-sneakiest” capitalism. Bailing out the banks without exacting punishment for those responsible and with no management rights for those who rescued them is not only irrational—it is inexcusable.

It has never been done before in a democratic society. It has only been done in military regimes, fascist governments, or monarchies. No wonder the public is genuinely mad.

So back to the question - Is capitalism moral? The answer is no and neither is it immoral.

Capitalism is nothing more than a “system of economy” –it has no morality attached to it whatsoever, except what we impose on it. If we use it in an immoral way—it will be just that. If we use it in a conscientious and responsible way, it becomes that.

We ourselves determine the morality of capitalism. Do we use it honorably or do we use it as a mechanism to aggrandize ourselves at society’s expense? Capitalism has to have clear and fair rules. It shouldn’t be a blank slate. 

Varley said, “There’s no conflict between doing business in an ethical and responsible way and making money.”  Agreed. That is what good business is all about, ethical and responsible profit. We make money by making the world a better place.

The Big Banking CEO concluded that as capitalists, “We make our biggest contribution to society by being good at what we do.” I guess he forgot that in the last couple of years, most of the big banks around the world, including his, were not “good” at what they did. Rather than contribute, they took away from society something really precious—our trust, our sense of decency, our sense of justice and more than that—our security.

There is one important positive aspect to London Bankers preaching the Gospel of “Me First” and that is the discussion of the morality of capitalism itself.  At least on that side of the Pond, there is a discussion. We need more of it to stimulate real change.

To answer the original question: Is paying big bonuses to bailed-out bankers the “Christian” thing to do? Not if you treat others fairly and expect them to do the same for you.

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