Markets and Morality

England’s Prime Minister, Gordon Brown, offers this rather Catholic insight: markets need morality. His point is a good one. People were not frustrated this past year with the fact that the markets crumbled. They were frustrated because the crumbling was caused by moral failure. Questionable practices led to questionable loans, which in turn led to failed mortgages and a failed system. There is a moral dimension to the free market that we must recover in part to turn it around.

Brown cites Adam Smith, who

recognised that the invisible hand of the market had to be accompanied by the helping hand of society. He argued that the flourishing of moral sentiments comes before – and is the foundation of – the wealth of nations. In other words, markets need morals.

Local society and the global marketplace are connected in a synergistic way. The morals required to guide the market cannot be developed on a global scale. They must begin in each person and extend through the family, community, city, state, and to the larger society. That is the principle of subsidiarity–beginning at home.

Brown recognizes the importance of beginning, well, at the beginning:

As we have discovered to our cost, without values to guide them, free markets reduce all relationships to transactions, all motivations to self-interest. So, unbridled and untrammelled, they become the enemy of the good society. The truth is that the virtues that make society flourish – hard work, taking responsibility, being honest, enterprising and fair – come not from market forces but from our hearts. And we should be optimistic, for they are nurtured every day in families and schools, and in businesses and communities.

The loss of focus on the individual in market transactions is perhaps just a symptom of our broader forgetfulness of the dignity of the human person. The market cannot change the morality of society, but a change in society’s morals just may change the market.

And the solution, Brown implies, is not to be found in the government’s paying more people to work in government jobs. The real change comes when we motivate people to develop their own unique talents and skills and bring a greater variety to society and the marketplace. In so doing, we may effect a more permanent change than a passing stimulus.

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