The role of culture and values in finance and how it shows up during financial crises…

My recent article in Moneycontrol.

Finance has risen from being a controversial field and even hated field of work to being one of the most sought after careers. The early philosophers had long warned about how finance is this immoral activity one should not get into. Religions such as Christianity and Islam not just considered lending against usury as a sin but even looked down on those who dealt with money matters. They understood compared to other economic activity, it is in finance where one can make more money over other’s misery.

Yet, no one can deny that finance has been crucial to human progress. Any new idea or invention needs finance to back it and access of finance is seen as a vital ingredient to progress. How does one figure this dilemma?

In the piece, I show how we have not really figured this dilemma. In earlier times, we were concerned more with morality and traded off progress. Now we care much about progress and not much about morality.

This is important as one clear concern which emerged post global financial crisis is how lack of culture and ethics has become so central to financial sector. There have been inquiries about financial sector conduct in US, UK, Ireland, Australia etc and all show how financial market participants have been cheating  customers, manipulating their own markets as seen in Libor, high bonuses and so on. Even worse is how all this was being done with so much panache.

In India, we were patting our backs that first we avoided the crisis and the financial excesses were not seen here. But what was a global trend, was bound to happen here too given our integration with the world. Integration is not just about liberalisation and globalisation of goods and services but cultural exchange too! Eventually we are seeing all this coming out in mess in private banks and non-banks such as IL&FS. We are seeing similar stories of overpaid executives, compromised credit ratings and equity analysts’ scorecard, sleeping independent high-profile directors and so on. Travelling to Mumbai and seeing the glitzy offices of financial-sector companies, one is obviously asking “Where are the customer’s yachts”? So far, our responses to these problems have been usual. We need to probe deeper like other economies and try figure the “missing culture” in Indian finance as well.

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