David Cameron must tackle moral hazard

It is widely expected that the Prime Minister is going to start calling for a more moral form of capitalism. I have a simple test of whether a politician is trying to debate, or avoid, tough policy questions – I ask myself whether anybody would agree with the opposite of what the politician is calling for.

During the 1997 election campaign, for example, the Labour Party called for an 'integrated transport system'. Clearly nobody wanted the opposite – a dis-integrated transport system. What the Labour Party actually wanted was a state-planned transport system because they did not believe that the market would bring about a more integrated system. But it was not convenient for Labour to talk about specifics.

So, who is for a more immoral form of capitalism? Since no party would make that its campaign slogan, the harder question is what detailed policies does David Cameron want to put behind his empty slogan? Does he believe that morality within the market system can be improved by state regulation? Does he simply want people to look at their own consciences and freely choose a better way of life? Or does he, like some other politicians who call for a more moral capitalism, want a market system that punishes people who are reckless with and lose large amounts of other people’s money? These are the substantive policy issues on which the Prime Minister needs to reveal his position.

 

Read the full article in City A.M.

With respect to Justice and Peace’s call for a global regulator and a global bailout, and the Prime Minister’s cognitive dissonance in regard to moral hazard, perhaps Benedict’s own Caritas in Veritate can point them in the right direction: ‘the Church searches for truth, proclaims it tirelessly and recognizes it wherever it is manifested. This mission of truth is something that the Church can never renounce (§9).’ The clerics of early mediaeval scholasticism and the later School of Salamanca (both precursors to the Austrian School) knew the moral errors of debasing the currency and of interfering in the free exchange of the marketplace; they too are among the patrimony of the ‘Church’s social doctrine [which] illuminates with an unchanging light the new problems that are constantly emerging (§12).’

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