Heather Stewart: Mixing money with morality

Much of what the City of London's finest and best-paid minds spent the past 20 years doing was, it turns out, "socially useless," according to Adair Turner, the man with the job of banging heads together in London's financial district, often called the City, and preventing another credit crunch.

To many living beyond the glamour of the City, that may seem obvious, but Turner's strongly worded intervention last week was a welcome first step in a much-needed debate about what sort of economy - and society - we want.

Asking questions like this first, instead of leaving them to be decided by millions of tiny decisions in the market, is one lesson we should bring to the current crisis from the work of John Maynard Keynes, according to a new book, Keynes, the Return of the Master, by Robert Skidelsky, author of the authoritative biography of the 20th century's greatest economist.

Skidelsky argues forcefully for the timely reappearance of his hero on the intellectual scene. With "fiscal stimulus", as it is now known, flavour of the month on both sides of the Atlantic, Keynes is already having a great credit crunch.

As Skidelsky points out, he was also rightly sceptical of over-confident economic modellers and the mathematisation of his subject - two of the faults that arguably helped get us into this mess.

However, Skidelsky also makes a determined foray into territory that was familiar to Keynes but is now considered irrelevant, perhaps even embarrassing, by many contemporary economists: ethics and morality.

Keynes would have been unlikely to join the orgy of banker-bashing that has consumed politicians and commentators, but might have had much to say about the direction of a society that made a series of conscious decisions, beginning under Margaret Thatcher, but enthusiastically picked up by Tony Blair and Gordon Brown, to unleash the money-makers - allegedly to the benefit of the rest of us - with scant consideration of the consequences.

Skidelsky shrewdly explores the tension, never satisfactorily resolved by Keynes himself, between the economist's belief that capitalism and the profit motive were the best and fastest way to accumulate sufficient wealth to create a society whose citizens could experience more of the good things in life, and his disdain for "love of money" - miserliness, or the pursuit of riches for their own sake.

When money-making is regarded as a means, not an end, there is something topsy-turvy about the past decade, when climbing the "property ladder" and safeguarding the spoils from the tax man became the subjects of endless TV shows and a million conversations.

Skidelsky quotes the British Chancellor (finance minister) Alistair Darling's observation that "the key thing that went wrong was that a culture was allowed to develop over the last 15 years or so where the relationship between what people did and what they got went way out of alignment, especially at the top end".

As Skidelsky points, out, the Chancellor is clearly hinting that something is wrong with the morals of contemporary Britain - but as a politician in an age when public preaching has long gone out of fashion, he is reluctant to say so.

"Being an intellectual, Keynes had no such inhibition. He was a philosopher and moralist as well as an economist. And he never ceased to question the purposes of economic activity," Skidelsky says.

Keynes's belief, as summarised by Skidelsky, was that, "to make the world ethically better was the only justifiable purpose of economic striving", a notion that would seem sentimental at best to the average hard-nosed economist today.

In the view of Keynes and his fellow Bloomsberries, it was not for economics - or markets - to determine what should constitute the "good life": how people should divide their time between work and leisure; what activities they should pursue; how they should treat each other.

But ethics and morality have retreated to the edges of public debate, and economic thinking - the market as the impartial aggregator of millions of individual wants - has surged into the vacuum. After the "end of ideology" that followed the collapse of communism, freedom came to mean economic liberation - American jeans and high-tech gadgets.

Fuzzy and impossible-to-model concepts such as "fairness" have been driven out of economics, which has become technocratic, mathematical and pseudo-scientific. At the same time, market thinking has expanded its reach deep into political questions.

Financial free-for-all in the City, aided and abetted by light touch regulation and the lionising of the money men, has only been the most egregious example of this marketisation of public policy.

From the idea that creating a quasi-market among schools will make them educate kids better, to the unilateral "liberalisation" of UK energy markets, leaving bill-payers hostage to the state-owned utilities of continental Europe, to the let-the-market-provide approach to pension provision that has left many millions of retirees struggling to make ends meet, market thinking has swept in across the board.

As yet, there has been little acknowledgment from government or opposition - let alone academic economists - that the values that underlay the past few years, as well as the theories, were catastrophically awry.

In that context, Turner's argument, in Prospect magazine, that the City had become "swollen," sucking in talented youngsters, and at least some of the recent "innovations" in finance of which Britain was so proud were in fact "socially useless," was refreshing.

It's about time our politicians told us how they will mould high finance and the economy to benefit of the rest of us. It's time to re-moralise economics.

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