RDN on capitalism on BBC R4 Moral Maze

My remarks (1 October 2008) irritated me almost as much as they seem to have irritated various members of the panel. So here’s an attempt at answering their questions better than I did on the night.

1 Can people be too rich?
In principle, no. If shareholders allow firms to pay huge sums to employees, that’s their business.

Of course, legislators have to concur, and would on the whole be unwise to put ceilings on earnings. If earnings packages are shown to be good for shareholders but bad for wider society, then legislators ought eventually to intervene. Pace Lehman Bros, doing this at all and certainly retrospectively is fraught with dangers.

2 Does the current crisis expose the immorality of capitalism?
No. Western capitalism has arisen out of good societies and is on the whole tempered in a good way by wise legislation. But capitalism is an animal as well as a social system and asking whether it is good is rather like asking whether nature is good.

The current crisis exposes curious and well-known characteristics of capitalism. It is founded on confidence and failure of capitalistic confidence can spread horrendous contagion throughout society.

3 Shouldn’t capitalists be allowed to fail?
Yes, on the whole they should and it’s important that they are. But if the failures are large enough, or happen in certain crucial parts of the system, the social contagion is too awful to allow. So the worse the failure and the more it might be right to punish capitalists, the less we can let the system punish them.

4 Can we ensure this sort of crisis doesn’t recur?
We’re bound to try and may succeed. But there’ll be other failures. Capitalism and its regulators are human. Every generation has had to learn new tricks.

5 What’s the most embarrassing feature of the present crisis?
For people who prefer the voluntary to the compulsory, it’s a toss-up between the mistakes which let it happen and the requirement that the state has to try to mend it.

6 What’s to be done?
When the dust has settled we’ll need to work out how to make sure that capitalists run things better and confine future suffering to the risk-takers who cause problems in future. This ought to be as voluntary as possible.

7 Were the sellers of sub-prime mortgages wicked?
It is always wrong to profit from people’s ignorance of the risk one is inviting them to take. Equally, buyers should always be aware they are at risk from the indifference of sellers. The poor ought to be cautious of debt. (I didn’t answer Will Self’s questions on this topic well.)