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Fallen Stars: On the Greed of Bankers and a New Morality

by Ulrich Thielemann Friday, Mar. 20, 2009 at 9:04 AM

The economic ethicist Ulrich Thielemann explains how greed, false theories and the herd instinct caused the massive financial crisis. They had the theory when we make profits that is ultimately good for everyone.



[This interview published on 2/16/2009 is translated from the German on the World Wide Web, Dr. Ulrich Thielemann is vice-director of the Institute for Economic Ethics at the University of St. Galen. He studied economics at Wuppertal and since 1989 in Switzerland.]

Hardly in office, the new US president Barack Obama finds clear words: Bank managers should be ashamed, he said. The high bonuses are a disgrace. The moral claim to the rulers of the financial world now occurs in a political speech in the midst of the crisis. The economic ethicist Ulrich Thielemann identifies greed as one of the basic problems of the financial crisis. The “financial wizards” set their own interests permanently above the public interest, he says. As Bertolt Brecht once formulated, “Food comes first and then morality.”

A photo of Josef Ackermann, the head of Deutsche Bank, with a victory sign is always cited to show the moral corruption of bank managers. What does this picture mean for you, Mr. Thielemann?

Ulrich Thielemann: The picture as a self-image of managers shows the motivation of these managers. Ackermann saw himself in the Olympiad of the “masters of the universe.” He is happy seeing himself as a victor that no one can apprehend.

Belonging to the best is not reprehensible.

Ulrich Thielemann: I see this differently. What drives these people? Greed obviously drives them, craving recognition, not only money. Managers are not focused on as many consumer goods as possible. They regard the bonuses and profits as medals as the “heroes of labor” in the DDR (East Germany) received at that time. Now only the seemingly objective market gives medals.

Does financial management have social responsibility?

Ulrich Thielemann: Obviously. Everyone is responsible for acting in integrity. But private banks think they can forego this. They believe they act responsibly by concentrating only on increasing profits.

Aren’t they conscious of this?

Ulrich Thielemann: There are simply false theories about how the market functions. Everyone thinks, the higher the profit, the better everyone’s life will be. The more capital is in play, the greater the investments and the more jobs will arise. Priority for labor, according to the slogan, means de facto right of way for capital. No wonder politics courts financial management and only weakly regulates the banks.

What is the problem?

Ulrich Thielemann: Many do not see creating jobs in one place simultaneously costs jobs elsewhere. Competition is a process of “creative destruction” as the economist Joseph Schumpeter once formulated.

That has now caused the financial world to crash.

Ulrich Thielemann: There was and is too much capital. The real economy simply cannot realize the expected profits. Thus a pseudo-world is built. Ever more capital forms that does not really exist. That is the bubble. This forms in a cascading way always driven by the greed of investment bankers who pocket exorbitant bonuses. In the back of their heads, they had the theory from their student days: When we make a profit, that is ultimately good for everyone somehow.

But the so-called “Corporate Social Responsibility” programs remind businesses including banks of their moral integrity. Isn’t that enough?

Ulrich Thielemann: Many of those programs are merely donor programs, a selling of indulgences diverting from the real core business and the ethical problems there. What is interesting is that businesses claim to operate in an ethically responsible way. They are morally vulnerable. Still the ethicization of the economy must be supported by politics. Otherwise the responsible enterprise with economic integrity quickly becomes the dumb one.

Is that changing now in the crisis?

Ulrich Thielemann: Absolutely. Before the American election, Alan Greenspan, the former head of the US Federal Reserve, said whom the people elect is not important since the global market has superseded politics. We see the results in the financial crisis. But the markets must not incapacitate politics. Therefore Angela Merkel wanted to “organize” globalization, so we have a “human market economy.” “Laissez faire without regulation is over.” This was clear for Nicolas Sarkozy after the crisis.

Is that true for the banks?

Ulrich Thielemann: Relatively little rethinking is occurring in the banks. The whole financial branch is now in a difficult situation. The business model that it represents is a discontinued model. The gigantic sum of capital in the books is actually bubble capital and must be reduced somehow.

In the last months, we heard the collapse was the worst stock market crash since the legendary “Black Thursday” of 1929. How was bank morality understood at that time?

Ulrich Thielemann: That isn’t so simple to say. The self-image of the person as “homo oeconomicus” was certainly not so deeply rooted. As today, the super-rich had taken society hostage. But unlike today fairness for everyone and integrity were guaranteed. Integrity meant responsibility toward others has priority over self-interest.

When was this integrity lost between 1929 and today?

Ulrich Thielemann: That was a creeping and insidious process. Think of the old bank manager Hermann Josef Abs, spokesperson of Deutsche Bank in the 1960s for example. In an interview, he reported that the income distribution in his firm was flat. The salaries hardly diverged. He was proud of that. Hans Bar, once one of the most important Swiss private bankers, said managers received such high compensations only because they were greedier, not because they were better. None of the young bankers would say something like that today.

We have spoken about banks and their actors. What is the relation of society to money?

Ulrich Thielemann: Current financial capitalism was a bad example because one could become very rich with a few tricks. That the business model of the investment banker broke down also had its good side. We can now return to the understanding of a market economy obliged to the prosperity of everyone – not only to the prosperity of a few. The discovery that craving for recognition is really an expression of weakness may be helpful. True greatness is in modesty.

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