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Free markets need fairness to function

Writing in the Daily Telegraph, Prime Minister Gordon Brown today said the current global financial crisis has “laid bare the weaknesses of unbridled free markets”. Mr Brown assures the British public that  New Labour was “pro-business and pro-markets and always will be”. However, he also sounded a cautious note by saying that society should not live by markets alone. The markets must reflect society’s values, including “fairness, stewardship and co-operation,” he said.

Mr Brown said he wanted to uphold these three key ethics in public policy and across the public arena, as “markets work best when underpinned by an ethic of fairness”.

How do we combine fairness, stewardship and cooperation in a free market system? What is the right balance? How do we “legislate” these values? Who decides what is fair…and what stewardship and cooperation should look like in the private sector/public sector mix on governance?

According to Brown, … “The ethic of fairness means we reward hard work, thrift, enterprise, effort and responsible risk taking, but refuse to condone or reward irresponsible or excessive risk taking.” How will “we” decide what is excessive risk taking? What is irresponsible behaviour? This could be a vigorous dialogue.

Brown also suggests that the “ethic of stewardship must restore to all financial institutions their public purpose.” This covers some of the same ground that John Ruggie has been traversing in the United Nations, when he talks about who is responsible for managing and assuring human rights on a global scale.

Those who govern – companies and public sector institutions – have a stewardship responsibility. These responsibilities have to be more clearly built on shared values. Maybe this market meltdown has been helpful in letting us sort out what those shared values really look like. The public furour over CEO compensation and short selling reflect a values intersection.

This pressure can strengthen the bridge between the public and the private sectors. Recall the words of Viktor Frankl in Man’s Search for Meaning:

“If architects want to strengthen a decrepit arch, they increase the load which is laid upon it, for thereby the parts are joined more firmly together.”

Gordon Brown describes our present situation as a “defining moment for our emerging global society”…and yes, I concur wholeheartedly,  this is a real test of the strength of globalization. Brown’s observation may prove to be as revolutionary – even visionary – as the thinking by Al Gore on climate change. We’ve known this all along, but finally, the truth is in our sights and we have no choice but to respond.

The good thing is that humans have the capacity to respond. And, to adapt. Values-based governance was frowned upon for years, and it is clearly revived. That admission allows us to move forward. There is no more room for denial.

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