The Centre for Enterprise, Markets & Ethics (CEME) was delighted to hold a lecture and roundtable discussion on the topic of “Capital Markets for the Good of Society”. Our distinguished speaker and author was Dr Lyndon Drake.
“Capital Markets for the Good of Society” is available to order as a publication here.
Tuesday 14th November 2017 – London Stock Exchange
Welcome from Lord Griffiths of Fforestfach:
A divide exists between theologians and academic economists, as well as financial practitioners. Lyndon Drake has known both worlds, having worked formerly as a trader in bonds and derivatives, and now studying for a PhD in Theology.
Presentation from Dr Lyndon Drake:
The financial sector has a very poor reputation, accused of ‘appropriating wealth created elsewhere in the economy’. Financial investors are treated with ‘widespread suspicion’, with many believing that their work carries ‘little benefit to the population as a whole’. How then can we improve this reputation and build socially-useful banking?
The issue is that we must restore trust with the public, the trust which was lost during the  financial crisis. Moreover, increasing numbers of people today favour a move away from a market economy; there is a deepening mistrust of capitalism and growing interest in socialism. In light of this change in public opinion, how can we motivate those in a dominant position within the financial markets to behave well and so benefit the general public?
The main caveats presented by capital markets are that the products are complex; they lie beyond personal experience, implicating clients, companies and governments rather than small businesses or individuals. There is a widening gap between diurnal experience and financial rhetoric; the benefits of a capital market seem irrelevant and ephemeral to an everyday consumer.
The issue is that the benefits of a capital market, and the reasons for which we have it, are not communicated clearly enough in the public sphere; in the place of any compelling narrative, we present only abstract and disconnected ideas. We must move away from talking about the aggregate benefits of a capital market, for such an argument bears no weight when ‘my part’ of the economy is ostensibly stagnant.
Moreover, the existing Biblical theology of capital markets is technical and incidental. Most theologians have a regrettably limited background to economics (the public comments that they make are enough to demonstrate their ignorance on the subject!).
This needn’t be a ‘zero-sum game’; rather, it is possible for us to show that finance can form a part of public ‘flourishing’ which benefits most people, giving the clear majority of individual’s economic freedom and dignity.
For example, it is possible to affirm property rights with the understanding that those with rights over property should ‘give back’ by using their capital for the common good.
The aim is to assess different types of capital markets and provide a moral metric against which to judge them. One central principle is that of the historical memory which exists around helping the marginalised. Why do we have this instinct for creativity and historical memory? Christian principles are persuasive and resonate with popular, contemporary understanding.
So how do we restore public trust in and engagement with capital markets? Firstly, we must showcase the positive ways in which capital markets contribute to the common good, countering the ‘stink of scandal’ which hangs over markets as a result of all the bad news that emerges in the media. Bond markets, for example, lend to governments through pension funds and hedge funds; those who benefit from government spending are not predominantly the higher earners. Another example is how derivatives lead to more visible pricing, allowing for fairer and more transparent trading. We must do more to communicate with the public the precise value that traders provide to society, and to explain why those in dominant positions earn the salaries that they do.
Another important step is to improve company culture within the financial sector and create fair, healthy praxis. This new culture should revolve around the concept of ‘stewardship’, which removes any inherent ownership from the broker who deals in finance. Increasingly digital trading lends traders anonymity and can create the illusion that they have no ethical obligation toward a client. Instead, they should look to trade with a stranger as though trading with a family member – ‘fictive kinship’. These paired principles of ‘stewardship’ and ‘fictive kinship’ would enable financial companies to maintain a just practice and build companies which are able to benefit the economically powerless. In this way would capital markets be restored to their proper role of ensuring the flourishing of individuals from all economic and social strata.