Edited by Cor van Beuningen and Kees Buitendijk
Over the past fifty years, (financial) capitalism has brought about an enormous growth in wealth. Millions around the world have been lifted out of poverty. However, the downsides of the present global economic constitution are rapidly becoming evident as well. Rising inequality, soaring debt levels, and repeated cycles of boom and bust have proven to be some of its key characteristics. After the 2008 crisis brought the financial system to the brink of collapse, new regulations, stricter supervision, higher capital requirements, and ethical codes were introduced to the sector. Today we find ourselves in the middle of another economic boom. Yet one pressing question remains: has anything changed? Have the (necessary) repairs fixed the flaws in the system? Or do we require even more fundamental reforms?
The volume Finance and the Common Good builds on the observation that society has co-evolved with the financial sector. We cannot simply claim that 'finance' was the sole instigator of the 2008 crisis. Society itself has become financialized; the process of replacing relations, structures of trust and reciprocity, by anonymous and systemic transactions. The volume poses vital questions with regard to this societal development. How did this happen? And more importantly: is change possible? If yes, how? Finance and the Common Good contains 21 essays on these themes.
- The initiative for this book was taken by the Socires (Society & Responsibility) foundation, an independent Dutch think tank engaged with questions at the interface of culture and society.
- The book reflects the findings of their Ethics and Finance program, which took place between 2015 and 2018.
- This program is now continued under the title Finance and the Common Good.
Contents of Finance and the Common Good
The book consists of four parts, which are preceded by an essay by former President of Socires, Jos van Gennip. He introduces the theme of the book and explains the ‘Socires approach’, in which he also clarifies why it is that Socires believes it is able to make a sensible contribution to the current debate on the financial sector.
Part 1 - Finance and Financialisation
Then, in Part 1, Finance and Financialisation, five authors investigate what financialisation is all about and how it impacts the financial sector in relationship to society and the state. Former Dutch Minister of Finance Wouter Bos looks back at the financial crisis of 2008 and its aftermath, concluding with a trenchant question: do we really need another crisis to finally learn our lessons? Professor Dirk Bezemer describes the socio-economic history of financialisation and the disastrous effects this process has had. He shows us how everything of real value, by financialisation, has actually become, paradoxically, financially less valuable. Professor Eelke de Jong continues this line of thought and adds: a truly honest and open dialogue on financialisation is imperative, especially in politics. As political unwillingness to intervene was one of the causes for the previous crisis, politicians should now draw their conclusions and act to prevent another one. Independent advisor Roland Kupers connects ideas about financialisation and the financial crisis to systems- and complexity theory. He considers the possibilities such theories offer with regards to restructuring our economic system. He believes it is about time that such a reconstruction of the financial sector takes place. Professor Govert Buijs argues that the failure of institutional order – by which he explicitly refers to the financial sector – is at the origin of populism and political unrest. He argues that restoring the ‘economic trinity’ is the first step towards a revitalisation of relationships within society.
Part 2 - Finance and Relations
The central question of Part 2, Finance and Relations, is whether relationships can be placed at the heart of the financial sector. Professor Lans Bovenberg argues that things already go wrong in secondary-level education. If we teach the youth about a world of markets and competition, it should be no surprise that when they reach adulthood, they will interact with the world according to these principles. Prof. Bovenberg suggests that we approach economics and the financial sector from a relational perspective. Cor van Beuningen and Kees Buitendijk, of the Socires’ Finance and the Common Good program, reflect on the phenomenon of financialisation with relation to culture and society. They also discuss the various excesses of financialisation and the possible ways of inverting negative developments: to move toward Finance for the Common Good. Professor Johan Graafland discusses the effects of relational thinking on our economy and on our society, asking whether market and morals, or the economy and relationships, are compatible in the first place. Christiaan Vos, philosopher and fiscal-economist, addresses a similar question. He argues that the role of ethics in society is to prevent all kinds of harm, but in finance ethical considerations seems to be no longer key. To prevent immoral outcomes of business decisions we need to re-enable employees to bring morality to the work floor.
Part 3 - Relational Finance: Regulation, Policies
In Part 3, Relational Finance: Regulation, Policies, Practice, we discuss the implications of relational finance, with particular focus on the way it would take shape in various domains of finance. Theodor Kockelkoren, former member of the board of directors of the Dutch Authority for Financial Markets (AFM), observes a collective obsession with supervision and regulation, which ultimately has the paradoxical effect of undermining morality. He argues for value-driven supervision. Professor Sylvester Eijffinger looks back on the work of the Maas Committee back in 2009, asking which changes have (not) taken place in the financial sector as a result of its findings. According to him, solid, experienced professionals with a strong backbone are needed to curb the risk appetite inherent to banking. Carla Moonen, former Chair of the Pension Fund for Care and Wellbeing (Pensioenfonds Zorg en Welzijn), reflects on the implications of Finance for the Common Good for large pension funds. She believes it is time for a fundamental reorientation with regard to how pension savings are invested. Director of the Belgian National Bank, and former Minister of Finance and vice-Prime Minister of Belgium, Steven Vanackere offers us a broad view on the question of morality in the modern age. He suggests that short-termism is a persistent trait of our culture. Acknowledging that regulation can have many adverse effects, he nevertheless warns for the disastrous effects of a ‘regulatory race to the bottom’ at the international level.
Part 4 - Relational Finance in the World of Tomorrow
In Part 4, Relational Finance in the World of Tomorrow, we consider the future of finance: what lies ahead? Maarten Biermans, responsible for sustainable capital markets at Rabobank, connects the question of ethics to the challenges FinTech poses for the financial sector. His message: we must think about ethical dilemmas of FinTech now, before reality overtakes us. Haroon Sheikh, senior researcher at the Dutch Scientific Council for Government Policy (WRR), discusses the future of the financial sector along two lines: geopolitics and FinTech, and asks: are we ready for the considerable changes that are going to occur in these domains? Former President of the European Council Count Herman Van Rompuy considers the implications of the financial crisis and the rise of populism for Europe and the European Union. He explains the necessity of a new agenda for the European Union. Finally, former Prime Minister of the Netherlands Professor Jan Peter Balkenende considers a number of overarching questions concerning the global economy and society. He reviews the answers that have been given to these questions in the past, as well as those that are currently being developed. Finally, he addresses the long road that lies ahead. Rens van Tilburg, director of the Sustainable Finance Lab – Socires’ partner organization for a 2019-2021 program (not coincidentally) titled ‘Finance and the Common Good’ - concludes this volume. He explores the question: why is there need for a Rhinelandic alternative to the current financial constitution? And how do we bring this kind of systemic change about? In the concluding remarks to the book, Cor van Beuningen and Kees Buitendijk attempt to unite the various strands of thought that are presented in the essays. How can we make the transition from the conclusions drawn in this book towards a productive dialogue, one that can truly contribute to a different ethics of the financial sector? Is there any chance of a Rhineland arrangement of relational finance?
Table of Contents of Finance and the Common Good
- Recommendation (Wopke Hoekstra)
- Introduction – Finance and the Common Good (Kees Buitendijk and Cor van Beuningen)
- The Socires Approach - Finance, State, Society (Jos van Gennip)
Part 1: Finance and Financialisation
- Looking Back at the Banking Crisis: Did We Learn Anything? (Wouter Bos)
- Financialisation: on Price, Value, Rules and Behaviour (Dirk Bezemer)
- Why an Open Dialogue is Needed (Eelke de Jong)
- Complexity, Culture, and Bank Privatisations (Roland Kupers)
- On the Economic Trinity (Govert Buijs)
Part 2: Finance and Relations
- Finance: A Relational Perspective (Lans Bovenberg)
- It’s All About Us (Cor van Beuningen and Kees Buitendijk)
- Is Relational Thinking Wishful Thinking? (Johan Graafland)
- Will Ethics Ever Trump Finance? (Christiaan Vos)
Part 3: Relational Finance: Regulation, Policies, Practice
- Reconnecting Finance and Society - About Rules and Purpose (Theodor Kockelkoren)
- Restoring Trust (Sylvester Eijffinger)
- Pension Funds for the Common Good (Carla Moonen)
- A Broad Approach to Finance and the Common Good (Steven Vanackere)
Part 4: Relational Finance in the World of Tomorrow
- Ethics of FinTech: The Need for a Normative Debate Before the Computer Says ‘No’
- A European Response to Digitalisation and Globalisation (Haroon Sheikh)
- Finance, State, and Society in Europe (Herman Van Rompuy)
- The Global Agenda, the New Economy, and Integrity: Towards a Sustainable Financial Sector (Jan Peter Balkenende)
- Fintech and the Common Good (Rens van Tilburg)
- Concluding remarks (Kees Buitendijk & Cor van Beuningen)