Description
The financial crisis, which occurred in 2008 in the USA spred gradually through the entire world and transformed into an global economic crisis. In this study, the ethical causes underlying the greatest global economic crisis since 1929 Great Depression will be discussed with a different perspective.
© Research Journal of Internat?onal Stud?es - Issue 19 (June., 2011) 82
Global Financial Crisis from an Ethical Perspective
Mehmet Akif ?ÇKE
Assistant Prof, Istanbul University, Faculty of Political Sciences
Department of Public Administration ?stanbul, Turkey
E-mail: [email protected]
Tel:+90 0212 440 00 00/12271
Abstract
The financial crisis, which occurred in 2008 in the USA spred gradually through the entire
world and transformed into an global economic crisis. In this study, the ethical causes
underlying the greatest global economic crisis since 1929 Great Depression will be
discussed with a different perspective. The aim of the study is to focus on the ethical
elements underlying the financial and economic life without ignoring the systemic elements
causing the economic crisis. Firstly, the importance of ethics in the economic life will be
discussed. Then it will be pointed out that Protestant Ethics, which had an important role on
the formation of capitalism by gradually deforming resulted a mentality change that led to
today crisis. When one regards global economic crisis as a result of this mentality change,
it will be underlined that the solution for it will require a new mentality change. In order to
function the globalized markets properly and to ensure global competition, widely accepted
global arrangements must be formed. Unfortunately up to now this could not be done.
Economic ethics could be a leading actor in the formation of proper game rules for the
global economy, and in the formation of a system of values which could encourage
economic actors in behaving according to game rules. History of economics showed that
financial systems, which were exposed to heavier arrangements after crisis, went around
these arrangements after a while or provided a relaxation of rules and following those,
crisis occurred one after another. Therefore, a part of solution lies in the formation of
heavier arrangements and control mechanisms whereas another part lies in vitalizing ethical
values, which will help the acceptance of rules of the game by the actors.
Keywords: Global Financial Crisis, Economic Ethics, Protestant Ethics, Financial
Markets and Trust.
1. Introduction
Acceleration in the globalization since the early 90s has caused serious structural shifts in the world
economy, especially by increasing competitive pressure. It is observed that ethical issues are mostly
ignored in the economic space during this economic and financial expansion. When the economy is
making progress, ethics are seen as an insignificant issue like intellectual or luxury goods; however, at
times when economic and financial crises occur, ethical issues become one of the most important
topics at the top of agenda. It is also interesting that sensitivity to ethics adopted in time of crisis is
gradually abandoned and forgotten again when the things are going well.
General tendency in economics and management literature until 90s had been on the idea that
ethics and economy are mutually exclusive and ethics have no place in business. The acceptance on the
capacity of markets to effectively regulate themselves on their own underlies this idea. However,
today, the question regarding the behavioural aspect of company as a citizen in a social structure
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considering that it be called nowadays as “corporate citizen” is increasingly brought to the agenda
(Schmitt and Steige, 2007).
The main reason why ethics in economy and finance are increasingly brought to the agenda not
only in scientific researches but also in public discussions is the increasing explicit unethical
behaviours of organisations especially in developed countries and increasing negative impact of such
behaviours. Examples such as the cases of Enron, World-com and Bernard Madoff in the USA, the
scandals of Parmalat in Italy, Siemens in Germany should be regarded as incidents arising mainly from
unethical practices of the companies and their management. Moreover, it should be considered that
international banking system due to its negligent acts, especially US banks and credit rating agencies
because of playing mutual games with them had also caused the US subprime mortgage crisis. During
the latest financial crisis, the nations made hundred-billions of U.S. dollars of interventions in order to
save national banks and other financial intermediaries from bankruptcy as a result of unethical acts of
financial intermediaries and this situation laid the burden on taxpayers (Buchholz and et al., 2009).
These scandals unsettle the values system on which financial capitalism focusing on shareholder value
is established. The US-based financial crisis surrounding almost every part of the world since 2007 and
decisions and premiums taken by top executives of financial institutions who are regarded as mainly
responsible for this crisis establish the importance of ethics once again.
In this study, the objective is to take a different viewpoint to the latest global financial crisis
and establish the importance of this issue in terms of ethics. In this context, it is aimed to emphasize
the importance of ethics in economic and financial world. Economic and financial crises had also been
seen in previous times and several measures had been taken and arrangements had been made to solve
such crises. However, it has been observed that similar problems arise again after a while even if they
are in different appearances. It is known that finance sector loosens the arrangements in time as they
are tightened during financial crises; such looseness causes speculative booms and then financial crises
occur. In fact, financial sector is the most strictly arranged area in economic system. Therefore, it
increasingly becomes evident that the idea to overcome crises only through legal arrangements by
ignoring corporate and individual ethical issues is not a solution. Within this framework, it is beneficial
to discuss whether the solution of such problems is the adoption of ethical values by company
executives to make them act in line with arrangements and rules of the game.
2. Ethics and Economic Behaviour
It is not true to see the concepts of economic, business and financial ethics as coming into fashion at
times and being discussed only in intellectual world yet impossible to apply or being luxury in the
business world. The issues of economic ethics date back to the old times as the economics itself. In
Ancient Greece, Aristotle discussed ethics, politics and economy as a whole. Adam Smith, the father of
modern economics, was not only an economist but also a moral philosopher. From the perspective of
Adam Smith, the act of pursuing self-interest never means unlimited freedom and such an act is always
limited by the frame of individual, moral and public order. However, as soon as the theory of classical
economics is replaced by neo-classical economics, ethical perspectives have been consciously
overlooked or completely taken out of context (Sinß, 2010).
To our opinion, the idea that it is impossible to compromise economy and ethics with each
other, in other words, ethics is not compatible with competition and profit maximization is not
applicable. Economics ethics mostly deals with systematic thought of basic logic of economy within its
normative conditions and results. For this reason, it is possible to see philosophy and ethics as the
compulsory ground and complement of economy (Wallacher, 2009). Therefore, the knowledge that
economy and sectors are compulsorily connected with ethics is one of the basic facts. Thus, making
business is always related to human decisions and behaviours and never disconnects with standards of
judgement, institutions and attitudes. Then it is possible to develop an ethically responsible and
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humane economic order through the connections between sectors and moral values (Nothelle-
Wildfeuer, 2009).
“Aristotle’s Trias”, consisting of ethics, politics and economy, has been effective through long
ages since the beginning of economics. According to this, economy is a part of politics and this part
which is considered as apolitical economy is evaluated as a sub-heading of ethics. Classical pioneers of
political economy accepted the relations between free market economy and ethics and political
conditions. Classical economists like Adam Smith and John S. Mill were also among the leading moral
philosophers (Ulrich, 2006).
According to the liberal philosopher Adam Smith, social utility can be maintained if everyone
pursues their own self-interests. It inevitably springs to mind that whether the latest financial crisis
costing trillions of dollars confutes the said optimistic assumption. However, in this very point, it
should not be ruled out that Adam Smith underlines the need of market to a framework order in order
to function. Market and competition can serve people as required only if a good framework order exists
(Homann, 2007b).
In Adam Smith’s approach, the idea that people act based on their self-interests is all along
discussed in connection with the idea of competition. Since the self-interest of every company is to
maximize its profits, every company will try to operate in the market in a way to eliminate self-
disadvantages of competition. In case the competition is not applicable, the said act of self-profit will
be limited by other competitive players. Adam Smith and fathers of Social Market Economy had seen
long-term effectiveness of ethics in this very fact (Brodbeck, 2003). In this context, it can be
considered that competition has the capacity to function almost as a moral value and thus competitive
theory in general and economics theory in particular can indirectly become an ethics theory. Through
competition, interaction between self-centred motivations is allowed and therefore, the effort to make
self-interest or utility maximization is politically restricted. For this reason, by demanding and
promoting competition, economists actually speak of an ethical judgement at the same time (Brodbeck,
2002).
It is not true to criticize the fact of economic players, who pursue their own personal interests,
as a negative behaviour only by taking an approach of moral prejudice. If such a criticism is made, then
the fact that personal interest is the engine of free market economy is ignored. However, ruling the
personal interest out may cause serious welfare losses and will change the conditions of poor people in
the world for better. One feature of competition is that it mostly tends to eliminate itself when it is
given free rein. For this reason, competition inevitably needs a regulatory framework. In the absence of
such a framework, self-interest or competition may cause chaotic and subversive impacts (Homann and
Klink, 2009). It can be seen in the history of economics that such subversive impacts may even result
in the collapse of financial and economic system as a whole.
Rules, referees and a playing field are needed in order to make the market economy system
function well. However, if the players in the market do not want to adopt such rules, it is not possible
to produce a fair game. A good product and service development or economic activities come forward
if everyone pursues their own interest. However, as mentioned above, the idea of Adam Smith that
personal interest is always realized in a specific order is frequently ignored. Therefore, pursuing
personal interest does not necessarily produce good results and market players do not necessarily direct
their aim to social solidarity. Economic activity that maintains social welfare appears as an outcome
which is not aimed by players who individually purse their own personal interests. This is one of the
basic principles of Classical Economics. In consequence, it should be underlined that the statement
“market economy should be organized in a way to serve the common welfare” is applicable (Homann
and Klink, 2009). Within this frame, the consideration of companies on ethical issues as one of the
basic elements of sustainable development should not be regarded as an inexpedient approach. Ideally,
competition in the market should be operated within an order formed by commonly accepted rules
which are not necessarily arranged as law.
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In today’s world economy which does not contain a compromise on the rules of global
competition, it is not a correct approach to ignore ethics. When this is the case, financial crises are
anticipated to become more intense and frequent, and such crises will result in more degeneration in
corporate integrity. In fact, the problems in economics ethics gain more importance in case the legal
framework is inadequate or absent at all. In such cases, everyone should take responsibility as “the
subject of ethics”. Recently, there are civil society initiatives and public discussions that aim to stop the
tendency on determining moral values at the lowest common denominator (Brodbeck, 2003). Such
valuable efforts are encouraging; however, they are still not enough to create awareness to the core in
this field.
In previous years, global finance executives felt the need of adopting a new moral model in
order to conduct long-lasting reliable operations, as a result of new conditions created by the
globalization of competition. From this viewpoint, such behaviour can be regarded as beneficial as the
executives have started to adopt a moral model of foresighted businessman during this period in which
global arrangements remain incapable. The model of entrepreneur or manager who performs
responsible behaviours within the frame of adopted ethical values and conducts sustainable business
will be able to make positive contribution to the development of international social market economy
(Klink, 2007). However, global finance executives have not embraced such a way and caused world
finance system crash to a wall so to speak (Homann and Klink, 2009). Especially in the United States
of America and European Union Countries, it became possible to prevent the collapse of financial
system only through unorthodox strict government interventions. After the global crisis, the leading
developed countries became heavily indebted this time. This means that in case a new crisis similar to
the latest one occur, nations will have insufficient means of intervention to save the financial system.
After the recent financial crisis, the number of people who are doubtful about the superiority of
pure market discipline is increasing day by day. Therefore, one of the main duties of companies in the
future will be the development of ethical responsibilities. In a globalized world where the influence of
economy is ever increasing, the companies are not only the producers anymore. Regardless of whether
they want or not, the companies today are also policymakers. This new role is a challenge for
companies since along with more power, comes more responsibilities. At this point, there are specific
duties of policy. The policy should develop a system that encourages and requires ethical behaviour as
well as eliminates negative incentive systems (Sinß, 2010). In this context, the increase in discussions
made on economy and business ethics can be evaluated as a development, which is promising yet not
enough.
3. The Spirit of Capitalism, the Protestant Ethic and Mental Shift
The recent financial crisis has clearly showed that the stability and sustainability of free market
economy are not secure in itself. The emergence of global capitalism has brought along several risks
that present completely different characteristics. At this point, it should be underlined that the efforts to
explain the market economy crisis in a country or region within the frame of one-way causal relations
will be superficial. During the crisis, recrimination among the parties is observed as the easiest way
generally adopted. However, even a disruption that occurs in one of the areas of economy, politics and
ethics can pose serious problems to companies, banking systems and even market economy system as a
whole (Küng, 2009).
The financial and economic crisis which was spread to the world from the US is now seen by
many people as a social and political turning point that may result in deep impacts. Ralf Dahrendorf, a
noted sociologist, attributes the recent financial crisis to deep mental shift experienced in societies. The
main element of this intellectual structure is formed by economy and the prevailing viewpoint in
society. It is stated that the mental shift experienced in previous years lies behind the recent crisis. The
said shift is the move from “savings capitalism” (Sparkapitalismus) to “capitalism of easy credit”
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(Pumpkapitalismus). Therefore, it is highlighted that the reactions against this crisis may also give rise
to a new mental shift (Dahrendorf, 2009a).
Undoubtedly, the concept of Protestant Ethic developed by Max Weber is the most referenced
issue in the development of capitalism or modern national economies. In the development of modern
economies, Protestant Ethic or ethics of savings in other words did not come to the forefront.
Individuals work to save money for the future. This understanding of saving is a prerequisite for
investments that will stimulate the process of modern economic development. The concepts of
working, hardworking and economizing had constituted the life approach which was dominant both in
the Continental Europe and the US (Dahrendorf, 2006). To put it another way, Weber attributes the
success and dominance of western capitalism to the rational control of greediness that lies behind the
human behaviour, and bases this rational control on religion or more precisely on Protestant Ethic
which highlights hardworking and being economical (Jain, 2007).
However, especially after the World War I, a mental shift has been experienced in almost every
part of the world beginning from the US. As the societies have started to focus on consuming, new
consumption patterns have been emerged and as a result, Protestant ethic and Puritan attitude have
eroded (Dahrendorf, 2009b). Daniel Bell is the first person who pointed out the said mental shift and
defined this shift in various aspects (Bell, 1976). Bell addressed to this problematic issue within the
cultural contradictions of capitalism. In this context, capitalist logic, on one hand, demands the
adoption of old values such as high-level work discipline, obedient and provident behaviour in order to
realize necessary investments for production. On the other hand, capitalist economy needs passionate
consuming behaviour. The said consuming behaviour depends in its essence on riskless customers who
eagerly consume the products introduced by capitalist mechanism to the market which is already
saturated with excessive production. Stimulation of this production means to attain “materialistic
hedonism” and eudemonism with an upward trend. In other words, developed capitalism demands the
elements of the Protestant ethic at the workplace, and the exact opposite outside work, in the world of
consumption (Dahrendorf, 2009b). As it is seen, there is too much difference between the person who
makes profit maximization though rational calculations and the costumer who pursues pleasure.
Therefore, it is clear that these two characters cannot harmonize with each other and unite in one
character (Jain, 2007). As a result, capitalist economic system destroys its own intellectual foundations
in the course of time (Dahrendorf, 2009b).
According to Bell, the understanding of capitalist protestant rationality is undermined by itself.
Because the capitalism that is not possible to harmonize with business ethics reproduces self-
realization which is not subject to limitation, hedonistic ethics and individual freedom. Therefore,
while business ethics prevails as it protects its existence in economy, the consequences of ethics in
politics and culture are questioned. On the one hand, in the organization of production and work, the
system today demands provident behaviour, industriousness and self-control, dedication to a career and
success, while on the other hand, in the realm of consumption, it fosters the attitude of “carpe diem”,
prodigality and display, and the compulsive search for play (Bell, 1975). That is to say that economic
system is established on specific values yet application of these values is likely to result in the collapse
of system.
Today, most people make consumption by depending on borrowed money or pumped money,
not on their savings or real income. However, it is not fair to blame the institutions, which turn a blind
eye to the facts or directly promote the developments, for this transition. Large numbers of everyday
citizens are also responsible for such developments. It is not adequate to see the recent global crisis as
the crisis of banking sector and financial institutions. This crisis also shows itself as the crisis of a
specific human behaviour which can be summarised as “I consume now but I’ll pay later!”
(Dahrendorf, 2010).
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4. Ethical Fundamentals for Global Financial Crisis
The financial crisis has made us understand that the issues such as overall purpose of economy and the
importance of human life are about to be forgotten. People, who only focus on profit and shareholder
value by only pursuing self-interest and trusting Adam Smith's “invisible hand”, have suppressed
human dignity, freedom and justice for a period. Inexistence of a consensus on the causes of recent
financial crisis makes it difficult to develop effective solution strategies. Therefore, it is useful to reveal
the ignored issues in the course of time by going back to the basics of making business (Nothelle-
Wildfeuer, 2009).
Speculative crises have occurred almost for 400 years. It is seen that the humanity still does not
have a solution for this. At this point, it is possible to say that the potential of progress made by
humanity in technical researches has not been attained in social, political and financial fields at the
same level. Therefore, the incapability of humanity in taking lessons from crises can be seen in
recurrent speculative mass psychos in history. Humanity loses its experience about crises after two
generations. However, the recent crisis has shaken the financial structure to its foundations. This
economic crisis is also a psychological issue. Therefore, the success of interventions which were made
in the form of government supports and conjuncture policies in order to keep the financial and
economic structure alive is substantially based on the ability of large number of people in guiding their
psychological senses to the correct direction. Actually, it is also likely to approach the recent crisis
from a different standpoint. Before the crisis, there was a period in which upswings were experienced
for a long time. In fact, it is possible to describe today’s big crisis as a return to the normal. Over the
last 10-15 years, ancient ideal on the correct limit has been lost since many players went over the limit.
Therefore, the crisis can also be regarded as a development that will help us to readopt more
convenient understanding of reality (Woltron and Liessmann, 2009). Ultimately, the crisis should be
accepted as an opportunity to make humanity come back to earth and necessary steps should be taken
in order to prevent the recurrence of similar mistakes by taking lessons from the past.
The FED, central banking system of the United States, has been accused since 2001 of rapidly
decreasing the interest rates and thus, setting the grounds for financial crisis by promoting asset prices
booms and desire for extreme risk. On the other hand, it is stressed that the credibility of
countercyclical Keynesian monetary policies which are frequently applied in times of recession has
decreased. However, it is observed that after the financial crisis, criticisms in the public mainly focus
on the unlimited greediness and morally misconducts of managers. Significant part of the elite who
participates in the discussions made on the causes of financial crisis argues that it will not be a solution
to apply stricter arrangements to the markets which are already instable in themselves. It is clear that
this opinion supports Neoliberalism which is built on the effectiveness of markets. Dissenting authors
argue against the effectiveness of markets. According to them, the efficient-market hypothesis in
financial markets is probably one of the biggest and expensive delusions of history of economics
(Schuberth, 2008).
The increasing dominance of Neoliberal approaches in economics has caused the economics
drift away from the needs of real life. As economics surrounded all over the world extremely, it has
been excluded from social relations and even it has been emphasized that social relations felt the need
to be a part of economic system. As a result, this situation resulted in the biggest economic crisis after
the great depression in 1929. The proliferation of new financial derivative instruments, hedge funds
and short-run high-rate profits have combined with various causes and led to a collapse in financial
markets. In fact, some economists mentioned before about the possible occurrence of this collapse but
such thoughts did not get the attention that they deserve. The values which are stimulated with the help
of digitalization of real life have started to be fictitious increasingly. These values have become the
symptom of a symptom of something for which a real response almost cannot be demanded. Therefore,
it is not surprising that some relations such as intemperately increasing wages of bank managers and
bosses of international companies have become meaningless. Nobel Economist Ronald Coase likens
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today’s economy to a floating theoretical system which is almost not interested in what is happening in
real world. Considering that economy has been separated from all other areas of life, it becomes
possible to perceive the sickness reflected in the greediness of speculators, managers and shareholders
(Kampits, 2009).
Karl Homann stresses that the main problem in financial crisis is not the greedy acts of
executives but the non-operative system of rules. According to Homann, the approaches that
completely blame the greedy acts of executives for the crisis and try to hold individuals responsible for
this situation are not applicable. Considering that these individuals work in social function systems
with strong internal logic, it is not fair to regard them as the sole responsible. Against the laws of
justice, politics, economics, it is not likely for an individual with a claim of individual morality to make
much impact (Homann, 2009). On the other hand, there are criticisms that the logic of capitalist system
apparently allows excesses of greed. For this reason, this raises the question whether the market is the
right model as an institution. However, since the replacement of market is not certain, such criticisms
become meaningless (Homann, 2007a). Therefore, it is more applicable to pay more attention to make
the market adopt fair game rules.
After the recent financial crisis, it is observed that there are increasing demands on the ethics
and sustainability of financial investments. Today, almost everyone agrees that the focus only on
maximum profits is the main reason that lies behind the recent financial or economic crisis. There is an
increasing consensus that financial markets and economy need ethics and it is required to focus on the
requirements of sustainable development. Economics is not a natural law. Quite the contrary, it occurs
as a result of social processes and can be structured and managed in principle. Therefore, all social
players, whether in the position of voter or consumer or investor, are invited to contribute to
formulization of financial markets and economy (Gabriel, 2009).
One absent element today is the approach to take healthy measures to the idea of one-
dimensional advantage and profit maximization. Another absent element is the connection of economic
logic structure with human responsibilities such as good manners, responsibilities, solidarity and
justice. Yet, in terms of ethical problems, the first thing that comes to people’s minds is individual
ethics, not the corporate ethics. However, this is not a logical alternative from the perspective of
economics ethics. The question here is the mutual interaction between individual attitude (individual
ethics) and corporate conditions (incentive and restrictions). Although ethics-based responsible
decisions and practices are supposed to be desired on the ground of specific individual logic, it should
be reasonable for each individual in terms of corporate self-realization pressure (Ulrich, 2009).
As it is known, financial sector has very basic functions in economy such as distribution of
risks, hedging, collection of savings, financial capital and liquidity realization. However, the recent
financial crisis led to some criticisms that financial sector created risks or intensified them rather than
managing the risks as desired in social environment. Such a comment is applicable for subprime credits
and securitised derivative financial instruments. However, it is wrong to interpret this situation
financial sector has completely become incapable of risk management. Undoubtedly, it is likely to take
better measures for similar developments by taking lessons from the recent crisis. In free market
economies, it is clear that crises will occur afterwards. However, recent crisis shows the importance of
integrating more stable and risk limiter negative feedback mechanisms into the economic system. In
order to succeed through such a practice, market players should be encouraged to comprehensively
adopt “sense of game” which gathers a proper understanding of both basic principles of economics and
appropriate division of responsibility (Lin-Hi and Suchanek, 2009).
The purpose with the assertion that ethical problems set the ground for recent financial crisis is
absolutely not to ignore or underestimate the importance of systemic factors causing the crisis. The
purpose is to discuss the crisis with its systemic factors within a cultural and social frame and
comprehend it from this point of origin. Another attention-grabbing issue is that after the crisis, almost
everyone has become complainant about the symptoms of morally distorted economics. These issues
can be summarized as follows (Ulrich, 2009):
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i. Greedy acts of investments towards maximum return on equity are criticized. Such greedy acts
have become a kinds of “desire”, a mental stimulation, and this stimulation has started to be
treated by business manager and economy policies as a restrictive condition, in other words, as
“we have no other option”.
ii. The doctrine of “Shareholder Value” has been exposed to criticisms. People have started to be
doubtful about the corporate management standards for good management in line with this
doctrine. The underlying cause of such situation is that the said standards have emerged as the
main reason for unfair trade practices of large joint stock companies during the recent crisis.
iii. Commercial models of financial markets, which can be defined as “Greater Fool Theory” of
today’s market, cover, securitize and distribute the risks. Whoever purchases them is guilty.
iv. There are criticisms on the increasing deviation on the understanding of players responsible for
economy and overlooking of such players on the difference between “earning money
humanely” and “earning money with impunity”.
4.1. The Importance of Trust in Financial Markets
One of the hottest topics during the financial crisis has been the loss of trust. Many companies then
have been strategically obliged to earn company stakeholders’ trust back and to manage relations with
these stakeholders more effectively. The issue of earning the trust back can be interpreted as putting up
the acceptance on the single objective of managers to increase the value of shareholders. Company
stakeholders, which include workers, customers, suppliers, society, media, various organizations,
government and non-governmental organizations, have the power to help companies in the re-
development of their credibility. As it can be seen in many examples, specific efforts of management to
increase shareholder value cannot be the leading force to achieve success in the long-term. However, it
can contribute to appear as a “good” company in the short-term (Leisinger, 2009).
It is fair to say that after the global financial crisis, societies have lost their trust in economic
system. For this reason, it is useful to examine the developments in recent crisis from the perspective
of economy and financial ethics. After the crisis, appropriate “rules of the game” will not be enough
bring the system back to its stability. Because the arrangements made after the previous crises had not
been sufficient, loosened in the course of time or various ways had been found to beat them and such
arrangements set the ground for new crises. Therefore, making new arrangements which are considered
to stable the system will not be sufficient in the long-term. More importantly, it will be significant as
players and large numbers of people adopt “sense of play” in a way to make rules of the games gain
required legitimacy (Lin-Hi and Suchanek, 2009).
For many years before the financial crisis, almost every players such as banks, financial sector
and its workers, low-income citizens and landlords gained advantage from securitized real estate trade.
As a result of success and profit stories in this field, almost everyone desired to be a part of this game
and gain advantage. However, this game turned out to be unsustainable in the course of time. One of
the most destructive damages of the crisis has been the lost of trust in market economy which is
thought as promoting selfishness, profit greediness and causing deep harms. In order to eliminate this
loss of trust, it is required to restore the economic system in terms of stability in which the expectations
of people on social cooperation including mutual advantages are met (Lin-Hi and Suchanek, 2009).
The human history shows us that through the development of a system of rules, several issues
more than estimated can be formulated. The correct actions made after the financial crisis can be listed
as the establishment of new rules on payments made to managers, holding administrative boards of
banks as responsible for their damages limited to their own private wealth, elimination of tax heavens
and integration of funds into the system such as hedge funds except the ones outside the supervision of
regulatory auditing companies. In this context, new rules established for the development of an order
© Research Journal of Internat?onal Stud?es - Issue 19 (June., 2011) 90
for markets are supposed to improve the operation of market, not to obstruct or block it (Homann,
2009).
In a modern world, it can be stated that market economy looks like the best system that makes
global common life possible among the systems developed up to this point. However it is not very
likely to state that market economy system is an excellent system in practice. For the adequate
operation of market economy as desired, it is required to develop appropriate global rules of the game.
Especially at the point where the resources of nations in global economy end, companies assume a new
role. Companies are supposed to be active in the formation of global rules of the game in order to
secure an agreed competitive system for their own interest. Social developments in the future will be
based on the understanding of globalized societies of 21
st
century on the introduction of conditions and
development of restrictions from such conditions (Lin-Hi, 2007). Undoubtedly, economy and business
ethics will continue to make important contributions at this point.
4.2. The Impact of Personal Interests on Financial Crisis
The selfishness and the desire to earn more income which led the world to recent financial crisis are
embraced by many people. Not only the managers of banking and real estate sectors and fund
managers, but also politicians, credit rating agencies, regulatory and auditing institutions, media and
many small investor have played this “game” causing the financial crisis. Societies are increasingly
unwilling to accept the externalisation of costs by companies and as a result, they start to question the
legitimacy of market economy system. The said pressure of legitimacy is naturally felt by the company
and endangers their acceptance in social area. Companies also feel that they are punished by public
because of their individual mistakes. Considering the empirical conditions, companies face with a
contradiction that their ethical operations are likely to be abused by their competitors. The challenge
today for the responsible companies is to rationally overcome this contradiction without being the
object of competitive disadvantages. In other words, the company should organize the responsibility
thoroughly and specific powers are needed to achieve such an organization. Thus, companies today
have responsibilities in the formation of a fair competition globally. By doing so, companies help
societies accept the market economy and have become invested in conditions that are required for their
accomplishment in the long-run (Lin-Hi, 2007).
Issues such as selfishness and fear of people on losing their wealth can be considered as “self-
interest”. As mentioned above, free market economy is established on the competition of economic
players pursuing their self-interest and by this way, it is recognized to achieve social welfare. However,
since 1980s, the acts of self-interest have endangered social welfare rather than promoting it. Along
with the recent global financial crisis, economy word and societies have been shaken to their
foundations. Markets collapsed and national economies faced with the danger of collapse. The current
issue became the determination of the blameful for crisis and financial managers who act with their
excessive greediness and selfishness were accused of putting economic system on the brink of abyss. It
is not useful to consider the problem solely based on the selfish behaviours of managers. The main
problem lied behind the morality, ethics and description of people in institutions such as occupational
training, professional life, family and education. In the course of crisis, many small investors, credit
consumers, investors, administrative boards and supervisory boards have been interested in higher-
yielding new financial assets. However, it is observed that this interest transformed day by day into an
uncontrolled greediness (Dilk, Gürtle and Littger, 2009).
If people do not have proper information about the market, then they become tend to head
towards more speculative and risky transactions. If people are not confident about the information they
have, they act in line with the acts of other people and consequently, they adopt herd psychology.
When a state of profitability or fear of loss occurs, many people break their fades. As a result, almost
everyone becomes incapable of understanding the way that markets operate and everyone becomes in
the danger of loss. In this chaotic environment, guilty people such as Bernard Madoff and his
supporters who trusted and helped him with blind obedience to collect money through snowball
© Research Journal of Internat?onal Stud?es - Issue 19 (June., 2011) 91
strategy find wide spaces for themselves. However, it is not enough to interpret the situation as people
who trusted and deposit money to Madoff and the others like him were a victim of their greediness. In
fact, the better part of these people is not greedy; they just took their self-interest into consideration
rightfully. Apparently, people, mainly together with the effect of specific conditions, can start to act
based on herd psychology (Obermülner, 2009).
It is certain that the abovementioned issues contributed to the recent financial crisis. However,
it is not very likely to prevent some basic motivations only through moral speeches as they guide
human behaviour. Actually, the solution lies behind the inhibition of said self-interests through self-
commitment, in other words to commit the self for the self interest. Inhibition of self-interests by
managers within the frame of self-commitment is supposed to be compulsory for companies to commit
themselves in line with the ethics (Suchanek and Lin-Hi, 2010). Under the light of all statements, it is
possible to say that the solution is not to prevent self-interest or greediness. It is needed to accept the
self-greediness which is a human instinct yet to guide it for the good of society (Dilk, Gürtle and
Littger, 2009). Therefore, self-commitment means the commitment to the rules by everyone in a way to
enable all to make good moves in this game.
In order to achieve a healthy self-commitment, it requires to understand the underlying relations
of game and to have an adequate understanding of game. In other words, if there is no anticipation that
one becomes disadvantageous due to the acts of other people, individuals will adopt an understanding
of game proper to the rules of game. Due to the high rates of anonymous and abstraction today, it will
not be possible to establish the said understanding of game among players on a pure foundation. It is
needed to maintain the trust among players through the enforcement of generally-accepted and
sanction-based rules of the game (Broock and Suchanek, 2009). In the course of recent financial crisis,
many available rules of the game have not been considered as a kind of capital that will provide high
profits for all players in the long-run. Quite the contrary, such players regarded the rules as external
restrictions made against self-interests. As a result, the underlying problem is that rules of the game are
perceived as the restriction of individual freedom, although they constitute the basic conditions for
(sustainable) freedom (Lin-Hi and Suchanek, 2009).
A valuable economics ethics should consider the existing conditions and combine them with
normative ideals within a controlled relation. The main problem is how to make moral values valid
under the conditions of modern society. In modern societies, it is not enough now to trust on the
heuristic discernment only and this shows the importance of problem. At this point, moral warnings for
individuals to do or not to do some specific acts may cause particular problems if self-interests are not
taken into consideration when such warnings are made. Therefore, there is no answer for question of
whether the individuals are required to act against their self-interest for the good of morality. The duty
of economics ethics will be the protection of players from negative consequences and establishment of
opportunities that will make them perform an evaluation between self-interest and moral values within
a symbiotic relation. (Lin-Hi, 2007) As a result, it is a fact that there are areas of conflict between
individual freedom and social structure of economy. Over the last decades, this conflict relation has
been interpreted as the liberalization, deregulation and privatization of economy (Büscher, 2008).
However, the recent economic crisis will intensify the criticisms on the validity of such interpretation.
In my opinion, economic approaches in which ethics are ignored and established on a kind of mechanic
human behaviour will exacerbate the current problems rather than overcoming global problems.
Basic principles of general ethics applicable to all areas of human life should also be adopted
by economy. In this context, ethics does not refer to only a piece of cream on a cake or a secondary
contribution to global market economy. It actually refers to a moral framework. The said framework
will have mutual commitment and interaction with the functions of basic economic institutions,
markets, governments, civil society and multi-national companies. Ethics does not mean the external
“moral speeches” made in vain yet the sincere commitment of all players to “moral behaviours”.
© Research Journal of Internat?onal Stud?es - Issue 19 (June., 2011) 92
Unfortunately, actualisation of such a mental shift in economy needs the pressure of pains that emerge
in times of crisis only (Küng, 2009).
Ethics should examine the boundaries of economy in detail and introduce new standards for a
fair society. It is not possible to achieve such a society by the renouncement of responsibilities by
singular players. An intellectual shift is required in order to inhibit boundless demands of companies
and shareholders and integrate ethical problems into efforts on economic profit. It should not be
forgotten that everyone bears responsibility more or less. Especially in the area of economy, such
responsibilities come forward. Naturally, there will be criticisms that such demands will have limited
effect considering the complex economic and social relations in globalized world. However, it
increasingly becomes an issue that a paradigm shift and an intellectual shift are needed to put the
boundless wild capitalism back on the right track. The only way to do this is to give up the hierarchy of
values focusing on only shares, profits and enhancement of some people’s welfare (in limited
numbers). Economy is desired to become in a position to serve human life, to harmonize with social
life and to have the capacity to meet the needs of existence. The said mental shift is more important
than all subsidies maintained by government to save companies in dire straits (Kampits, 2009).
In the market and capitalism, there is an internalized understanding of ethics such as the
commitment to contract or payment ethics. There is almost a consensus at this point. However, an
important ethical problem emerges after this point: To whom does a company owe a responsibility? Is
a company responsible to only its owners and shareholder or also its customers? To what extent a
company is responsible to its employees and ecological and social environment? (Woltron and
Liessmann, 2009). In principle, cheaters always gain advantage in the short-run yet they are at a
disadvantageous position at 90% of the times in the long-run. If a company pays bribes, it gains
advantage in the short-term yet it loses in the medium term. While the discussions in public consider
the greediness of big speculators as the sole responsible for crisis, they ignore the greedy acts of small
investors. However, if small investors did not believe high interest rates with a greediness by trusting
on such big players, speculative booms would not expand this much. At this point, it should be
remembered that greediness can be guided naturally and it can emerge as a result of educational
processes of players such as pressure groups (Woltron and Liessmann, 2009).
Today, some characteristics of financial world are against the entrepreneurial spirit, business
and financial ethics and thus they may contradict with basic principles of capitalism. Because the
financial world develops such financial instruments and practices that separate profit from risk, the
person who profits and the person who bears the risk become completely different persons. Financial
crisis shows us that both managers and foresighted businessmen in financial sector have noticeably
overstepped their bounds. For this reason, the existence of financial and economic system has become
in danger as a whole. On the other hand, this crisis can be utilized as an opportunity to lead a shift in
understanding in a way to permanently maintain the existence of financial and economic system and
re-guide such an understanding. Because social market economic needs this ideal behaviour in order to
maintain the social welfare as a whole. Naturally, a social consensus is required in order to make
responsible business within a model of foresighted businessman (Klink, 2010). The most serious
variation in the principles of foresighted businessman during the occurrence of financial crisis emerged
in responsibility of financial instruments for customers. Foresighted behaviour will not aim the highest
possible profit yet the most possible attractive rate between profit and risk (Klink, 2009).
5. Concluding Remarks
Global financial crisis has revealed the importance of ethics in economy and finance once again. It is
worrying that ethical values are forgotten when the things are good yet they become an issue in times
of crisis. It is a mistaken approach to consider business and financial ethics as concepts that come into
fashion at times. Considering that unethical behaviour of people is one of the causes of recent crisis,
the solution can partly be sought at this point. The focus of finance sector on a system based on the
© Research Journal of Internat?onal Stud?es - Issue 19 (June., 2011) 93
interests of company stakeholders rather than on system mainly based on shareholder value should be
regarded as a step taken in the right direction.
In a world where globalization gradually increases, it will be a disaster for all the developed
and developing countries, that economic competition results in the determination of ethical values at
the lowest common denominator. It will be a wrong approach to regard recent global crisis as a final
point that this mentality brought global economy. This crisis could be regarded as an initial point
which shows what could happen when ethics in economy is forgotten. If in globalized economic
environment, it could not be commonly compromised on globally accepted economic ethics and global
arrangement mechanisms, world economy will be inevitably led to chaos and crash.
The solution lies in forming proper game rules in economy and in forming an economic ethics
which will encourage economic actors and the society to behave according to the rules of the game.
Economic and financial crises in the past showed that it cannot be possible to prevent future crises only
by heavy arrangements. In a world economy where global rules of the game have not been set yet,
ethical issues have gained much more importance.
When one accepts global crisis as a result of a mentality change, a new mentality change will
be necessary for solution. When one looks at the steps taken after global financial crisis, precautions
which could change the mentality that led crisis, were not taken. The precautions taken up to now was
rather palliative and encourage the speculative processes as a result of same mentality after the crisis
whereas it is necessary to change economical mentality that led global economy to crisis. In some
languages, the world “crisis” means at the same time “opportunity”. If mankind has the virtue of taking
lessons from the past, he can prevent heavier crisis in the future changing this economic crisis into an
opportunity for economic mentality transformation. We should hope that this mentality change begins
by remembering that economics serve human life.
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doc_618415855.pdf
The financial crisis, which occurred in 2008 in the USA spred gradually through the entire world and transformed into an global economic crisis. In this study, the ethical causes underlying the greatest global economic crisis since 1929 Great Depression will be discussed with a different perspective.
© Research Journal of Internat?onal Stud?es - Issue 19 (June., 2011) 82
Global Financial Crisis from an Ethical Perspective
Mehmet Akif ?ÇKE
Assistant Prof, Istanbul University, Faculty of Political Sciences
Department of Public Administration ?stanbul, Turkey
E-mail: [email protected]
Tel:+90 0212 440 00 00/12271
Abstract
The financial crisis, which occurred in 2008 in the USA spred gradually through the entire
world and transformed into an global economic crisis. In this study, the ethical causes
underlying the greatest global economic crisis since 1929 Great Depression will be
discussed with a different perspective. The aim of the study is to focus on the ethical
elements underlying the financial and economic life without ignoring the systemic elements
causing the economic crisis. Firstly, the importance of ethics in the economic life will be
discussed. Then it will be pointed out that Protestant Ethics, which had an important role on
the formation of capitalism by gradually deforming resulted a mentality change that led to
today crisis. When one regards global economic crisis as a result of this mentality change,
it will be underlined that the solution for it will require a new mentality change. In order to
function the globalized markets properly and to ensure global competition, widely accepted
global arrangements must be formed. Unfortunately up to now this could not be done.
Economic ethics could be a leading actor in the formation of proper game rules for the
global economy, and in the formation of a system of values which could encourage
economic actors in behaving according to game rules. History of economics showed that
financial systems, which were exposed to heavier arrangements after crisis, went around
these arrangements after a while or provided a relaxation of rules and following those,
crisis occurred one after another. Therefore, a part of solution lies in the formation of
heavier arrangements and control mechanisms whereas another part lies in vitalizing ethical
values, which will help the acceptance of rules of the game by the actors.
Keywords: Global Financial Crisis, Economic Ethics, Protestant Ethics, Financial
Markets and Trust.
1. Introduction
Acceleration in the globalization since the early 90s has caused serious structural shifts in the world
economy, especially by increasing competitive pressure. It is observed that ethical issues are mostly
ignored in the economic space during this economic and financial expansion. When the economy is
making progress, ethics are seen as an insignificant issue like intellectual or luxury goods; however, at
times when economic and financial crises occur, ethical issues become one of the most important
topics at the top of agenda. It is also interesting that sensitivity to ethics adopted in time of crisis is
gradually abandoned and forgotten again when the things are going well.
General tendency in economics and management literature until 90s had been on the idea that
ethics and economy are mutually exclusive and ethics have no place in business. The acceptance on the
capacity of markets to effectively regulate themselves on their own underlies this idea. However,
today, the question regarding the behavioural aspect of company as a citizen in a social structure
© Research Journal of Internat?onal Stud?es - Issue 19 (June., 2011) 83
considering that it be called nowadays as “corporate citizen” is increasingly brought to the agenda
(Schmitt and Steige, 2007).
The main reason why ethics in economy and finance are increasingly brought to the agenda not
only in scientific researches but also in public discussions is the increasing explicit unethical
behaviours of organisations especially in developed countries and increasing negative impact of such
behaviours. Examples such as the cases of Enron, World-com and Bernard Madoff in the USA, the
scandals of Parmalat in Italy, Siemens in Germany should be regarded as incidents arising mainly from
unethical practices of the companies and their management. Moreover, it should be considered that
international banking system due to its negligent acts, especially US banks and credit rating agencies
because of playing mutual games with them had also caused the US subprime mortgage crisis. During
the latest financial crisis, the nations made hundred-billions of U.S. dollars of interventions in order to
save national banks and other financial intermediaries from bankruptcy as a result of unethical acts of
financial intermediaries and this situation laid the burden on taxpayers (Buchholz and et al., 2009).
These scandals unsettle the values system on which financial capitalism focusing on shareholder value
is established. The US-based financial crisis surrounding almost every part of the world since 2007 and
decisions and premiums taken by top executives of financial institutions who are regarded as mainly
responsible for this crisis establish the importance of ethics once again.
In this study, the objective is to take a different viewpoint to the latest global financial crisis
and establish the importance of this issue in terms of ethics. In this context, it is aimed to emphasize
the importance of ethics in economic and financial world. Economic and financial crises had also been
seen in previous times and several measures had been taken and arrangements had been made to solve
such crises. However, it has been observed that similar problems arise again after a while even if they
are in different appearances. It is known that finance sector loosens the arrangements in time as they
are tightened during financial crises; such looseness causes speculative booms and then financial crises
occur. In fact, financial sector is the most strictly arranged area in economic system. Therefore, it
increasingly becomes evident that the idea to overcome crises only through legal arrangements by
ignoring corporate and individual ethical issues is not a solution. Within this framework, it is beneficial
to discuss whether the solution of such problems is the adoption of ethical values by company
executives to make them act in line with arrangements and rules of the game.
2. Ethics and Economic Behaviour
It is not true to see the concepts of economic, business and financial ethics as coming into fashion at
times and being discussed only in intellectual world yet impossible to apply or being luxury in the
business world. The issues of economic ethics date back to the old times as the economics itself. In
Ancient Greece, Aristotle discussed ethics, politics and economy as a whole. Adam Smith, the father of
modern economics, was not only an economist but also a moral philosopher. From the perspective of
Adam Smith, the act of pursuing self-interest never means unlimited freedom and such an act is always
limited by the frame of individual, moral and public order. However, as soon as the theory of classical
economics is replaced by neo-classical economics, ethical perspectives have been consciously
overlooked or completely taken out of context (Sinß, 2010).
To our opinion, the idea that it is impossible to compromise economy and ethics with each
other, in other words, ethics is not compatible with competition and profit maximization is not
applicable. Economics ethics mostly deals with systematic thought of basic logic of economy within its
normative conditions and results. For this reason, it is possible to see philosophy and ethics as the
compulsory ground and complement of economy (Wallacher, 2009). Therefore, the knowledge that
economy and sectors are compulsorily connected with ethics is one of the basic facts. Thus, making
business is always related to human decisions and behaviours and never disconnects with standards of
judgement, institutions and attitudes. Then it is possible to develop an ethically responsible and
© Research Journal of Internat?onal Stud?es - Issue 19 (June., 2011) 84
humane economic order through the connections between sectors and moral values (Nothelle-
Wildfeuer, 2009).
“Aristotle’s Trias”, consisting of ethics, politics and economy, has been effective through long
ages since the beginning of economics. According to this, economy is a part of politics and this part
which is considered as apolitical economy is evaluated as a sub-heading of ethics. Classical pioneers of
political economy accepted the relations between free market economy and ethics and political
conditions. Classical economists like Adam Smith and John S. Mill were also among the leading moral
philosophers (Ulrich, 2006).
According to the liberal philosopher Adam Smith, social utility can be maintained if everyone
pursues their own self-interests. It inevitably springs to mind that whether the latest financial crisis
costing trillions of dollars confutes the said optimistic assumption. However, in this very point, it
should not be ruled out that Adam Smith underlines the need of market to a framework order in order
to function. Market and competition can serve people as required only if a good framework order exists
(Homann, 2007b).
In Adam Smith’s approach, the idea that people act based on their self-interests is all along
discussed in connection with the idea of competition. Since the self-interest of every company is to
maximize its profits, every company will try to operate in the market in a way to eliminate self-
disadvantages of competition. In case the competition is not applicable, the said act of self-profit will
be limited by other competitive players. Adam Smith and fathers of Social Market Economy had seen
long-term effectiveness of ethics in this very fact (Brodbeck, 2003). In this context, it can be
considered that competition has the capacity to function almost as a moral value and thus competitive
theory in general and economics theory in particular can indirectly become an ethics theory. Through
competition, interaction between self-centred motivations is allowed and therefore, the effort to make
self-interest or utility maximization is politically restricted. For this reason, by demanding and
promoting competition, economists actually speak of an ethical judgement at the same time (Brodbeck,
2002).
It is not true to criticize the fact of economic players, who pursue their own personal interests,
as a negative behaviour only by taking an approach of moral prejudice. If such a criticism is made, then
the fact that personal interest is the engine of free market economy is ignored. However, ruling the
personal interest out may cause serious welfare losses and will change the conditions of poor people in
the world for better. One feature of competition is that it mostly tends to eliminate itself when it is
given free rein. For this reason, competition inevitably needs a regulatory framework. In the absence of
such a framework, self-interest or competition may cause chaotic and subversive impacts (Homann and
Klink, 2009). It can be seen in the history of economics that such subversive impacts may even result
in the collapse of financial and economic system as a whole.
Rules, referees and a playing field are needed in order to make the market economy system
function well. However, if the players in the market do not want to adopt such rules, it is not possible
to produce a fair game. A good product and service development or economic activities come forward
if everyone pursues their own interest. However, as mentioned above, the idea of Adam Smith that
personal interest is always realized in a specific order is frequently ignored. Therefore, pursuing
personal interest does not necessarily produce good results and market players do not necessarily direct
their aim to social solidarity. Economic activity that maintains social welfare appears as an outcome
which is not aimed by players who individually purse their own personal interests. This is one of the
basic principles of Classical Economics. In consequence, it should be underlined that the statement
“market economy should be organized in a way to serve the common welfare” is applicable (Homann
and Klink, 2009). Within this frame, the consideration of companies on ethical issues as one of the
basic elements of sustainable development should not be regarded as an inexpedient approach. Ideally,
competition in the market should be operated within an order formed by commonly accepted rules
which are not necessarily arranged as law.
© Research Journal of Internat?onal Stud?es - Issue 19 (June., 2011) 85
In today’s world economy which does not contain a compromise on the rules of global
competition, it is not a correct approach to ignore ethics. When this is the case, financial crises are
anticipated to become more intense and frequent, and such crises will result in more degeneration in
corporate integrity. In fact, the problems in economics ethics gain more importance in case the legal
framework is inadequate or absent at all. In such cases, everyone should take responsibility as “the
subject of ethics”. Recently, there are civil society initiatives and public discussions that aim to stop the
tendency on determining moral values at the lowest common denominator (Brodbeck, 2003). Such
valuable efforts are encouraging; however, they are still not enough to create awareness to the core in
this field.
In previous years, global finance executives felt the need of adopting a new moral model in
order to conduct long-lasting reliable operations, as a result of new conditions created by the
globalization of competition. From this viewpoint, such behaviour can be regarded as beneficial as the
executives have started to adopt a moral model of foresighted businessman during this period in which
global arrangements remain incapable. The model of entrepreneur or manager who performs
responsible behaviours within the frame of adopted ethical values and conducts sustainable business
will be able to make positive contribution to the development of international social market economy
(Klink, 2007). However, global finance executives have not embraced such a way and caused world
finance system crash to a wall so to speak (Homann and Klink, 2009). Especially in the United States
of America and European Union Countries, it became possible to prevent the collapse of financial
system only through unorthodox strict government interventions. After the global crisis, the leading
developed countries became heavily indebted this time. This means that in case a new crisis similar to
the latest one occur, nations will have insufficient means of intervention to save the financial system.
After the recent financial crisis, the number of people who are doubtful about the superiority of
pure market discipline is increasing day by day. Therefore, one of the main duties of companies in the
future will be the development of ethical responsibilities. In a globalized world where the influence of
economy is ever increasing, the companies are not only the producers anymore. Regardless of whether
they want or not, the companies today are also policymakers. This new role is a challenge for
companies since along with more power, comes more responsibilities. At this point, there are specific
duties of policy. The policy should develop a system that encourages and requires ethical behaviour as
well as eliminates negative incentive systems (Sinß, 2010). In this context, the increase in discussions
made on economy and business ethics can be evaluated as a development, which is promising yet not
enough.
3. The Spirit of Capitalism, the Protestant Ethic and Mental Shift
The recent financial crisis has clearly showed that the stability and sustainability of free market
economy are not secure in itself. The emergence of global capitalism has brought along several risks
that present completely different characteristics. At this point, it should be underlined that the efforts to
explain the market economy crisis in a country or region within the frame of one-way causal relations
will be superficial. During the crisis, recrimination among the parties is observed as the easiest way
generally adopted. However, even a disruption that occurs in one of the areas of economy, politics and
ethics can pose serious problems to companies, banking systems and even market economy system as a
whole (Küng, 2009).
The financial and economic crisis which was spread to the world from the US is now seen by
many people as a social and political turning point that may result in deep impacts. Ralf Dahrendorf, a
noted sociologist, attributes the recent financial crisis to deep mental shift experienced in societies. The
main element of this intellectual structure is formed by economy and the prevailing viewpoint in
society. It is stated that the mental shift experienced in previous years lies behind the recent crisis. The
said shift is the move from “savings capitalism” (Sparkapitalismus) to “capitalism of easy credit”
© Research Journal of Internat?onal Stud?es - Issue 19 (June., 2011) 86
(Pumpkapitalismus). Therefore, it is highlighted that the reactions against this crisis may also give rise
to a new mental shift (Dahrendorf, 2009a).
Undoubtedly, the concept of Protestant Ethic developed by Max Weber is the most referenced
issue in the development of capitalism or modern national economies. In the development of modern
economies, Protestant Ethic or ethics of savings in other words did not come to the forefront.
Individuals work to save money for the future. This understanding of saving is a prerequisite for
investments that will stimulate the process of modern economic development. The concepts of
working, hardworking and economizing had constituted the life approach which was dominant both in
the Continental Europe and the US (Dahrendorf, 2006). To put it another way, Weber attributes the
success and dominance of western capitalism to the rational control of greediness that lies behind the
human behaviour, and bases this rational control on religion or more precisely on Protestant Ethic
which highlights hardworking and being economical (Jain, 2007).
However, especially after the World War I, a mental shift has been experienced in almost every
part of the world beginning from the US. As the societies have started to focus on consuming, new
consumption patterns have been emerged and as a result, Protestant ethic and Puritan attitude have
eroded (Dahrendorf, 2009b). Daniel Bell is the first person who pointed out the said mental shift and
defined this shift in various aspects (Bell, 1976). Bell addressed to this problematic issue within the
cultural contradictions of capitalism. In this context, capitalist logic, on one hand, demands the
adoption of old values such as high-level work discipline, obedient and provident behaviour in order to
realize necessary investments for production. On the other hand, capitalist economy needs passionate
consuming behaviour. The said consuming behaviour depends in its essence on riskless customers who
eagerly consume the products introduced by capitalist mechanism to the market which is already
saturated with excessive production. Stimulation of this production means to attain “materialistic
hedonism” and eudemonism with an upward trend. In other words, developed capitalism demands the
elements of the Protestant ethic at the workplace, and the exact opposite outside work, in the world of
consumption (Dahrendorf, 2009b). As it is seen, there is too much difference between the person who
makes profit maximization though rational calculations and the costumer who pursues pleasure.
Therefore, it is clear that these two characters cannot harmonize with each other and unite in one
character (Jain, 2007). As a result, capitalist economic system destroys its own intellectual foundations
in the course of time (Dahrendorf, 2009b).
According to Bell, the understanding of capitalist protestant rationality is undermined by itself.
Because the capitalism that is not possible to harmonize with business ethics reproduces self-
realization which is not subject to limitation, hedonistic ethics and individual freedom. Therefore,
while business ethics prevails as it protects its existence in economy, the consequences of ethics in
politics and culture are questioned. On the one hand, in the organization of production and work, the
system today demands provident behaviour, industriousness and self-control, dedication to a career and
success, while on the other hand, in the realm of consumption, it fosters the attitude of “carpe diem”,
prodigality and display, and the compulsive search for play (Bell, 1975). That is to say that economic
system is established on specific values yet application of these values is likely to result in the collapse
of system.
Today, most people make consumption by depending on borrowed money or pumped money,
not on their savings or real income. However, it is not fair to blame the institutions, which turn a blind
eye to the facts or directly promote the developments, for this transition. Large numbers of everyday
citizens are also responsible for such developments. It is not adequate to see the recent global crisis as
the crisis of banking sector and financial institutions. This crisis also shows itself as the crisis of a
specific human behaviour which can be summarised as “I consume now but I’ll pay later!”
(Dahrendorf, 2010).
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4. Ethical Fundamentals for Global Financial Crisis
The financial crisis has made us understand that the issues such as overall purpose of economy and the
importance of human life are about to be forgotten. People, who only focus on profit and shareholder
value by only pursuing self-interest and trusting Adam Smith's “invisible hand”, have suppressed
human dignity, freedom and justice for a period. Inexistence of a consensus on the causes of recent
financial crisis makes it difficult to develop effective solution strategies. Therefore, it is useful to reveal
the ignored issues in the course of time by going back to the basics of making business (Nothelle-
Wildfeuer, 2009).
Speculative crises have occurred almost for 400 years. It is seen that the humanity still does not
have a solution for this. At this point, it is possible to say that the potential of progress made by
humanity in technical researches has not been attained in social, political and financial fields at the
same level. Therefore, the incapability of humanity in taking lessons from crises can be seen in
recurrent speculative mass psychos in history. Humanity loses its experience about crises after two
generations. However, the recent crisis has shaken the financial structure to its foundations. This
economic crisis is also a psychological issue. Therefore, the success of interventions which were made
in the form of government supports and conjuncture policies in order to keep the financial and
economic structure alive is substantially based on the ability of large number of people in guiding their
psychological senses to the correct direction. Actually, it is also likely to approach the recent crisis
from a different standpoint. Before the crisis, there was a period in which upswings were experienced
for a long time. In fact, it is possible to describe today’s big crisis as a return to the normal. Over the
last 10-15 years, ancient ideal on the correct limit has been lost since many players went over the limit.
Therefore, the crisis can also be regarded as a development that will help us to readopt more
convenient understanding of reality (Woltron and Liessmann, 2009). Ultimately, the crisis should be
accepted as an opportunity to make humanity come back to earth and necessary steps should be taken
in order to prevent the recurrence of similar mistakes by taking lessons from the past.
The FED, central banking system of the United States, has been accused since 2001 of rapidly
decreasing the interest rates and thus, setting the grounds for financial crisis by promoting asset prices
booms and desire for extreme risk. On the other hand, it is stressed that the credibility of
countercyclical Keynesian monetary policies which are frequently applied in times of recession has
decreased. However, it is observed that after the financial crisis, criticisms in the public mainly focus
on the unlimited greediness and morally misconducts of managers. Significant part of the elite who
participates in the discussions made on the causes of financial crisis argues that it will not be a solution
to apply stricter arrangements to the markets which are already instable in themselves. It is clear that
this opinion supports Neoliberalism which is built on the effectiveness of markets. Dissenting authors
argue against the effectiveness of markets. According to them, the efficient-market hypothesis in
financial markets is probably one of the biggest and expensive delusions of history of economics
(Schuberth, 2008).
The increasing dominance of Neoliberal approaches in economics has caused the economics
drift away from the needs of real life. As economics surrounded all over the world extremely, it has
been excluded from social relations and even it has been emphasized that social relations felt the need
to be a part of economic system. As a result, this situation resulted in the biggest economic crisis after
the great depression in 1929. The proliferation of new financial derivative instruments, hedge funds
and short-run high-rate profits have combined with various causes and led to a collapse in financial
markets. In fact, some economists mentioned before about the possible occurrence of this collapse but
such thoughts did not get the attention that they deserve. The values which are stimulated with the help
of digitalization of real life have started to be fictitious increasingly. These values have become the
symptom of a symptom of something for which a real response almost cannot be demanded. Therefore,
it is not surprising that some relations such as intemperately increasing wages of bank managers and
bosses of international companies have become meaningless. Nobel Economist Ronald Coase likens
© Research Journal of Internat?onal Stud?es - Issue 19 (June., 2011) 88
today’s economy to a floating theoretical system which is almost not interested in what is happening in
real world. Considering that economy has been separated from all other areas of life, it becomes
possible to perceive the sickness reflected in the greediness of speculators, managers and shareholders
(Kampits, 2009).
Karl Homann stresses that the main problem in financial crisis is not the greedy acts of
executives but the non-operative system of rules. According to Homann, the approaches that
completely blame the greedy acts of executives for the crisis and try to hold individuals responsible for
this situation are not applicable. Considering that these individuals work in social function systems
with strong internal logic, it is not fair to regard them as the sole responsible. Against the laws of
justice, politics, economics, it is not likely for an individual with a claim of individual morality to make
much impact (Homann, 2009). On the other hand, there are criticisms that the logic of capitalist system
apparently allows excesses of greed. For this reason, this raises the question whether the market is the
right model as an institution. However, since the replacement of market is not certain, such criticisms
become meaningless (Homann, 2007a). Therefore, it is more applicable to pay more attention to make
the market adopt fair game rules.
After the recent financial crisis, it is observed that there are increasing demands on the ethics
and sustainability of financial investments. Today, almost everyone agrees that the focus only on
maximum profits is the main reason that lies behind the recent financial or economic crisis. There is an
increasing consensus that financial markets and economy need ethics and it is required to focus on the
requirements of sustainable development. Economics is not a natural law. Quite the contrary, it occurs
as a result of social processes and can be structured and managed in principle. Therefore, all social
players, whether in the position of voter or consumer or investor, are invited to contribute to
formulization of financial markets and economy (Gabriel, 2009).
One absent element today is the approach to take healthy measures to the idea of one-
dimensional advantage and profit maximization. Another absent element is the connection of economic
logic structure with human responsibilities such as good manners, responsibilities, solidarity and
justice. Yet, in terms of ethical problems, the first thing that comes to people’s minds is individual
ethics, not the corporate ethics. However, this is not a logical alternative from the perspective of
economics ethics. The question here is the mutual interaction between individual attitude (individual
ethics) and corporate conditions (incentive and restrictions). Although ethics-based responsible
decisions and practices are supposed to be desired on the ground of specific individual logic, it should
be reasonable for each individual in terms of corporate self-realization pressure (Ulrich, 2009).
As it is known, financial sector has very basic functions in economy such as distribution of
risks, hedging, collection of savings, financial capital and liquidity realization. However, the recent
financial crisis led to some criticisms that financial sector created risks or intensified them rather than
managing the risks as desired in social environment. Such a comment is applicable for subprime credits
and securitised derivative financial instruments. However, it is wrong to interpret this situation
financial sector has completely become incapable of risk management. Undoubtedly, it is likely to take
better measures for similar developments by taking lessons from the recent crisis. In free market
economies, it is clear that crises will occur afterwards. However, recent crisis shows the importance of
integrating more stable and risk limiter negative feedback mechanisms into the economic system. In
order to succeed through such a practice, market players should be encouraged to comprehensively
adopt “sense of game” which gathers a proper understanding of both basic principles of economics and
appropriate division of responsibility (Lin-Hi and Suchanek, 2009).
The purpose with the assertion that ethical problems set the ground for recent financial crisis is
absolutely not to ignore or underestimate the importance of systemic factors causing the crisis. The
purpose is to discuss the crisis with its systemic factors within a cultural and social frame and
comprehend it from this point of origin. Another attention-grabbing issue is that after the crisis, almost
everyone has become complainant about the symptoms of morally distorted economics. These issues
can be summarized as follows (Ulrich, 2009):
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i. Greedy acts of investments towards maximum return on equity are criticized. Such greedy acts
have become a kinds of “desire”, a mental stimulation, and this stimulation has started to be
treated by business manager and economy policies as a restrictive condition, in other words, as
“we have no other option”.
ii. The doctrine of “Shareholder Value” has been exposed to criticisms. People have started to be
doubtful about the corporate management standards for good management in line with this
doctrine. The underlying cause of such situation is that the said standards have emerged as the
main reason for unfair trade practices of large joint stock companies during the recent crisis.
iii. Commercial models of financial markets, which can be defined as “Greater Fool Theory” of
today’s market, cover, securitize and distribute the risks. Whoever purchases them is guilty.
iv. There are criticisms on the increasing deviation on the understanding of players responsible for
economy and overlooking of such players on the difference between “earning money
humanely” and “earning money with impunity”.
4.1. The Importance of Trust in Financial Markets
One of the hottest topics during the financial crisis has been the loss of trust. Many companies then
have been strategically obliged to earn company stakeholders’ trust back and to manage relations with
these stakeholders more effectively. The issue of earning the trust back can be interpreted as putting up
the acceptance on the single objective of managers to increase the value of shareholders. Company
stakeholders, which include workers, customers, suppliers, society, media, various organizations,
government and non-governmental organizations, have the power to help companies in the re-
development of their credibility. As it can be seen in many examples, specific efforts of management to
increase shareholder value cannot be the leading force to achieve success in the long-term. However, it
can contribute to appear as a “good” company in the short-term (Leisinger, 2009).
It is fair to say that after the global financial crisis, societies have lost their trust in economic
system. For this reason, it is useful to examine the developments in recent crisis from the perspective
of economy and financial ethics. After the crisis, appropriate “rules of the game” will not be enough
bring the system back to its stability. Because the arrangements made after the previous crises had not
been sufficient, loosened in the course of time or various ways had been found to beat them and such
arrangements set the ground for new crises. Therefore, making new arrangements which are considered
to stable the system will not be sufficient in the long-term. More importantly, it will be significant as
players and large numbers of people adopt “sense of play” in a way to make rules of the games gain
required legitimacy (Lin-Hi and Suchanek, 2009).
For many years before the financial crisis, almost every players such as banks, financial sector
and its workers, low-income citizens and landlords gained advantage from securitized real estate trade.
As a result of success and profit stories in this field, almost everyone desired to be a part of this game
and gain advantage. However, this game turned out to be unsustainable in the course of time. One of
the most destructive damages of the crisis has been the lost of trust in market economy which is
thought as promoting selfishness, profit greediness and causing deep harms. In order to eliminate this
loss of trust, it is required to restore the economic system in terms of stability in which the expectations
of people on social cooperation including mutual advantages are met (Lin-Hi and Suchanek, 2009).
The human history shows us that through the development of a system of rules, several issues
more than estimated can be formulated. The correct actions made after the financial crisis can be listed
as the establishment of new rules on payments made to managers, holding administrative boards of
banks as responsible for their damages limited to their own private wealth, elimination of tax heavens
and integration of funds into the system such as hedge funds except the ones outside the supervision of
regulatory auditing companies. In this context, new rules established for the development of an order
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for markets are supposed to improve the operation of market, not to obstruct or block it (Homann,
2009).
In a modern world, it can be stated that market economy looks like the best system that makes
global common life possible among the systems developed up to this point. However it is not very
likely to state that market economy system is an excellent system in practice. For the adequate
operation of market economy as desired, it is required to develop appropriate global rules of the game.
Especially at the point where the resources of nations in global economy end, companies assume a new
role. Companies are supposed to be active in the formation of global rules of the game in order to
secure an agreed competitive system for their own interest. Social developments in the future will be
based on the understanding of globalized societies of 21
st
century on the introduction of conditions and
development of restrictions from such conditions (Lin-Hi, 2007). Undoubtedly, economy and business
ethics will continue to make important contributions at this point.
4.2. The Impact of Personal Interests on Financial Crisis
The selfishness and the desire to earn more income which led the world to recent financial crisis are
embraced by many people. Not only the managers of banking and real estate sectors and fund
managers, but also politicians, credit rating agencies, regulatory and auditing institutions, media and
many small investor have played this “game” causing the financial crisis. Societies are increasingly
unwilling to accept the externalisation of costs by companies and as a result, they start to question the
legitimacy of market economy system. The said pressure of legitimacy is naturally felt by the company
and endangers their acceptance in social area. Companies also feel that they are punished by public
because of their individual mistakes. Considering the empirical conditions, companies face with a
contradiction that their ethical operations are likely to be abused by their competitors. The challenge
today for the responsible companies is to rationally overcome this contradiction without being the
object of competitive disadvantages. In other words, the company should organize the responsibility
thoroughly and specific powers are needed to achieve such an organization. Thus, companies today
have responsibilities in the formation of a fair competition globally. By doing so, companies help
societies accept the market economy and have become invested in conditions that are required for their
accomplishment in the long-run (Lin-Hi, 2007).
Issues such as selfishness and fear of people on losing their wealth can be considered as “self-
interest”. As mentioned above, free market economy is established on the competition of economic
players pursuing their self-interest and by this way, it is recognized to achieve social welfare. However,
since 1980s, the acts of self-interest have endangered social welfare rather than promoting it. Along
with the recent global financial crisis, economy word and societies have been shaken to their
foundations. Markets collapsed and national economies faced with the danger of collapse. The current
issue became the determination of the blameful for crisis and financial managers who act with their
excessive greediness and selfishness were accused of putting economic system on the brink of abyss. It
is not useful to consider the problem solely based on the selfish behaviours of managers. The main
problem lied behind the morality, ethics and description of people in institutions such as occupational
training, professional life, family and education. In the course of crisis, many small investors, credit
consumers, investors, administrative boards and supervisory boards have been interested in higher-
yielding new financial assets. However, it is observed that this interest transformed day by day into an
uncontrolled greediness (Dilk, Gürtle and Littger, 2009).
If people do not have proper information about the market, then they become tend to head
towards more speculative and risky transactions. If people are not confident about the information they
have, they act in line with the acts of other people and consequently, they adopt herd psychology.
When a state of profitability or fear of loss occurs, many people break their fades. As a result, almost
everyone becomes incapable of understanding the way that markets operate and everyone becomes in
the danger of loss. In this chaotic environment, guilty people such as Bernard Madoff and his
supporters who trusted and helped him with blind obedience to collect money through snowball
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strategy find wide spaces for themselves. However, it is not enough to interpret the situation as people
who trusted and deposit money to Madoff and the others like him were a victim of their greediness. In
fact, the better part of these people is not greedy; they just took their self-interest into consideration
rightfully. Apparently, people, mainly together with the effect of specific conditions, can start to act
based on herd psychology (Obermülner, 2009).
It is certain that the abovementioned issues contributed to the recent financial crisis. However,
it is not very likely to prevent some basic motivations only through moral speeches as they guide
human behaviour. Actually, the solution lies behind the inhibition of said self-interests through self-
commitment, in other words to commit the self for the self interest. Inhibition of self-interests by
managers within the frame of self-commitment is supposed to be compulsory for companies to commit
themselves in line with the ethics (Suchanek and Lin-Hi, 2010). Under the light of all statements, it is
possible to say that the solution is not to prevent self-interest or greediness. It is needed to accept the
self-greediness which is a human instinct yet to guide it for the good of society (Dilk, Gürtle and
Littger, 2009). Therefore, self-commitment means the commitment to the rules by everyone in a way to
enable all to make good moves in this game.
In order to achieve a healthy self-commitment, it requires to understand the underlying relations
of game and to have an adequate understanding of game. In other words, if there is no anticipation that
one becomes disadvantageous due to the acts of other people, individuals will adopt an understanding
of game proper to the rules of game. Due to the high rates of anonymous and abstraction today, it will
not be possible to establish the said understanding of game among players on a pure foundation. It is
needed to maintain the trust among players through the enforcement of generally-accepted and
sanction-based rules of the game (Broock and Suchanek, 2009). In the course of recent financial crisis,
many available rules of the game have not been considered as a kind of capital that will provide high
profits for all players in the long-run. Quite the contrary, such players regarded the rules as external
restrictions made against self-interests. As a result, the underlying problem is that rules of the game are
perceived as the restriction of individual freedom, although they constitute the basic conditions for
(sustainable) freedom (Lin-Hi and Suchanek, 2009).
A valuable economics ethics should consider the existing conditions and combine them with
normative ideals within a controlled relation. The main problem is how to make moral values valid
under the conditions of modern society. In modern societies, it is not enough now to trust on the
heuristic discernment only and this shows the importance of problem. At this point, moral warnings for
individuals to do or not to do some specific acts may cause particular problems if self-interests are not
taken into consideration when such warnings are made. Therefore, there is no answer for question of
whether the individuals are required to act against their self-interest for the good of morality. The duty
of economics ethics will be the protection of players from negative consequences and establishment of
opportunities that will make them perform an evaluation between self-interest and moral values within
a symbiotic relation. (Lin-Hi, 2007) As a result, it is a fact that there are areas of conflict between
individual freedom and social structure of economy. Over the last decades, this conflict relation has
been interpreted as the liberalization, deregulation and privatization of economy (Büscher, 2008).
However, the recent economic crisis will intensify the criticisms on the validity of such interpretation.
In my opinion, economic approaches in which ethics are ignored and established on a kind of mechanic
human behaviour will exacerbate the current problems rather than overcoming global problems.
Basic principles of general ethics applicable to all areas of human life should also be adopted
by economy. In this context, ethics does not refer to only a piece of cream on a cake or a secondary
contribution to global market economy. It actually refers to a moral framework. The said framework
will have mutual commitment and interaction with the functions of basic economic institutions,
markets, governments, civil society and multi-national companies. Ethics does not mean the external
“moral speeches” made in vain yet the sincere commitment of all players to “moral behaviours”.
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Unfortunately, actualisation of such a mental shift in economy needs the pressure of pains that emerge
in times of crisis only (Küng, 2009).
Ethics should examine the boundaries of economy in detail and introduce new standards for a
fair society. It is not possible to achieve such a society by the renouncement of responsibilities by
singular players. An intellectual shift is required in order to inhibit boundless demands of companies
and shareholders and integrate ethical problems into efforts on economic profit. It should not be
forgotten that everyone bears responsibility more or less. Especially in the area of economy, such
responsibilities come forward. Naturally, there will be criticisms that such demands will have limited
effect considering the complex economic and social relations in globalized world. However, it
increasingly becomes an issue that a paradigm shift and an intellectual shift are needed to put the
boundless wild capitalism back on the right track. The only way to do this is to give up the hierarchy of
values focusing on only shares, profits and enhancement of some people’s welfare (in limited
numbers). Economy is desired to become in a position to serve human life, to harmonize with social
life and to have the capacity to meet the needs of existence. The said mental shift is more important
than all subsidies maintained by government to save companies in dire straits (Kampits, 2009).
In the market and capitalism, there is an internalized understanding of ethics such as the
commitment to contract or payment ethics. There is almost a consensus at this point. However, an
important ethical problem emerges after this point: To whom does a company owe a responsibility? Is
a company responsible to only its owners and shareholder or also its customers? To what extent a
company is responsible to its employees and ecological and social environment? (Woltron and
Liessmann, 2009). In principle, cheaters always gain advantage in the short-run yet they are at a
disadvantageous position at 90% of the times in the long-run. If a company pays bribes, it gains
advantage in the short-term yet it loses in the medium term. While the discussions in public consider
the greediness of big speculators as the sole responsible for crisis, they ignore the greedy acts of small
investors. However, if small investors did not believe high interest rates with a greediness by trusting
on such big players, speculative booms would not expand this much. At this point, it should be
remembered that greediness can be guided naturally and it can emerge as a result of educational
processes of players such as pressure groups (Woltron and Liessmann, 2009).
Today, some characteristics of financial world are against the entrepreneurial spirit, business
and financial ethics and thus they may contradict with basic principles of capitalism. Because the
financial world develops such financial instruments and practices that separate profit from risk, the
person who profits and the person who bears the risk become completely different persons. Financial
crisis shows us that both managers and foresighted businessmen in financial sector have noticeably
overstepped their bounds. For this reason, the existence of financial and economic system has become
in danger as a whole. On the other hand, this crisis can be utilized as an opportunity to lead a shift in
understanding in a way to permanently maintain the existence of financial and economic system and
re-guide such an understanding. Because social market economic needs this ideal behaviour in order to
maintain the social welfare as a whole. Naturally, a social consensus is required in order to make
responsible business within a model of foresighted businessman (Klink, 2010). The most serious
variation in the principles of foresighted businessman during the occurrence of financial crisis emerged
in responsibility of financial instruments for customers. Foresighted behaviour will not aim the highest
possible profit yet the most possible attractive rate between profit and risk (Klink, 2009).
5. Concluding Remarks
Global financial crisis has revealed the importance of ethics in economy and finance once again. It is
worrying that ethical values are forgotten when the things are good yet they become an issue in times
of crisis. It is a mistaken approach to consider business and financial ethics as concepts that come into
fashion at times. Considering that unethical behaviour of people is one of the causes of recent crisis,
the solution can partly be sought at this point. The focus of finance sector on a system based on the
© Research Journal of Internat?onal Stud?es - Issue 19 (June., 2011) 93
interests of company stakeholders rather than on system mainly based on shareholder value should be
regarded as a step taken in the right direction.
In a world where globalization gradually increases, it will be a disaster for all the developed
and developing countries, that economic competition results in the determination of ethical values at
the lowest common denominator. It will be a wrong approach to regard recent global crisis as a final
point that this mentality brought global economy. This crisis could be regarded as an initial point
which shows what could happen when ethics in economy is forgotten. If in globalized economic
environment, it could not be commonly compromised on globally accepted economic ethics and global
arrangement mechanisms, world economy will be inevitably led to chaos and crash.
The solution lies in forming proper game rules in economy and in forming an economic ethics
which will encourage economic actors and the society to behave according to the rules of the game.
Economic and financial crises in the past showed that it cannot be possible to prevent future crises only
by heavy arrangements. In a world economy where global rules of the game have not been set yet,
ethical issues have gained much more importance.
When one accepts global crisis as a result of a mentality change, a new mentality change will
be necessary for solution. When one looks at the steps taken after global financial crisis, precautions
which could change the mentality that led crisis, were not taken. The precautions taken up to now was
rather palliative and encourage the speculative processes as a result of same mentality after the crisis
whereas it is necessary to change economical mentality that led global economy to crisis. In some
languages, the world “crisis” means at the same time “opportunity”. If mankind has the virtue of taking
lessons from the past, he can prevent heavier crisis in the future changing this economic crisis into an
opportunity for economic mentality transformation. We should hope that this mentality change begins
by remembering that economics serve human life.
References
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