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Rivista di etica e scienze sociali / Journal of Ethics & Social Sciences



The "First International Meeting on Finance and the Common Good" took place in Geneva at the end of March 2001. About 40 people participated, including financial operators, government officials and academics, along with representatives of NGO's and of advocacy groups from around the world. Finance and the Common Good is the title of the journal founded in 1998 by the Financial Monitoring Centre (Observatoire de la Finance), itself only founded a couple of years earlier, which aims to address the role finance has or should have in promoting the general common good. The Centre operates at both theoretical and practical levels, promoting research into the foundations of the interrelation between finance and the common good as well working on particular initiatives or promoting practical policy options. The activities of the Centre are divided into four programmes. The first is "Finance and Common Good", of which more below. The second is "Finance, Ethics and Responsibility", which is aimed more at creating materials for teaching finance ethics as well as involving the working together of small groups of financial practitioners on problems of ethics and finance. "Finance, Cultures and Society" is the third programme, which looks at more fundamental research and, in particular, the influence of the great spiritual traditions of the world on financial activities. Lastly, "Finance and Technology" tracks the changes that technology and globalisation are causing in the world of money and finance, and organises seminars and publications to disseminate results.

This meeting was set up under the auspices of the first programme, and, being the first of its kind, the organiser described it as a "happening", or a first exploration of how things would go. It involved people who have supported the journal Finance and the Common Good, either as contributors or as subscribers. The Faculty of Social Sciences at the Angelicum (FASS) was represented because we have contributed to the journal. We were also there because we have set up a group of financial operators and academics in Rome to consider the ethical aspects of finance, which is linked to the Financial Monitoring Centre through its second programme (more below).

The meeting consisted of four roundtable presentations and discussions. In the first, the question addressed was that of financial exclusion, and the related issues of international debt and micro-finance. Presentations were made by the head of the Jubilee 2000 campaign in Japan and a representative of the sweatshop workers in Mexico as well as by young start-up micro-financiers and those with much experience in the field. One of the issues that emerged most strongly in the discussion was that of the problems of micro-financing. Apart from the problem of defining exactly what constitutes micro-finance (a problem that can be resolved in the future as understanding of micro-finance develops), the main substantive issue discussed was the level of interest that should be charged on micro-loans. While on the one hand, it would seem most ethical to charge minimal or no interest at all, this reduces the amount of credit available, since it has to be financed by outside aid. Some micro-credit organisations without access to aid have to charge interest rates of 20 -30% in order to stay in business, but reports indicate that local people are willing to pay these rates as they are still substantially lower than those of the local loan sharks. Still, this rate is rather heavy in absolute terms. Another way of dealing with this issue is to arrange for a bank in a rich country to provide a guarantee in hard currency for a local bank, so that the latter is able to make micro-loans at small interest rates. This has the added advantage that it builds relationships between local banks and those in the rich nations, strengthening the local banks and giving them more support in developing their activities. Another related way of stimulating the economy in depressed areas is the creation of systems of "alternative money" or non-money based trading systems (like the LETS - Local Exchange Trading System). The question of collecting taxes on transactions in alternative currency was raised. The presenter claimed, however, that since the systems she was discussing are in poorer countries, where the systems of social security, health and education are very limited, any loss in tax revenue was not of major concern, at least as far as helping the poor is concerned

Secondly, the problem of the remuneration of financial operators was considered, in particular, the impact it has on investing for the long term. Since financial institutions and individuals are earning less and less of their income from interest and more and more from commissions on transactions, this encourages them to make many, sometimes unnecessary, transactions and to take a very short term view on investment returns. Although one participant, himself a financial operator, claimed that: "One can apply to financial markets the Churchillian definition of democracy: it is the worst solution, except for all the others", there were some proposals for different ways of thinking about remuneration of those working in financial markets. One participant looked at the different principal operators in the financial system (analysts, fund managers, brokers, dealers and investment bankers) and outlined three major problems concerned with their remuneration: conflicts of interest, informational asymmetry and market malfunctioning. Improving their commitment to long term financing could include a more active role for unions and pensioners in evaluating the use of their pension funds and avoiding the evaluation of fund managers on purely short-term criteria. Another participant proposed a system of sharing in the profits and losses of investment, which, if favoured by the tax authorities, could become a genuinely attractive solution to some aspects of the problem of linking remuneration of financial operators to a long term perspective, even to financial operators themselves. Also included in this section of the meeting was a paper on the financing of "global public goods". Public goods, which include a vast array of things like transport systems, education, or a clean environment, are somewhat like private goods that are only attainable with long term funding and a long term perspective. They tend to be under-funded and under-provided because their non-exclusionary and non-rival nature make them difficult if not impossible to produce via the market. This is not so bad at the level of the nation, since national governments can step in to finance them where market mechanisms do not help, but at the global level no such government exists and global public goods tend, therefore, to be seriously under-funded and under-produced.

Thirdly, the issue of responsible investing was addressed. In this session, the FASS representative presented a simple decision-making scheme for managers and investors based on the principle aim of realising the common good. Most of the discussion, however, was about ethical or responsible investment funds. A lot of progress has been made in recent years in the development of these funds, and, even if they only represent a tiny fraction of the financial resources invested through the markets, they have a symbolic value that bulks larger than their actual size would suggest. The most intense discussion tool place in this section of the conference because the conference organiser pointed out that all the presenters had come from the rich countries and that he wanted to hear what "responsible investing" meant to one of the representatives from the South. At the end of it, one proposal made was that of a "Charter for Investors", loosely based on the model of the Charter of Human Rights, where the global responsibilities of investors could be laid out and to which various bodies would be asked to sign up.

Lastly, drawing on the previous discussions, some of the problems in the "architecture" of the international financial system were addressed. Given that this is such a complex topic, it was difficult to arrive at any kind of conclusion. One of the points made was that we are not really dealing at the moment with an "architecture" or a "system"; global financial operations are too anarchically organised, after the collapse of the Bretton Woods system, for us to think of them as forming part of a system. The challenge is precisely to coral them in so that they do form part of a system, one that can be directed to the common good. Practical suggestions concerning transparency and standards, financial regulation and supervision, international money and development finance were made. Initiatives such as the Tobin Tax were discussed, as well as the feasibility of an international currency (still a long way off, but interestingly also Tobin's preferred method for dealing with currency instability in his 1972 paper where he introduced the idea of the tax on currency transactions). Another point of discussion was the apparent immobility of the major economic nations in the face of international financial instability, despite the fact that much technical work has been done on what mechanisms would be appropriate to deal with this. This can be accounted for largely because it is "politically rational" for these nations not to act. Instability does not unduly affect them; their electorates are not interested in the development of the rest of the world; the costs of overseeing the financial system could be high, and so on. One of the important components of reform of the present system is to reverse the way in which, in recent years, the losses experienced during financial crises are socialised, while the gains are privatised. Privatising losses would mean that investors would have to be more prudent in their investing, which will tend to reduce instability; socialising benefits means here that government intervention in the markets is limited to protecting those not able to influence market movements, as well as overseeing general operations, and in particular, protecting the rest of the economy from financial crises engendered purely by imprudent financial activity. On the international level, this needs to be backed up by a reform of the international organisations charged with overseeing international financial stability so that they are: 1) controlled by a wider group of nations; 2) are independently audited, and 3) are also in some way accountable to civil society (perhaps though some kind of voice being given within them to NGO's)

The presentations at the meeting will be published, either as a book or as a special number of "Finance and the Common Good". There is more information about the Financial Monitoring Centre on their web site ( There are also articles on finance and ethics in previous numbers of OIKONOMIA, available on the web site (

Finance and the Common Good Group in Rome
As mentioned above, this group has been launched by the Faculty of Social Sciences, Angelicum, and will form part of a wider network of such groups in Geneva, Paris and London, linked through the Financial Monitoring Centre's second programme. At the first meeting, Paul Dembinski, founding member of the Financial Monitoring Centre, spoke about the two year experience of the group in Geneva. The Geneva group sees itself partly as a support group for financial operators experiencing difficulties and tensions between what is required of them in their work and what they regard as ethically acceptable, and partly as a think-tank for discussing the interaction between finance and ethics or the common good. At their first meeting, Justin Welby, an Anglican priest who had worked for ten years in the City of London, talked to them about how some of his colleagues from the City phoned him after his ordination, asking him if he would become a kind of chaplain to a group they were setting up. He was surprised, and asked them why they felt the need for this. They replied that three of their group had committed suicide in the previous two months, and they realised they needed help. Pressures in Geneva and in Rome are probably not as high as in the City, but still it is useful for financial operators to have the possibility to discuss issues that arise for them with others who understand both the technical questions and the need to use techniques towards good ends.
As a result of the discussions, it was agreed to begin in Rome by discussing the document produced by the Geneva group, Ethical Risks in Financial Activities. Ideally, we would then go on to produce a similar document ourselves, based on the particular issues of importance in the Roman context.


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Albino Barrera OP  -  Stefano Menghinello  -  Sabina Alkire

Introduction of Piotr Janas OP