Ethics and why the Financial Crisis is insoluble
by Andy Blunden
“The Radical Critique of Liberalism. in memory of a vision.” The first
of 2 volumes, by Toula Nicolacopoulos, published by re.press Melbourne
2008. $35 paperback.
THE FINANCIAL crisis which began in the US in October 2008 is at
bottom an ethical crisis and, if Toula Nicolacopoulos is right, it
will take a lot more than triple bottom lines to fix it.
Conventional wisdom would suggest that understanding and foreseeing
the ultimate fate of this crisis is the task of economic science, but,
at least recently, when the system began to fail, the logic of
economics was overridden by state intervention. Different governments
responded differently in 2008, not because of sectional interests, but
because of legitimate differences about what was the right thing to
do. Nor can the origins of the crisis be described in purely economic
terms; they lie in ethical problems which are matters of dispute
within the capitalist elite itself.
Although religious and other traditional ethical concepts rear their
heads from time to time, predominantly, and overwhelmingly in economic
life, the ethics of liberalism holds sway in the ruling capitalist
elite. By liberalism, I mean the ethical principles dating from
Hobbes, Locke, John Stuart Mill, and espoused nowadays by people like
John Rawls and Ronald Dworkin, as well as Milton Friedman and
Friedrich Hayek, that is to say, supporters of laissez faire in both
economics and culture.
For two hundred years, philosophers, judges and law-makers have
debated the principles of liberalism. So when the world was suddenly
teetering on the edge of an economic collapse it was not at all
obvious to world leaders what was the right thing to do and whether
anyone had done anything wrong in the first place, and if so who.
Using the writings of the foremost contemporary liberal philosophers,
Toula Nicolacopoulos has traced the logic of liberalism from inside so
to speak, not by running a counter-argument or even by playing one
liberal philosopher off against another, but taking each version of
liberalism at a time, and tracing its underlying logic to see if it
stands up in its own terms.
The crucial claim made by Nicolacopoulos is that all varieties of
liberalism rely on being able to draw a sharp line between matters
which are public (and can therefore be regulated by law) and matters
that are private (which, according to liberal philosophy, the state
must leave alone). This position all liberals share in common, and
each of the philosophers she examines handles this division into
public or private in a different way. According to Nicolacopoulos,
this public-private dichotomy is the most basic, foundational ethical
principle underlying modern capitalism.
For example, when one person buys something from another the price is
a private matter between the two parties, and should not be determined
by the state. What consenting adults do in their own bedroom is
considered private and not a matter for the law, but what an adult
does with a child is regarded as a matter of public interest.
Similarly, in most western nations, religion is a private matter, so
political leaders can practice whatever religion they like, so long as
the separation between church and state is maintained. But the
separation of public and private is problematic. If an insurance
company goes bankrupt, does the state have a right and/or duty to bail
it out? People who put their money into the company did so at their
own risk, after all. . If someone takes out a loan that they cannot
afford to repay, isn’t that a private matter? Can the person who sold
them the loan be accused of any wrongdoing? Does the state have any
right to regulate the finance industry? These are ethical questions,
and if loansharks are to be sent to prison, if people who have lost
their money in dodgy bonds are denied legal recourse to compensation,
or when companies taken into public ownership, then these are not
really economic questions, but are ethical questions.
Nicolacopoulos does not propose any alternative to the liberal
paradigm. What she does do is to follow to the end the way each
theorist has constructed the public-private distinction. In each case,
she finds that the theorist has failed to avoid falling into
contradiction. John Rawls does better than others, but even Rawls
cannot sustain the public-private dichotomy without ultimately coming
into contradiction with himself. This is not a trivial matter. The US,
for example, is a highly litigious society and nothing can pass in
that country without, at some point, being tested in the courts.
Whatever one makes of the corruption, prejudice and even the cruelty
of American capitalism, in the long run, actions have to be justified
by rational argument in a court of law. Thus, and inevitably, the
deep-seated contradictions that Nicolacopoulos has unearthed come to
light and demand resolution. Nicolacopoulos’s book is not light
reading, but it sheds an original and arguably very important light on
the unfolding crisis of capitalism in a moment when the critique of
neoliberal thinking is very much needed.