Wasted Talent?

Biding my time in our smallest room recently, I was confronted by Iman's revelation [The Week, 9.7.11] that, instead of "a dirt-poor goatherd who couldn't speak a word of English" - as American modelling agencies were apparently led to believe when she first came to their attention - she was actually "fluent in five languages and studying political science at university in Nairobi."

Well, what can I say? I guess I'm as surprised by this as Iman's first modelling agent, but it has little to do with her job description. And it's a bit rich now for her to expect us to be impressed by her deep knowledge of languages and political science, having preferred to present herself to the world as a human coathanger.

But, hey, I guess it's never too late.

I don't mean to 'pick on' Iman, but her story presents an interesting illustration of a theme. As Lord Turner pointed out, much activity in the City, for example, is ‘socially useless' and 'of no real use to humanity’. And, I've suggested before, if we are going reverse an ugly trend in our society, we must agree on at least one higher ambition than the accumulation of wealth (or fame, or celebrity).

Perhaps the fact that, notwithstanding fortune and fame, Iman now wishes to flaunt her academic credentials suggests that attaining a decent education is that higher ideal.

What Is More Socially Important Than The Creation Of Wealth?

I've been reading article after article, and book after book about our financial crisis, and the really bad news is not the continuing poor risk management and regulatory failings despite decades of warnings in the form of scandals and mini-crises, or bank ram-raids on the Treasury to cover their losses while they retain their profits and keep paying giant bonuses, or £81bn in public sector spending cuts, higher unemployment, lower house prices or a decade of economic malaise.

The really bad news is that all this stems from a western cultural problem that is nowhere near resolution, so that we are doomed to repeat the whole, sorry saga.

Of all that I've read so far, perhaps John Lanchester's Whoops! has been most emphatic in elucidating what that cultural problem is - recently borne out by the ending to Money Never Sleeps (and, indeed, "The Other Guys"). Lanchester alerts us to the fact that John Maynard Keynes, the great god of economic thought, wistfully looked forward to a new world without greed and acquisitiveness:

"When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues."

J.M. Keynes, "Economic Possibilities for our Grandchildren", 1930

In other words, the root cause of all this financial mayhem is that we have no higher, universally accepted social ambition(s) than the accumulation of wealth.

So when will the accumulation of wealth cease to be of high social importance?

When there is enough wealth? Surely not. There will never be 'enough wealth', because we seem to have no idea what 'enough' is as a society, nor how to figure that out. And there will always be greedy people, and people in great need, who will be compelled to find a way to accumulate wealth. So don't look to change people's desire to accumulate wealth as a solution. That will never happen. Especially when the financial crisis is putting everyone under pressure to make a penny to survive, although an Age of Conspicuous Thrift and a focus on sustainable capitalism may help.

No, if we are going reverse an ugly trend in our financial system, our society must agree on at least one higher ambition than the accumulation of wealth.

What's it to be?

Learning?

Greed Is Still Good

If you don't want to know the ending to the film Money Never Sleeps, stop reading now.

For the rest, I have to say I'm troubled by whether audiences believe the ending to this movie is a positive "Hollywood" resolution, instead of the grimly ironic testament to persistent greed that it actually is.

To cut the story short, Gordon Gecko, immortalised by the line "Greed...is good", leaves jail after doing time for crimes committed during Wall Street, only to trick his 'leftist' daughter and her naïve fiancé into returning $100 million of the ill-gotten gains Gordon had salted away in his daughter's name. She'd been going to give it to charity, but her fiancé convinced her to invest it via him and Gordon in a 'clean-tech' alternative energy company (the nature of whose connection with the fiancé is never satisfactorily explained). Gordon somehow diverts the cash, ruining their plans and their relationship in one hit. As a result, he's told he'll never see his grandson-to-be, which seems to be the only thing in the world that really bothers Gordon. In the final scene, however, Gordon is redeemed in the eyes of his daughter and her fiancé - and heals the emotional rift between them - by dropping by to announce that he's deposited a freshly laundered $100 million in the bank account of said energy company. Gordon can now spare the cash, he happily explains, because he's just made another fortune shorting the markets and managed to skim a little cream for himself via the Cayman Islands. Cue the wedding and dancing.

I guess one can't blame a daughter for wanting her dear old dad to be around her child, even if he is only anxious to teach the kid the equivalent of safe-cracking. But I was struck by the fact that she's also billed as a 'leftist' and that she and her fiancé share a passion for 'clean-tech' alternative energy. And I reckon the example of their easy forgiveness in the film might be a sign that audiences think that the Bernie Madoffs of this world - indeed our financial institutions - can redeem themselves simply by investing their ill-gotten gains in 'worthy causes' - or by repaying their bailout money - rather than by behaving ethically.

Or, in other words, that greed is still good.

This is chilling enough when you consider that such a view would endorse the illegality, or at least the immorality, of the mortgage brokers and bankers who gleefully shoveled the likes of NINJA loans into the bond markets and even simultaneously shorted the resulting bonds - all at the taxpayers' expense. But it's especially chilling given the recent sober reminder from Hank Paulson, formerly both Chairman/CEO of Goldman Sachs and US Treasury Secretary at the start of the financial meltdown (somewhat simultaneously, some seem to be suggesting):

"Speaking close to the two-year anniversary of Lehman Brothers' collapse, Mr Paulson said that while he welcomed much of the new financial regulation, it would not be enough to prevent another crisis. "We have to assume that regulation won't be perfect. We'll have another financial crisis sometime in the next 10 years because we always do.""

Timely, too, that UBS, the global investment bank, should announce today that it won't be pursuing the former senior managers who appear to have put in place “incentives...to generate revenues without taking appropriate consideration of the risks [that]...facilitated losses” because any such court action would be “more than uncertain”, expensive and “lead to negative international publicity and thus hamper UBS’s efforts to restore its good name in the markets” [my emphasis]. What's that a 'good name' for, exactly? And what sort of message does that meek surrender send to the current management, clients and other stakeholders?

Why, that greed is still good, of course.

Paulson, perhaps ironically, is right. No amount of regulation will change this cultural belief. It's a crisis of leadership, yes, but only because we get the leadership we deserve. Cultural change is something that must evolve bottom-up.

And that's what troubles me about the forgiveness, wedding and dancing at the end of Money Never Sleeps. If Hollywood had been confident that our values had changed, the only thing that would have united the young lovers would have been a strenuous and simultaneous citizens' arrest.

The Leadership Crisis Is Ours To Resolve

Paul Moore's recent evidence to the Treasury Select Committee reveals the kind of top-down culture in the UK financial system that explains not only rampant over-expansion and the financial chicanery that went with it, but also arrogant, self-interested foot-dragging over such things as slow payments, mis-selling of PPI, acceptance of falsely self-declared income on mortgage applications and allegedly excessive bank charges. Intensive regulatory activity, checks and balances aimed at preserving the banks has not been enough to save them. For this, the very taxpayers who are poorly served as consumers must now pay.

After a string of CEO departures, the resignation of Sir James Crosby from his post as Deputy Chairman of the FSA, and with the "blame" now lying at the door of the man who was Chancellor through it all, there is no doubt we are in the midst of a leadership crisis.

But what lies in store for us once the "old guard" has gone? Who are the new leaders? Will their leadership improve?

Leadership is a rather nebulous concept. Over centuries, people have literally died trying to define it by reference to specific character traits, sundry personal qualities, types of behaviour, situational responses, functional responsibilities and so on. But regardless of whether or not leadership features all or some of these characteristics, it is ultimately a very complex, contextual, dynamic, inter-personal relationship between the purported leader and those he/she is trying to lead.

In other words, leadership is what the participants in the relationship make it, and we get the leaders we deserve.

But we know this, and we're acting on it. Our decline in faith in our institutions over the past 30 years, and the corresponding surge in political awareness, participation in informal politics, and personalisation of previously mass consumer experiences all reflect our growing individual pragmatism and our confidence in acting on it from the bottom-up. We have learned that great leadership is within our control because we are a fundamental part of that relationship. In essence, we are the leaders.

That is why, when Chris Skinner issued an apology to 98% of bankers for his rather apt criticism of banks, I suggested that in fact they should take his remarks personally. Because we know that as people they are not powerless. We know that great leadership will emerge when the 98% respond to the criticism, bottom-up, by forging a decent relationship with their customers, putting those customers first, ahead of their managers, executives, board directors or shareholders. Only then will we see decent, sustainable profits from the finance services industry.