PEOPLE AND POLITICS BY MOHAMMED HARUNA

Wall Street Meltdown; As The Chickens Return To Roost

kudugana@yahoo.com

 

The recent meltdown of Wall Street as THE symbol of Capitalism has once again brought to the fore the fundamental question about what economic value system can best bring about the greatest good for the greatest number, i.e. development, if you will. By value system I mean the interplay of principles or standards that should guide personal or group behaviour in society.

           

Since Karl Marx wrote his Das Kapital in the 19th century, the choice of the value system that can foster the development of the human race has, broadly speaking, been between Communism and Capitalism. The collapse of Soviet Union in the late eighties as the model of Communism was hailed by champions of Capitalism as evidence of the superiority of free market morally and in terms of efficiency. One famous American social scientist, Francis Fakuyama, even hailed this development as “the end of history”.

           

Well, the collapse of Wall Street with its threat to drag down the rest of the world with it shows that history never ended. Capitalism may have trumped Communism, but the search for an ideal value system has not, and cannot, come to an end because of the victory of Capitalism.

           

Every value system, whether it is socio-economic or political, has its strengths and weaknesses just like the human beings that create it have their strengths and weaknesses. Some people believe human behaviour through which value systems are created is determined at birth. Others believe that once the value systems are set they alone determine human behaviour. In both cases human beings are considered to have little or no choice in how they behave.

           

Yet others believe both genetic and social victim explanation of human behaviour are wrong and certainly do not offer adequate explanation of human behaviour. Individuals, such people believe, have free will and should therefore be accountable for their individual behaviour.

           

I would like to argue that the truth lies in between the three explanations. Even then I believe free will is by far the strongest of the three factors responsible for our behaviour. I think that is why we often talk about the importance of satisfying our personal conscience in whatever we do. I guess also that this is why at least the religious minded among us believe God will hold us individually accountable for what we say or do and not visit our crimes on others or vice-versa.

           

Human beings are, of course, social animals but it is their free will that enables them to think collectively about how to organise their relationships. It is also what enables them to change those relationships when times dictate.

           

Capitalism trumped communism precisely because its strength lies in its emphasis on individual free will.

           

Capitalism, however, comes with its weaknesses, not least of which is its over-emphasis on the profit motive. And then, of course, its strength in emphasizing individual freedom can turn into a weakness when it is not balanced by concern for the other fellow i.e. concern for equity.

           

I think it is the combination of this over-emphasis on profit and the absence of strong enough checks on greed and our personal egos that has led to what now seems to be the collapse of Wall Street. The combination of these two has contributed immensely to the creation of the myth of self-regulating free market whereas, in truth, markets have never been self regulating in the absolute sence.

           

Market forces may regulate themselves but it is always within the framework of the laws and conventions created by human beings. This fact was brought home forcefully in a recent article by the Archbishop of Canterbury, Rowan Williams, published in the London Spectator of September 27, entitled “Face it: Marx was right about capitalism.”

           

Capitalism is in deep crisis, he said, because, “we find ourselves talking about capital or market almost as if they were individuals with purposes and strategies, making choices, deliberating reasonably about how to achieve aims. We lose sight of the fact that they are things that we make. They are sets of practices, habits, agreements which have arisen through a mixture of choice and chance.”

           

It is this conception of Capitalism or free market as self-regulating that has been used to rationalize and justify the kind personal greed and egotism that has characterized the system since before America's President Ronald Reagan and Britain's Prime Minister Margaret Thatcher with their creed of neo-conservatism and supply-side economics whose main features are deregulation, liberalization, privatization, regressive taxation and, paradoxically, social welfare for the rich. These are the very same features that have characterised our socio-economic reforms since military president, General Ibrahim Babangida's Structural Adjustment Programme in the eighties.

           

It is this greed and this egotism that in turn led to the Savings and Loans scandal of the Reagan era which, in retrospect, was a harbinger of today’s collapse of Wall Street. Similarly it is the same weaknesses that, in more recent times, led to the collapse of Enron, the American energy giant that set up shop not too long ago in metropolitan Lagos.

            

Right here at home it is the reason for the recent accounting scandals at Unilever and Dunlop, not to mention the controversy between two major accounting firms over the recapitalization of NICON as a private insurance company under the management of the highly controversial Mr. Jimoh Ibrahim.

           

As chartered accountants you must accept responsibility for these scandals because without your connivance it is not possible for such companies and others we have not yet heard of to declare phantom profits and phantom assets.

             

Mr Chairman, for sometimes now the John Templeton Foundation has been running a series of conversations among the world's leading scientists, scholars, and public figures about what it calls the “Big Questions”. The fourth and most current in the series was the question, “Does the free market corrode moral character?” Thirteen scientists, scholars and public figures took part in the debate.

           

As you might well have guessed their answers were mixed. For me, however, the most reasonable and objective answer was by Michael Walzer, a professor emeritus of social sciences at Princeton. “The worst corruptions of our public life,” he said, “come not from politics but from the economy and they come because we don’t have similar constitutional limits on market behaviour”, that is, the kind of constitutional limits most countries have on the exercise of political power.

           

Constitutional checks on political power, he pointed out, has put limits on tyranny, repression, censorship, etc, at the same time that the absence of similar checks on free market has bred greed and egotism.

           

As we continue the search for the value system that best accords with the human desire for progress we should remember that the debate, as Archbishop William said in the article I have quoted from, is not about "how to choose between total control and total deregulation, but how to identify the points and practices where social risk becomes unacceptably high.” In other words we must begin to lay as much emphasis on equity as we do on wealth creation.

           

As chartered accountants you have a very critical role to play in making these choices because it is your profession that serves as the watchdog over the performance of the companies that produce the goods and services societies need to make progress. In informing the public about the state of affairs of these companies you should know that facts have this nasty habit of always catching up with fiction.

           

This responsibility to tell the truth about the balance sheets and profit and loss accounts of the entities that make up our economy is both collective and individual. Naturally, the starting point must be at the individual level.

           

In my office, Mr. Chairman, I have pinned on my notice board, words I have come to cherish as among the wisest that have ever been written. Many of you may be familiar with them but I crave your indulgence all the same to quote them in full because they bear repeating as a guide for human behaviour. They were said to have been engraved on the tomb of an Anglican Bishop in the Crypts of Westminster Abbey. The title of the words was “Start with Yourself."

           

“When I was young and free and my imagination had no limits”, the Anonymous Bishop wrote, “I dreamed of changing the world. As I grew older and wiser, I discovered the world would not change so I shortened my sights somewhat and decided to change only my country.

           

“But it too seemed immovable.

           

“As I grew into my twilight years, in one last desperate attempt, I settled for changing my family, those closest to me, but alas, they would have none of it.

           

“And now as I lie on my death bed, I suddenly realised if I had only changed myself first, then by example, I would have changed my family.

           

“From their inspiration and encouragement, I would then have been able to better my country and, who knows, I may have even changed the world.”

           

Whatever our professions, let us resolve today to meet the challenge of human progress posed by the  Capitalist value system we have chosen for our country by starting with personally living only those positive aspects of it that we cherish. Who knows, we may succeed in achieving what our Anonymous Bishop realised he should have done only as he lay dying.

 

This is an edited version of a paper I delivered at the recent 38th Annual Accountants' Conference of The Institute of Chartered Accountants under the Theme, "CORRUPTION: A GLOBAL PROBLEM."