Davos Man should stick to his professional knitting
Patrick Hosking in The Times and John Gapper in the Financial Times both say interesting things about Davos Man. But they leave the impression that Mr Schwab’s elite festival was about boosting the egos of corporate giants. The real Davos Mistake was quite other.
The annual bashes seemed to me to have evolved into occasions for a sort of Sunday-best breast-beating. Annually, the captains of our world herded together to hear special truths from pop stars and other gurus. The message they were supposed to be taking home was about enriching their business lives with philanthropic, environmental, social and even spiritual dimensions. The Masters of the Universe were to find redemption in Saving the Planet and healing The People.
I say this with a certain glee and malice. For several years I tried in a rather half-hearted way to get on this circuit. I wanted to lob up and argue that firms were at risk of not remembering that their core satisfactions (social, spiritual etc) should flow from a professional job competently done.
Now I am able to argue that the “Davos Mistake” may have been to misdefine the real crisis in capitalism. If (and it is a big “if”) Davos bigged-up the “free market” and if (as I believe) it sought to mitigate the resultant excesses by a bolt-on Corporate Social Responsibility, then it was recommending the wrong solution for a problem which it didn’t properly diagnose anyway. (Of course, I didn’t see the important details of the problem either, not knowing a CDS from a Bulge Bracket.)
We might have avoided some of the present crisis if Davos Man had been not merely greedy but also more professional. The answer to the economic and social effects of greediness is not to bolt on a measure of pre-packaged CSR (whatever its merits), but for senior people to deeply internalise a sense of seriousness and competency. So I agree with Mssrs Gapper and Hoskings that we need the competence (and the advice) of bankers, but I want to add something about the re-orientation which is needed.
The point of professionalism is to provide an interface (a balance) between the purely private and the public-spirited. But it recommends sticking to the knitting. It is about the good an engineer can do by and in building good bridges, a surgeon by cutting people up well. It requires people to think about their skill in a wide but not a limitless context. So a banker would wonder deeply whether he was putting people’s money at the requisite – the agreed – level of risk. And he would think about systemic risk too.
The Crunch with its huge bail-outs remind the professional in the banker how crucial the State is. Always was, always will be. I have the feeling that Davos Man – both in the form of politicians and financiers – did not attend properly to their interdependence. The bankers must be wishing they had not asked for such great freedom and their political masters must equally regret giving it to them.
But even that thought can be refined in a free-market direction. The more one asks for freedom, and gets it, the more one needs self-discipline in using it. Professionalism helps here because it is institutional: a professional is bolstered by his fellows as they work out what good and sensible behaviour is, but also disciplined by them if he strays from the path. This is to say: the people who know best the risks of their line of work (and of personal greed) put their shared expertise, experience, wisdom and probity into wrestling with the problem. Thus they avoid the moral hazard of relying too much on regulators to keep them safe.