We Can Fix The Economy But Not Human Nature

In the Church of England's new book the Archbishops of Canterbury and York are too focused on inequality rather than poverty, greed and folly

Some 30 years ago, under the auspices of the then Archbishop of Canterbury, Robert Runcie, the Church of England published a book, Faith in the City, which caused something of a stir as a result of its somewhat intemperate and economically illiterate attack on the economic policies of the Thatcher government. As Chancellor of the Exchequer at the time, I remember it well.

A new book has now emerged, On Rock or Sand? Firm Foundations for Britain’s Future, edited by the Archbishop of York, Dr John Sentamu, explicitly harking back to the earlier one. Regretting, in his own words, that “on facing savage attacks [on Faith in the City] not only by those in the government of the day but also by other powerful figures in society, the Church leadership then lost its nerve and moved on to internal ‘churchy’ matters”, he presents the new book as the Church of England having regained its nerve.

On Rock or Sand? (SPCK, £9.99) may not be quite as bad as its predecessor, but Archbishop Sentamu’s contribution, the lengthiest in the book, is fundamentally flawed. His overriding concern is with inequality, of the extent of poverty in what is, overall, a relatively prosperous society. The flaw—surprising in one who originally hails from overseas—is that he presents this solely as a British phenomenon, seemingly unaware that studies by the International Monetary Fund and others have clearly shown that, throughout the developed world, inequality (as officially measured) has been gradually rising for the past 30 years or so, under a wide variety of governments and policies.

So there is nothing unusual about the British experience, nor can it be attributed to the policies of the present UK government. Indeed, the most recent official figures suggest that, over the past few years, income inequality in the UK (unlike in most other countries) has lessened slightly. There are clearly larger forces at work affecting us all, of which modern technology and globalisation are two of the most important; and most people, sensibly, would not wish to turn their backs on either. It is, of course, understandable that at a time of recession inequality causes more resentment than it does when overall prosperity is growing—which, happily, in the UK it now is. It is also understandable that at a time of recession there is increased resentment at the extent of tax avoidance by the rich. But that is a separate issue.

According to the leftist French economist Thomas Piketty, who has written a best-selling (if little read) big book on the subject, the explanation of growing inequality worldwide is that the return on capital exceeds the rate of economic growth. This dubious generalisation is not only based on flawed statistical evidence but ignores the extent to which the return on capital reflects risk. Be that as it may, his proposed remedy is a swingeing tax on high incomes, worldwide. My own experience is that, when as Chancellor I sharply reduced the tax on high incomes in the late 1980s, the yield actually rose, giving me more scope for helping the poor through public expenditure. The only sufferers were the accountancy firms and tax lawyers, who had been doing very well advising the rich how to reduce their tax bills. Needless to say my heart bled for them, but I felt they would survive.

I was also aware of the observation of the eminent development economist, Professor Peter Bauer, that you do not make the poor rich by making the rich poor. The bottom line is that we need to focus more on policies that relieve poverty, rather than attempt to reduce—or is it eliminate?—inequality.

Be that as it may, Archbishop Sentamu is not only seemingly unaware that the rising inequality which exercises him is a global, not a British, phenomenon. He is also, surprisingly (although this is true also of Piketty), apparently unaware of a much more important feature of the past 30 years, namely the progressive reduction in inequality between the developed and developing worlds. As a result of the belated discovery by most of the developing world that the liberal market capitalist economy, for all its undoubted flaws (for that is the nature of mankind), is the only high road to material prosperity, and greatly assisted by globalisation, the gap between living standards in the developing world and in the developed world is steadily narrowing, a welcome process that seems likely to continue.

It is true, of course, that inequality within the developing world is considerably greater than in the developed world, and is probably growing faster. Nevertheless, a world in which extreme poverty is perceptibly diminishing, and inequality reducing on the global scale, while by no means perfect (nothing is), does not seem to me too bad. There are certainly far worse things to worry about.

Archbishop Sentamu’s ignorance or neglect of what has been happening beyond our own shores, however, is one thing. What surprised me more was the contribution of the Archbishop of Canterbury, Justin Welby, to the book. I have a high regard for Justin Welby. We worked closely together, for more than a year, as members of the Parliamentary Banking Commission, under the outstanding chairmanship of Andrew Tyrie MP. Indeed, it was on my suggestion that (as Bishop of Durham) he was invited to join the Commission in the first place. Moreover, he is unusual among the bishops and archbishops to have had a successful business career before entering the Church, having been a highly-regarded group treasurer of Enterprise Oil, trading oil derivatives with the best of them. (Curiously enough, Enterprise Oil was a company which in a sense I created, when, as Energy Secretary, I forced the then state-owned British Gas Corporation to disgorge its North Sea oil interests, which I then privatised under that name.)

At the heart of Archbishop Welby’s contribution there is the following bewildering passage: “We believe that if we can fix the economy, the fixing of human beings will automatically follow. That is a lie. It is a lie because it is a narrative that casts money, rather than humanity, as the protagonist of God’s story.”

I have to say that, in a rather long lifetime either observing or participating in politics and public life, I have never come across anyone who believes that “if we can fix the economy, the fixing of human beings will automatically follow”. With great respect, the only proposition close to a “lie” is to assert that “we” do believe that. We certainly believe that it is an obligation on governments to try and “fix” the economy to the extent that they are able to do so: the people, rightly, expect no less. But insofar as this is connected to the “fixing” of human beings (a much more difficult task) the relationship in fact flows in the opposite direction.

For example, the full name of the Commission on which Justin Welby and I sat was the Parliamentary Commission on Banking Standards; and “standards” referred to standards of behaviour, a cultural and ethical matter which was at the heart of the banking meltdown of 2008 and which had had such disastrous economic consequences. As I wrote in the updated version of my memoirs some five years ago, “While New Labour’s system of bank supervision and regulation was a disaster, that is in no way to deny that the root cause of the crisis lay in the greed and folly of all too many bankers, in the broadest sense of the term.”

This is certainly a difficult area. The ability of politicians and governments in a free society to influence human behaviour and promote ethical standards is limited. And it is significant that the great Adam Smith, author of both The Theory of Moral Sentiments, an analysis of man as a moral being, and The Wealth of Nations, an analysis of man as an economic being, spent most of the rest of his days vainly trying to write a synthesis of the two.

But the claim that “we” believe that by “fixing” the economy we can “fix” human beings, and that this alleged belief has anything whatsoever to do with the problems that face us, is absurd and unhelpful. Archbishop Welby may well have a point when he complains that “our greatly secularised society seems to agree on only one, quite un-Christian principle: that it’s every person for themselves”; but that clearly doesn’t apply to the political class. Unlike in some other countries, few in Britain enter politics in order to enrich themselves, nor (unless they become Prime Minister) do they do so.

As I have observed elsewhere, there has indeed been a damaging cultural change, which has undoubtedly made a contribution to the banking disaster in particular. In the old days, bankers’ greed and folly was to a considerable extent kept in check by the fear of loss of reputation if things went wrong: a powerful spur to banking prudence and rectitude. But we now appear to live in an age in which the acquisition of wealth counts for more than reputation. The archbishops would have done better to have addressed themselves to how this might be reversed. But then that would have been much harder.

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