Markets are not moral. They are, in the end, nothing more than a mechanism to provide prices. Adam Smith’s famous claim that “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest” remains pivotal: nothing beats the market economy as a method of harnessing self-interest for the common good. To this way of thinking, let businessmen and financiers be cut-throat; and then let government or charities step in to smooth the rough edges of the world they form. Be amoral at work and then pursue moral ends efficiently. This isn’t a right-wing belief either: Bob Reich, a left-wing economist and former US labour secretary, has been shouting from the rooftops for a while that attempts to moderate this model — through pushing “corporate social responsibility”, for example — are doomed to failure.

Markets are not moral. But morality can affect markets. That’s what people are trying to get at today: the lack of some common ethical values can actually harm market efficiency. It is something that’s always been understood, actually; for example, a shared morality can build the trust that’s an essential lubricant for market economies. (Steve Knack at the World Bank believes that it is so essential to credit and repayment that differing levels of trust “explain basically all the difference between the per capita income of the US and Somalia”.) The reason microcredit works is through making debt and credit personal again, by reintroducing shame and honour as levers. As economist Paul Seabright says, the point is that well-designed systems can “make a little bit of public spirit, altruism or professionalism go a long way”. But the systems better be well-designed, and the little bit of professionalism better exist.

... contd.