Stephen Green concluded the St Michael’s, Cornhill Lenten lecture series with his talk on ‘Belief in the City’. The full text of the lecture is available below.


St Michael’s Cornhill, 18 March 2015

When my old friend Bishop Stephen Platten asked me, some months ago, to give this lecture as part of his Lent series, I had no idea that I and my former employer would become the focus of such intense critical scrutiny in recent weeks. I wondered whether, as a result, I would be a distraction from today’s topic; and I suggested to Stephen that he might want to find someone else to give a lecture on faith and the City – someone to stand where I am now who would be less controversial and who could thoughtfully reflect on the ethics of the markets.

Stephen would have none of that. And I am grateful for the challenge he set me – to reflect, on the basis of real personal experience, on the dilemmas of living in the markets – dilemmas which are, as I will want to argue, of clear and universal human significance.

That personal experience is of a career which has a certain circularly to it. This lecture is not going to be an ‘apologia pro vita sua’. But I do want to pick out one connecting thread in my life which leads me into my main theme. I started as a civil servant in what is now DFID, before moving to McKinsey (where for much of the time I found myself working on projects involving developing economies) and thence to HSBC in Hong Kong. The bank was a bank for the emerging markets – which in so many ways it still is at its core. I expected to spend perhaps three or four years there: it turned out to be twenty eight. And I certainly did not expect that period to be followed by three years as Trade Minister – where for obvious reasons much of the focus was on the opportunities in the emerging markets, and where for me the climax was my very last week in office, which I spent at the World Trade Organisation meeting in December 2013. That was when the world came together amidst long and tense negotiations (and well after midnight) on a Trade Facilitation deal – which eventually got launched several months later – and which over the next decade should make a real difference to some of the poorest countries on the planet.

The connecting thread in all this has been a continuing interest in emerging markets (a term which I have always disliked, however, because of the way it reduces the complex process of social and economic modernisation to a market phenomenon). I still find that interest as strong as ever. Last week I was in Burma, meeting with microfinance workers and some of their clients – seeing with my own eyes how very small loans enabled people to start and grow businesses, to create jobs and – in their minds the biggest prize of all – to get their children educated for a better future than the one they had had.

Both the City’s practitioners and its detractors might well think such people and their needs are simply irrelevant to the behemoth of the international financial markets. But they would be wrong, of course. It may be a long thread, but it’s a connecting thread nevertheless. From the smallest loan in a rural community in Burma, through the more complex financial demands of the newly urbanised middle classes of the emerging world, through the new trading and investment powerhouses of Asia, to the older, more staid world of developed Europe – economies and societies are becoming more intertwined, interacting more and more, and their financial needs are more and more interconnected. From the Burmese with their new mobile phones to London traders with all appliances and means to boot, we learn the truth of an old saying: ‘no man (no person, for this day and age) is an island’…And – to shift the metaphor – the financial markets are more and more like a single ocean, with shallows and inlets but where nowhere is ultimately separate from anywhere else, and where the tides and storms have their impact everywhere.

Hence, the question of purpose and of value in the City has nothing less than a global human significance. This is the theme I want to address. This lecture is not about what might be called the technical lessons of the financial crisis – the new regulatory environment, new standards on capital adequacy, new rules on bonus structures, ring fencing, and so on – important though those unquestionably are. Rather, I want to look at the broader philosophical – one might even say, theological – issues posed by the phenomenon of the financial markets. As I hope will become clear, so far from this being just an academic exercise, the questions have deep and direct relevance to us all (and not just to any bankers here present).

I start with the fact – which has been repeated often enough that it risks becoming a cliche – that there has been a huge breakdown of trust in what the financial markets do. We need to note three aspects of this failure of trust, though: that it did not start with the financial and economic crisis; that it is not confined to banks; and indeed, that it is part of a much more pervasive trend of social mistrust.

First, the trend of treating all institutions of society with increasing suspicion probably dates from the late 1960s onwards. The turbulence of that era – the one when the postwar generation found its voice – had many proximate causes, which some of us are old enough to remember: the Vietnam war, the Prague spring, the tensions of mutually assured destruction, the pains of decolonisation and apartheid, the civil rights movement, and student demonstrations all over the Western world. It was a time which saw the media develop a significantly more aggressive, more irreverent voice in its dealings with those in power or authority. It was the time when the demos found its voice – a voice which it has never lost since.

Since then, survey after survey has shown a decline in public trust in institutions at large. The financial and economic crisis certainly put the banks in a very uncomfortable spotlight. But in fact the loss of trust is much more systemic than that. It is business as a whole – particularly big business – which has lost respect and trust. Indeed, not only business but all sorts of other institutions: politicians, the police, not least the media themselves, to name but a few. It also goes with a declining tendency to ‘join up’. All kinds of traditional institution have seen their memberships fall: political parties, churches, the scout and guide movement, Masonic lodges and Rotary Clubs, and so on. Society is becoming more questioning, more suspicious, more atomised.

And in particular, it has become sceptical – to say the least – about business and the capitalist system. To anyone who remembers the new dawn a quarter of a century ago – when the major ideological competitor of capitalism finally collapsed – when Francis Fukuyama wrote his famous essay entitled ‘The End of History?’ – this can only seem ironic. Twenty five years of liberal market capitalism have seen massive gains in prosperity throughout much of the world – as well as the arrival of the digital age in which global connectivity at zero marginal cost and social networking is opening up unprecedented opportunities for individual and social development. Yet capitalism, together with the financial system that underpins it, is in the dock as it has not been for decades.

So what is up?

Well, we know that public disquiet with business and with the financial sector in particular has many roots: the destructive financial engineering of the greedy days before the bubble burst in 2007/8; the sense that in too many sectors the market works to the detriment of the weak – small business, for example, either as competitor or as supplier. There is also a widespread public perception that some multinational businesses and some wealthy individuals play fast and loose with the tax rules, so as to squirrel away income into low tax jurisdictions and avoid making their rightful contribution to the public well being.

And last, but certainly not least, there is a general angst about the rising inequality of modern society. Like all of these other issues in the public mind, this is not a peculiarly British problem. The extent of that angst internationally is revealed by the fact that a previously little known professional economist could write an 800 page treatise on this subject, full of tables, graphs and mathematics, which has become an international best seller. Thomas Piketty argues that rising inequality is inherent in the way capitalism operates; and he ends with a policy recommendation for corrective redistributive taxation at the international level, even whilst recognising that it has no chance of implementation.

Piketty’s thesis has been picked over extensively – and will no doubt continue to be the subject of detailed academic debate. But two things are certain: first, that the degree of inequality has indeed risen significantly since the 1970s in virtually all developed and emerging societies. Secondly, he caught the mood of the times. Many people are deeply uncomfortable with what this inequality means for human and social well being.

Beneath this angst, I would suggest, lies something even deeper: the fear that urbanisation and globalisation have ushered in a transactional society where price is the only measure of value – where relationships and values are viable only to the extent that they add value – where all that matters in human and social relationships can be boiled down into some sort of contract of exchange. The financial markets are inevitably seen as the epitome of all this, because the contracts which underpin a transactional society always seem potentially to have a monetary value. And because the financial markets are intrinsically global, they are where all the cultures of the world meet in a sort of global bazaar – which is perhaps what London, above all cities, has become.

The truth is of course that many enjoy the excitement of the global bazaar: in so many ways it is liberating and full of promise. Not for nothing is it the case that societies which modernise are societies which urbanise. There are no exceptions to this rule. The chances are that those Burmese families I met will be urban dwellers within just a few years. And societies which urbanise, it seems, are societies which become more and more transactional.

But down the ages, people have also worried about what life in the markets does to human beings. As consumers our choices seem limitless but turn out to be strangely unsatisfying. Where is real value to be found in the bazaar? And now the bazaar is going virtual and global, in a world of limitless and instantaneous information. But how much of all that information amounts to more than noise? What is its real value?

These are not new questions. ‘Why spend your money on that which is not bread, and your labour on that which does not satisfy?’ So said a voice from two and a half millennia ago, questioning even then the purpose of the bazaar. Or from two hundred years ago: ‘The world is too much with us; late and soon, getting and spending, we lay waste our powers’. And a much more recent voice (from the 1930s), but still well before the Internet age: ‘where is the life we have lost in living? Where is the wisdom we have lost in knowledge? Where is the knowledge we have lost in information?’ Isaiah, Wordsworth and T.S.Eliot respectively. None of these voices has lost itsresonance with the passing years. All remind us of the need to find the common human values, without which the global bazaar (and the financial markets at its core) will never become civilised.

Nowadays, the challenge of purpose and value is more and more widely accepted. At the practical level, business schools offer courses in business ethics and corporate culture as mandatory parts of their management programmes. And there are few public companies today which do not have some form of corporate mission and responsibility statement as part of their self-understanding. Several decades ago, Milton Friedman argued that the business of business was to make profits – all other social objectives were the responsibility of the state or of civil society. Few these days would argue that this was an adequate definition of the role of business. Most would accept that the stakeholders of business – including many shareholders, as well as employees, clients and the wider public – have expectations of business which go well beyond simple profit maximisation within the law.

But in that case,what is the relationship between profit and corporate social responsibility? I have always believed that the responsibility of boards is for the long term sustainable growth of the company, and that achieving this requires not just a profitable business model but proactive employee engagement, and a responsiveness to both clients and community. Practical wisdom dictates that a strong culture of values is therefore essential to sustainable value maximisation. Hence, so long as the focus is on the long term, values are not merely compatible with value maximisation: they are essential to it.

But I confess a certain unease about this argument as it stands. Not that it is wrong – and later I will come back to its relevance for day-to-day business. But it does sidestep an issue which humanity needs to stare in the face as it stands on the threshold of the new global era. If values are essential to value, not just in business but in public life generally, where do we find the values that are common – that are fundamental and universal – in a connected and transactional urban world? And how do we nurture them?

Much of the time, this is a question we avoid. It can seem remote and academic – the stuff of philosophical dispute, not of daily life. Firstly, it can seem perplexing, because down the ages we know how our understanding of what is right and wrong has shifted (at the time Wordsworth was writing, Wilberforce and others had to campaign long and hard for the abolition of the slave trade). It can, secondly, seem sensitive because we are unsure whether cultural diversity entails diversity in values. And at the deepest level, we fear that moral absolutes beg the question about the source of their absoluteness. How exactly can a modern society of all faiths and none unite behind a set of common absolute values? Or – to put the question another way – what is the identity of a modern society, what is the moral basis for that identity, and is there – or should there be – a universal answer to the question?

Different answers can be given to this profoundly important question, of course. To take just one example, Stephen Pinker’s very successful book ‘The Better Angels of our Nature’ argues with a well researched thoroughness that humanity’s lot is gradually improving on almost any measure, and the long term trends have been favourable for a long period of history. He argues for the fundamental role of the European enlightenment in unleashing a humanist consciousness which is gradually transforming the entire global consciousness. I am not sure: I think he underplays both the origins and the imperfections of the European enlightenment, as well as underestimating the rather different perspectives of Asian cultures which are going to have a greater impact on the global consciousness than Europeans may find it comfortable to acknowledge.

But my main point here is simply to stress the profound importance of the question. We do not debate it enough, and we fail to do so at our long term peril. It is a key task for both academics and practitioners in our era.

In the meantime, however, in the real world of commerce and the markets we have to make our decisions on a daily basis and in contexts which are fraught with uncertainties and imperfections. Much of life – and certainly much of life in the markets – is lived in shades of grey rather than in black and white. This means that we inevitably find ourselves having to make do (a) with some necessary working assumptions and (b) with what some have called ‘middle axioms’ as guiding principles. This latter term comes from a theological context: in the 1940s, when we had an Archbishop of Canterbury every bit as engaged in debate about the direction of society as we have in Justin Welby today, they sought to identify bridging themes – or ‘middle axioms’ – which could be derived from and consistent with fundamental principles of universal and enduring validity (above all, the law of love which should ideally govern all human relationships), but which could set a meaningful practical context for specific policies or prescriptions. These ‘middle axioms’ did not necessarily have universal validity: they were in effect provisional definitions of the type of behaviour required in the circumstances of the time.

And using this framework, I would suggest that we need to make use of one necessary working assumption and two ‘middle axioms’ about the markets.

The necessary assumption concerns the markets themselves. It is itself clearly provisional: we have been forced to modify it in recent years. Back in the heady years after 1989, there was a prevailing market fundamentalism which held that the markets are largely self-regulating, self-stabilising, efficient allocators of capital which – if largely left to themselves – would deliver rising prosperity to all. We now know this to be wrong, having learnt (or relearnt) some painful lessons about the potential destructiveness of the markets. But we also know there is no real alternative to making the markets work better: that is, after all, the stark lesson of the twentieth century. There is no credible alternative system available: there is no revolution to be had. At their best the markets are an indispensable servant of human welfare, even if at their worst they are a terrible master. In recent decades liberal market capitalism has created a global middle class in the hundreds of millions – perhaps already even in the billions. This is hardly the result that Marx imagined.

Which means that we have to learn the policy lessons, to create the right regulatory environment and corporate business cultures, on the basis of the axiom that economic and social development needs to work with the grain of the markets. Only thus will that global transformation continue to deliver such unprecedented benefits to humanity.

And a second middle axiom is surely that we have to discover an ethic of commerce which works, in the sense that it is utilitarian, effective and therefore commands widespread support – whether or not we can discover a universally agreed answer to the fundamental question about absolute values and identity. This is in practice the kind of ethic which business schools aim to teach: these are the kinds of values which company boards strive more or less successfully to articulate and implement.

A powerful way of focussing this is through a broad and holistic understanding of a company’s brand. A concept which began life as a marketing tool has broadened out in recent years. We now understand that the brand is about something far more than market positioning, marketing ‘image’ and a memorable logo. The brand is about what the company represents. It sums up its position with its shareholders, its employees, its clients, and in the community. It sums up its position, in short, in society. It is a prism through which any strategically significant action or proposal (acquisitions, for example) should be viewed. The brand needs steady nurturing over time. It does not do well in a short termist climate.

Not that every shareholder cares about the long term of course. The average shareholding has a life of less than a year. But the responsibility of the board is surely clear, and so therefore is the need to have robust and courageous conversations with those who cannot see the connexion between value and values – who, to put it another way, cannot see the connexion between shareholder value and the value of the brand, understood in the sense I have been talking about.

This is a key challenge for boards – to ensure that the company’s purpose and responsibilities are clearly articulated and understood throughout the organisation – and indeed, not merely understood, but accepted and lived throughout the organisation. Indeed, surely the leadership required comes not only from the top but all the way through the system. After all, even the person with no one reporting to them on any organisation chart has the opportunity to influence others – colleagues, clients – for good or for ill. This is, if you will, the cultural equivalent of the famous story of the cleaner at NASA who, when asked what his job was, replied that he was helping put someone on the moon. So in an important sense the company should ideally expect to find cultural leadership exercised by all colleagues throughout the system. In practice, of course, the ideal will only ever be imperfectly realised: but living with ideals always entails the risk of failure.

Can all this be measured, monitored and managed? Yes, at least up to a point, as part of the employee engagement surveys that more and more companies now undertake. Yes, as part of the regular recruitment programmes of large organisations – which should surely not focus just on skills and aptitudes but also on the values that recruits are likely to bring to the role. And yes, there are procedural methods and remuneration practices which can help to reinforce the kind of behaviour which nurtures the culture and the brand.

But we need also to remember a fundamental truth about corporate culture. It can’t be mechanised: it can’t be performed. It has to be lived. Which means it has to be personal. Particularly for the senior leadership – the board and the top management. If for them it is nothing more than rhetoric, this will become obvious to those who hear and watch them. Even if everyone knows the company’s mission statement off by heart, that’s not the same as living by it. In fact, corporate mission statements with right-sounding language about corporate social responsibility are probably nowadays as common as politicians’ promises of more for less at elections. So does that simply mean that we should ignore the fine words, and just concentrate on getting the incentives right?

Getting the incentives right is certainly necessary – and difficult, and sensitive, as chairs of board remuneration committees – perhaps one of the least sought-after board positions nowadays – are fully aware. Yet it is equally plainly not sufficient – first, because it is always a blunt instrument, as, for example, any investment banking manager knows who seeks to manage expectations in the context of a savagely competitive industry. And secondly, and still more fundamentally, the more an organisation is run primarily on incentives, the less – almost by definition – it can have a true corporate identity – except in the minimal sense that it becomes little more than a sort of market place, where the relationship between company and employee is nothing more than a contract, a transaction.

So can nurturing the corporate culture be shown to pay? Now, there’s a question. At one level, the answer is surely: yes. Isn’t that what the whole experience of the last few years – the financial crisis, the corporate comeuppances, the breakdown of public trust – tells us? But there is an important subtlety about this. The 19th century Anglican cleric Richard Whately famously commented that he who acts on the principle that honesty is the best policy is not an honest man. Something similar is true of corporate culture. At the end of the day, we don’t – or shouldn’t – aspire to good values, to a strong corporate culture, because they pay, but because they are right. They would still be right even if they could never be shown to have a beneficial impact on the business. They would still be right even if they failed to gain public trust.

In any event, corporate culture alone is not the panacea for regaining public trust in the markets. There is also the small matter of remuneration. What do we say – in times troubled by inequality – about those whom the market rewards with income and wealth way beyond any conceivable definition of need in a modern society? Since this is a church and this is Lent, we can hardly ignore the challenge. ‘It is easier for a camel to pass through a needle’s eye than for a rich person to enter the Kingdom.’ And plenty more in much the same vein.

This is not the occasion for a detailed discussion of why the market rewards those who work in it so well, or of why – in general – business remuneration has grown so much faster than rewards in society at large. Suffice it to say that this whole question is profoundly uncomfortable and difficult to deal with. How can anyone defend the difference between what a financial market professional expects to be paid and the salary of, say, the head of an inner city school? Yet the markets are international and their competitive dynamics are hard to ignore. Therein lies their moral ambiguity.

What we can expect is that those in this position should recognise what might be called an individual social responsibility in parallel to the corporate social responsibility I have been talking about. How that is discharged is arguably a personal challenge: but it surely should be costly. Biblical tradition requires tithing: yet for many of us, tithing is not nearly enough. Again, it would take me too long to elaborate on all the implications of this. And perhaps they can only in the end be faced personally anyway. Suffice it to say, however, that rising to the challenge brings with it an often unexpected bonus (and this time, not a material one). Because we discover – in words attributed to St Francis, a figure far distant from the materialistic whirl of the markets – that in giving we receive. And what we receive makes us whole – more so than we may have even dared to hope in the secret recesses of our souls.

I want to make one final point – and it is one that I make from personal experience – experience which is, I suspect, shared by all of us one way or another. And that is that sooner or later, something will go wrong. It’s a truth of life in general of course – and it’s a truth of business life in particular. No matter how diligently, for example, a board works to ensure a long term focus and a clear commitment to corporate social responsibility and the common good – no matter how much effort they put into nurturing a strong corporate culture – something goes wrong. Something happens which is painful and dismaying. It can be very public, too. What then? Is the whole thing exposed as a charade? Is it just another piece of grist to the mill of distrust and cynicism?

No. In fact, you only really know the mettle of a brand – in that broad sense in which I have been using that term – when you see how a company reacts to something that has gone wrong. Recognition, remorse, relearning and renewal are always possible. The right kind of brand – the real evidence of corporate social responsibility – is where there is no denial or downplaying, but a determined effort to work through the full implications for the brand of what has gone wrong. No one gets everything right all of the time. Learning from experience, including bad experience, including the experience of having gone wrong – both collectively and individually – is an essential ingredient in all life, and that goes for business life too.

In fact, I would argue that the time for remorse is probably never over. But again, since this is a church and this is Lent, I can’t forbear to cite the stories of failures that lead to renewal: Peter whose courage failed him at the decisive moment; the prodigal son who squanders his inheritance but whose humiliated return is celebrated so generously by his waiting father; or the tax collector Zacchaeus, a man with a profession even more unpopular then than bankers are now – a man who is transformed by his encounter with the truth about himself – a man who finds joy and integrity in his renewal, perhaps for the first time in his life – and a man who is, crucially, not told to give up his profession (which would perhaps have been the all too easy populist response to his moral failings).

Bishop Stephen asked me to talk on the theme of belief in the City. I hope it is clear from all I have said that I believe profoundly in the City – in the role of the markets in creating human welfare. But I hope it also clear that I recognise the dilemmas – because the real world of the markets is shot through with imperfections that we will never completely expunge – because we as individuals are similarly prone to failure – because the dilemmas and challenges are real, significant and hard, if not impossible, to avoid. And finally, I hope it is clear that I believe that we have no alternative but to take the moral risk of engagement in that ambiguous and imperfect world, because so much is at stake for development, both social and individual, around the world.

Thank you.