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The Banker

In a cover note released with the British bank HSBC’s 2008 earnings report, Stephen Green, its chairman and former CEO, recapped the by now familiar causes of the financial crisis (cheap credit, overly complex financial products, excess leverage) before addressing a more touchy one: “Underlying all these events is a question about the culture and ethics of the [banking] industry. It is as if, too often, people had given up asking whether something was the right thing to do, and focused only on whether it was legal and complied with the rules. The industry needs to recover a sense of what is right and suitable as a key impulse for doing business.”       

The title of Green’s new book might lead the reader to think that it concerns itself with the ethical underpinnings of the financial crisis and the way forward for the banking industry. Did bankers lose their moral compass? Are all of us complicit because we were too greedy? Surprisingly, and somewhat disappointingly, Good Value is not that book. Instead, it is primarily a competent if brief history (and defense) of globalization.     

Before taking Good Value on its own terms, let me fantasize about that other book Green might have written, the one more squarely focused on the ethics of the banking profession. With so much public anger directed at bankers, a thoughtful response to the moral question would be most welcome. Given Green’s mix of a top banker’s insider perspective and his moral authority as an ordained Anglican priest, no one seems better placed to reflect on the human failings behind the financial crisis. And as his book demonstrates, he is reflective and erudite, with a humble writing style. (Humility is not usually a quality we associate with bankers.) I suspect that other book would have been very fine.

Good Value does touch on the banking industry and the crisis, but its focus is globalization, which Green sees as both inevitable and good. We should embrace globalization, he argues, not because it raises our income but because it represents progress for humanity; interconnectedness propels us toward the Omega Point. More below on the Omega Point; but first consider Green’s argument—not wholly original but nevertheless important—that globalization is inevitable. He reminds us that globalization is not an ideology like communism that we can choose to tear down and dispense with, but a series of events and actions and phenomena that have been unfolding for centuries. He builds his case by taking us back to periods of increasing interconnectedness as well as to periods of disunity, of which today’s crisis should be seen as the latest. Along the way, he tells some lively stories. To wit: In 1805, the Bank of England installed a weather vane on its roof to help guide monetary policy. Easterly winds forecast shipments coming into London and the need for a larger money supply; and in this way westerly winds warned the central bank of inflationary pressures.       

Green is most passionate when he turns to the moral case for globalization. His guru here is Pierre Teilhard de Chardin, the once-famous French Jesuit thinker whose book, The Phenomenon of Man, published posthumously in 1955, proposed the concept of the Omega Point, the higher consciousness toward which humanity is evolving. Green’s insight is to connect modern-day globalization to the Omega Point: “[Teilhard] has seen that globalization is about something far deeper than economics, commerce and politics. It is an evolution of the human spirit.” Green, channeling Teilhard, envisions “a complex membrane of thought, fuelled by human consciousness” that will “envelop the globe.” These ideas are, well, kooky; but they are also provocative. It is a surprising turn of thought that lifts Green’s book from forgettable to original. For many readers, the book will be an introduction to Teilhard, and since one cannot help but see the link between Teilhard’s ideas and our increasingly connected world, Green deserves credit for bringing him to our attention. However, I find it hard to accept either the factual or the normative conclusion that Teilhard and Green draw. First, globalization need not cause human thought to converge. (Think End of History.) Second, to say that convergence of thought would be progress for humanity is to grossly undervalue individualist thinking.        

Introducing us to Teilhard is part of Green’s larger aim to make the globalization debate more engaging. “In one sense, the least interesting aspect of globalization is commerce, even though it is commerce that lies at its root,” writes Green. He would prefer the discussion of globalization to explore how it shifts the balance of political power and fosters cultural interaction. Such an embrace of globalization betrays its author’s wealth: after all, there are nearly three billion people in the world living on less than two dollars a day, and they will likely find it hard to look past the sometimes cruel economic consequences of globalization. The public debate on globalization should stay focused on the effects that loom large in most people’s lives.      

The last third of Green’s book covers the banking industry and business more generally. He urges a broader concept of corporate social responsibility, one that takes into account business’s carbon footprint and replaces check-the-box CSR metrics like corporate donations with an ethos in which the impact on society is a consideration in all corporate decisions. Green’s vision is a pleasant one, and perhaps no amount of new government regulation can eliminate the fact that powerful financiers could do serious damage to the economy, thus making us utterly reliant on their integrity. But then we are left asking, how do we build that culture of morality, that kinder, more honest banking industry? Green does not offer specific answers, but he is hopeful: “We must ease our way forward. The new form of capitalism for our interconnected, globalized, complex and increasingly self-conscious world—the world that Teilhard de Chardin uncannily forsaw—will emerge slowly from the last one, but equipped with new tools and subject to new restraints.” Green’s sanguine outlook is his default state; and if you do not start with his optimism, you will likely remain unconverted.      

Green seems uncomfortable making himself too much of a character in his story, which is a shame because his personal experiences are so closely tied to the topics he discusses. He could have reflected on how morals within the banking industry have evolved during his thirty year career, for example. By writing that “the industry needs to recover a sense of what is right,” he reveals that things have gotten worse in his view. It would have been fascinating for him to discuss why he believes this. Here’s one possibility: Over the last three decades, bankers went from earning about the same as similarly-educated professionals to earning vastly more. (A striking fact: if you compare two Harvard alumni with same graduation year, SAT scores, college major, and grade point average, the banker today makes three times as much as his classmate.) This run-up in compensation has likely had profound effects on the industry’s sense of what is right. In other words, outsized compensation might be as much cause as effect of the dysfunction in the financial sector. Green might completely disagree with this speculation. If so, his rebuttal would have been welcome.

Seema Jayachandran is an assistant professor of economics at Stanford University.