The Sunday Times February 13, 2022 25
COMMENT
Matthew Syed
Today’s masters of the universe are
still being taught ethics don’t matter
“Congratulations on the A*s,
Tom, Dick and Harry!”The expectation
of being cheated
means that
people get their
retaliation in first
Without a moral framework, economies cannot thrive. The decay we see now in the West is the result
J
ohn Major is right. Faith in
democracy and capitalism has
collapsed, populism has flared up
and autocratic regimes have been
emboldened. The problem with
his speech to the Institute for
Government on Thursday,
however, is that he sought to pin
the blame on Boris Johnson, which was
something of a stretch for a set of global
trends that predated the PM. I think we
should dig a little deeper.
And a good place to start is with an
article by Milton Friedman for The New
York Times 50 years ago, arguably the
most influential op-ed to have been
written. It was there that Friedman
made a case that might seem, to some,
common sense: that the sole
responsibility of corporations is to
maximise profits within the law. It
became known as the Friedman
doctrine.
In truth, this argument traded upon a
long tradition in economics, stretching
back to Adam Smith. In The Wealth of
Nations the Scottish sage argued that
when people act according to self-
interest, they are led “as if by an
invisible hand” towards the common
good. Firms maximise profits by making
great products, to the benefit of
consumers, which feeds back into new
investment. This was said to be the basis
for capitalism.
But this analysis missed something of
gigantic importance that will probably
have struck you already. What about
ethics? What about trust, reliability and
good faith? What about the moral
context in which productive activity
happens? It seems incredible, as I look
back, that in three years of studying
economics in the early 1990s morality
wasn’t mentioned once by myprofessors, something that troubled me
deeply. It is not unlike studying physics
without hearing about gravity.
The importance of ethical context was
already familiar to sociologists 20 years
before Friedman’s op-ed. In the 1950s an
American called Edward Banfield had
travelled to southern Italy to solve a
conundrum that had long vexed
economists: why did the area have such
low growth compared with the
prosperous north? After detailed study
he realised that it had nothing to do with
investment or capital but something
quite different: moral education.
In Italy young people were taught to
be suspicious of others and to expect
them to act in bad faith. Banfield
alluded to stories such as the one in a
novel that tells of a father putting his
six-year-old son on a high ledge. “Jump
and don’t worry: Daddy will catch you,”
the father says. When the boy jumps,
the father allows him to fall to the
ground. “Remember one thing,” he
tells his injured son. “In this life, never
trust anyone.”
In this context mutually beneficial
activity is obliterated. People don’t
want to co-operate with others, fearing
they will be swindled. They don’t trust
judges to act impartially when
enforcing contracts. Worst of all, the
expectation of being cheated means that
people get their retaliation in first,
corroding trust still further. The net
result is that social networks shrink, the
rule of law is weakened and growth
collapses — a pattern seen in southern
Italy for centuries.
In the north firms and individuals
acted according to self-interest but
within a different ethical context. A
more trusting context. A context where
selfishness was constrained by honesty,particularly in the post-Friedman age,
has been a catastrophe for the West. It
taught impressionable undergraduates
that — contrary to what they learnt from
their parents about decency and
integrity — naked self-interest was
acceptable, even obligatory. These
students would soon go on to dominate
corporate and political elites, not least,
in this country, via the study of politics,
philosophy and economics at Oxford.
It is no coincidence that capitalism
transmogrified in this period.
Corporations started to pollute at scale,
fund dubious research (think tobacco)
and boast about “ripping the eyes out
of clients”. In the build-up to the credit
crunch, ratings agencies gave triple-A
scores to junk, brokers oversold debt
and banks took calamitous risks.
Meanwhile politicians took jobs at
these companies after leaving office, a
trend that accelerated under Major.
The invisible hand became the
revolving door.
Morality, the most beautiful social
technology yet invented, the invisible
forcefield that incubates prosperity, was
for wimps. Fiercely intelligent
economics and MBA graduates would
patiently explain that if we want
corporations to change behaviour, we
shouldn’t bother with ethics but merely
alter the law. They were blind to the fact
that legal sanctions alone are too blunt
an instrument to drive progress, a point
well known in southern Italy. Think, for
a moment, of the scale of enforcement
required to police the minutiae of
economic behaviour: such a legal system
would overwhelm the productive
resources of any economy.
And this goes to the nub of the moral
vandalism wreaked upon society by
economics teaching. In one experimentundergraduates were asked to play a
game that measured selfishness and
deception. For most students, the longer
they attended university, the more
honestly they played, as you’d expect
with maturing youngsters. The sole
exception was economics. Only here did
students become more selfish the longer
they studied. Worse, they were more
likely to say that they would not return a
wallet if they found one — precisely the
behaviour you see in low-trust societies.
I am not suggesting that corporations
(or individuals) should act like charities.
No, the point is that fierce competition,
which will always remain the prime
driver of innovation, must take place
within a framework of values. Consider,
by way of analogy, the rivalry between
Roger Federer and Rafael Nadal, the
innovations of one inspiring a response
from the other, an evolutionary process
of tremendous power. Yet while they are
both ruthless winners, they also act
within the rules and, more importantly,
the spirit of the rules. These things are
not mutually exclusive — unless you have
spent too long studying economics.
It is curious that Smith grasped much
of this. A few years before The Wealth of
Nations he wrote The Theory of Moral
Sentiments, in which he noted that,
without ethics, free markets are derelict.
I suspect he would have also condemned
much of so-called stakeholder
capitalism, in which corporations
engage in virtue signalling while gaming
the tax system.
What’s certain is that we need to
push back against the virus of the
Friedman doctrine, which continues to
infect western capitalism. And a good
start would be to transform the
teaching of economics.
@MatthewSyedT
he only singer I can think of
who possesses a vocal timbre
that conveys its owner’s
seemingly inexhaustible self-
regard, Sting is a very wealthy
man who just got a whole lot
richer. Last year The Sunday
Times Rich List calculated the
former Police frontman’s fortune at an
eye-watering £220 million. To this can
now be added the rumoured
£220 million he earned by selling the
publishing rights to his songs to
Universal Music Group, a deal that was
announced last week.
Sting joins a growing list of musicians
who have cashed in their publishing
and/or recording rights for staggering
sums: Bruce Springsteen reportedly
trousered $500 million for his back
catalogue in December, David Bowie’s
estate sold the singer’s rights to Warner
Chappell Music for hundreds of millions
of dollars at the start of this year, and
Bob Dylan’s deal with Universal left him
walking away with up to $400 million in- Shakira, Neil Young and Stevie
Nicks are among many others who have
scored mega paydays.
The pensioners of pop are doing very
nicely indeed, then, with the big labels
and song-rights companies such as
Hipgnosis and Round Hill willing to part
with vast amounts for the right to exploit
songs they clearly feel have the
economic stamina to justify their
investments (a confidence arguably not
shared by the songwriters themselves).
The stats appear to back this up: older
songs and albums now dominate
listening habits on streaming services,
scoring a 74.5 per cent share in the US
last year.
That will be music to the ears of
heritage acts, many of them already
swilling with money. For younger
musicians, though, the picture is a lot
less rosy. At last week’s often
excruciating Brit Awards it was
impossible not to view the present and
future landscape of pop as more
scorched-earth than thriving, despite
riveting performances from homegrown
artists such as Sam Fender, the so-called
Springsteen of North Shields, and the
rappers Dave and Little Simz.
For there to be old music, you need
new music. Artistically, Simz and her
contemporaries flew the flag for British
pop. But the cringe-making banter
Buying Sting’s
back catalogue
for £220m
must dent
investment in
new talent
reeked of complacency. An event
organised and staged by the major
labels’ representative body, the British
Phonographic Industry (BPI), the
ceremony — whose live viewing figures
this year, at just 2.7 million, represented
an all-time low — rightly celebrates new
talent. But it does so at the same time as
the big three major labels fight tooth and
nail against proposals to make the
distribution of income from streaming
more equitable. At the same time, too, as
they pour large chunks of their earnings
into heritage song catalogues — which
one would think must dent their
investment in new talent.
The BPI talks up the majors’
continuing investment, while streaming
services such as Spotify deflect criticism
of their pitifully low royalty rates by
arguing that it is the labels that dictate
how the pie is cut up. Adele, Ed Sheeran,
Billie Eilish, Drake and Taylor Swift have
enough pulling power and star wattage
for the scandalously small percentages
the streamers and major labels share
with artists not to matter. But younger,
mid-table artists need committed
younger fans to build and sustain their
careers, and, as those streaming figures
suggest, they are nothing like as engaged
and loyal as new bands need them to be.
The major labels are too blinded by
dollar signs to acknowledge the crisis
music is facing. The Competition and
Markets Authority has just launched a
study of the economics of streaming, so
the BPI has a choice: reform, or risk
being forced to do so. The pie needs to
be redivided, and fresh thinking is
required, starting with music in schools,
which is increasingly neglected. This is
just one way the majors could put their
money where their mouths are: a
nationwide investment in education,
seeding talent and success.
Sting is sitting pretty. Perhaps he will
toast the doubling of his fortune with a
glass of Message in a Bottle, one of the
wines he produces on his Tuscany
estate. Will Little Simz be quaffing a
celebratory flute of Simz-branded
bubbly in 2051? Don’t bet on it.
@DanCairns123Dan Cairns
The mania
for buying
up old songs
is killing
pop music
“His name’s down for Eton,
the MCC and a hip operation”NEWMAN’S
WEEK
“So the Big Dog whistle
worked, then?”reliability and doing the right thing even
when it might pay to do the wrong. And
this expresses a curious phenomenon
absent from classical economics: when a
critical mass of people act in a
trustworthy way, it enlarges the
potential of everyone. This is why the
Renaissance happened in the north, not
the south.
Don’t take my word for it. A seminal
study in 1998, ignored by most
economists, showed that a 15 per cent
increase in a nation’s belief that “most
people can be trusted” adds a full
percentage point to growth every year
— a staggeringly large effect. “If trust is
low,” the authors write, “economic
growth is unachievable.”
And this leads to a devastating
conclusion: the teaching of economics,