Can Capitalism Be Moral after the Financial Crash?

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The 2008 financial crash was as much a moral crisis as a financial one. It exposed a major weakness in the capitalist system, and it was not principally financial, but human. Markets have an effect on morality, and this led to the financial crash. In its aftermath, ethics within economics has yet to be resolved. This failure to hold accountability will result in another crisis. There must be a re-evaluation at the heart of what economics stands for.

Markets leave their mark

A common critique of capitalism is that it perpetuates greed, or worse causes greed. This is, at best, a partial diagnosis. Blaming greed debases the problem of markets. Rather, the “logic of [economics] no longer applies to material goods alone, but increasingly governs [morality]” (Sandel, 2012). The character of Gordon Gekko in the film Wall Street is the embodiment of market values replacing human principles. “Greed is good” (Wall Street, 1987) highlights not only a toxic mindset, but also a moral failing at the heart of the financial crash: economic principles replacing ethical standards.

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After the Cold War, capitalism was the surviving, and seemingly triumphant, economic system. The triumph of capitalism creates an unrivalled free market economy that has blurred the line between market and social aspect of life. This hazardous faith in the market and deregulation results in the market degrading life into a product. Market values crowd out traditional, social values. This leads to social disintegration, what Émile Durkheim refers to as ‘anomie’ (Durkheim, 1993). Durkheim posits that the effects of capitalism, in the form of 19th-century European industrialisation, lead to a condition in which social moral standards are non-existent. This effect has only continued since, and has been enhanced from the 1980s. Durkheim believes that the labour force will suffer at the hands of the “malady of the infinite” (Durkheim, 1993). What he means by this is that unlimited economic desires will only become more intense and lead to a moral collapse in society. There is an “expansion of… market values into spheres of life where [it does not] belong” (Sandel, 2012).

Market triumphalism promotes individualism. This invokes Adam Smith’s The Theory of Moral Sentiments (1759) that the pursuit of self-interest leads to the common good. Yet, the economic man’s character has fundamentally changed since Smith. Smith places significance on moral character in economics; he sets this out in stating (Smith, 1776): “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

“Morality stems from our sentiments, not our reason” (Collier, 2018); there is an intimacy within society that creates an altruist perspective, and thus leads to the common good. However, given that society is no longer as integral, the pursuit of self-interests now leads to individual benefit. The consequentialist lens of capitalism is no longer concerned with maximising benefit for others. Instead, the objective of self-interest has become egoist in nature. The market values of profit only relate to private not social welfare. The principles of capitalism now rule culture. “During the era of market triumphalism…, without realising it, without deciding to do so, [society] drifted from having a market economy to being a market society” (Sandel, 2012).

This self-concerned mindset is evident in the build-up to the financial crash. Greed only becomes a problem when it is channelled into individualism. Market values infected morality, and so those in finance only viewed their operations as an instrument of profit. On a basis of a solitary maximising ideology a moral failure began to take place in markets. Bankers lying to sell debt indicates a never-ending downward cycle. “The culture of ‘pass the parcel’” (Costa, 2011) implies a disregard for humanity, because faith in capitalism, promised that the result would always be economic prosperity. Moral hazard no longer regulates financial activity because moral behaviour became over-ruled by economic behaviour. New ethical values arise as a product of capitalism, and thus market ideals replaced morality with a maximising utility. The mindset of ‘the ends justifying the means’ illustrates how markets taint morality. Firms were free to act as selfish as they could within the law, absolved from any moral obligations. The ethical foundation that Smith assumed was lost. “We dehumanised the market and, in turn, it dehumanised us” (Sandel, 2012).

Too big to fail

‘Too big to fail’ was the phrase that came out of the 2008 crisis. Governments were forced to use taxpayer money to rescue banks and other institutions that were so dominant in the financial system that their collapse would threaten the entire economy. This potential for extreme negative externalities can place blame on the banks, yet the “financial crisis discredited governments more than banks” (Anielski, 2007).

Government failed to hold institutions morally accountable, and this still continues. The lack of punishment against banks indicates the futile power that politics has over economics. The era of market triumphalism started with Thatcher and Reagan and continued with Blair and Clinton. Their conviction that markets, not government, were the future of prosperity was an unchallenged assumption, and ever since “market mechanisms are the primary instruments for achieving public good” (Frederick R. and Molly S., 2015). Political faith in market values enabled capitalism’s influence. The faith in market triumphalism forced politics to uphold economic values. The moral vacancy within politics stems from economics’ refusal to offer public discourse on the ‘good life’. This Aristotelian thought posited that government should lead society to an ideal. The aspiration of the ‘good life’ was rooted in fulfilling purpose and creating happiness, but the rise and power of economics changed this goal. The appeal of economics is its non-judgemental stance towards values. The reluctance to engage with ethics is at the heart of market reasoning, and thus has drained moral standard influence over the public.

Deregulation symbolises morality being pushed aside. Valorising irresponsible and unethical behaviour creates a vacuum of morality within capitalism, thus creating the climate for a financial crisis. As Hyman Minsky argued crashes are integral to financial markets. Minsky claimed that economic stability would give rise to a speculative bubble in which more risks will occur. The cause of these risks is the absence of morality within borrowing, which leads to an accumulation of debt and thus instability. Moral vacancy has the intention of avoiding the notion of the ‘good life’, but this reluctance to admit this led to market triumphalism’s crash and the persistent grip of market reasoning. The ‘Ponzi borrowers’ are the embodiment of market values affecting judgement. Borrowing based on the belief that the market leads to the subprime crisis. This has only been worsened by the lack of accountability after the crash, which will only perpetuate such immoral behaviour. “The spectacular failure of financial markets did little to dampen faith in markets” (Sandel, 2012).

Those that took such unethical, reckless decisions received no punishment. Those who suffered were the ones that had to bail out these banks. The inadequacy of the regulation authorities in administering justice illustrates that institutions became too powerful - immune to moral law. Governments and regulation authorities enabled the financial crash. Capitalism disconnects politics from morals; financial confidence overrules moral hazard. Firms that know they are ‘too big to fail’ are less likely to adhere to moral obligations within regulation. The swift removal of such regulation implies that governments are too reliant on banks to stimulate the economy. Yet, these banks do not care about the whole economy. They are run by those who are self-interested, caused by the non-existence of legislative power due to market-driven politics.

“The near collapse of [capitalism]... prompts a reconsideration of markets” (Sandel, 2012). The absence of morality is the appeal of economics, and its danger. The answer is not regulation, but reform.

Capitalism with a conscience

Reform must change the framework of capitalism. There is an ideal infrastructure within capitalism, one that allows people to make their own choices. Yet, there must be an understanding that such choices have consequences. Economics in reality, as Keynes said, is a “method rather than a doctrine, an apparatus of the mind, a technique of thinking”. Therefore, the target must be the mindset behind economic decisions.

In The future of capitalism (2018), Paul Collier posits that “utilitarianism became the intellectual underpinning of [capitalism]” (Collier, 2018). This maximising ideology can be seen in Milton Freidman’s belief that the only responsibility of businesses is to their stockholders, advocating to make as much profit as possible. Capitalism has used utilitarianism to justify actions treating life as a commodity and a means of profit. This has led to a crescendo of immoral behaviour, which has been valorised by the consequentialist lens of utilitarianism governing values. Once realising, the effects of capitalism, there must be a deliberation on what values are controlled by. Such deliberations touch, unavoidably, on competing conceptions of the ‘good life’. Economics operates on moral terrain, so “market reasoning must become moral reasoning (Sandel, 2012)”.

The era of market triumphalism has coincided with a time when there has been a vacuum of moral substance at the heart of decision making. Capitalism does not necessitate perfect equality, but it must now require a shared notion of a common life. To be grounded in reality is not to appreciate nuance through subjectivity, but rather some objectivity. If we begin to live more authentic lives, truth to both an inner and outer nature, then society can function on a foundation of morality. Thus, such thinking must be centered on not a utilitarian compass, but rather one of virtue.

According to Friedman “the world runs on individuals pursuing their self-interests”, therefore people are always going to push the market to its moral limit. “Capitalism is not an ideology, but an operating system” (Srinivasan, 2016) - only as good as those who practice it; to influence that mindset, there must be a sense of virtue at the heart of economic logic. Such virtue can be seen in the maxim of Immanuel Kant: “Act in such a way that you treat humanity, whether in your own person or in the person of any other, never merely as a means to an end, but always at the same time as an end.” (Kant, 1996)

It is imperative to reconnect markets with the values and morality of the practitioners. To recover a moral spirit can be found in the virtue of a shared humanity, one that precedes and surpasses any regulation. This self-regulation must be internal so that a sustainable and effective compass can be established. “Economic policy does not follow from economic theory” (Craig Freedman and David Colander, 2018), yet what an ethical theory can do is not directly change people, but provide a framework in which they are formed. Capitalism must have the “intention… to offer a measure of useful guidance” (Craig Freedman and David Colander, 2018).

What economics must do is advise, “to influence people’s preferences for the better”. Values of virtue must be elevated to the forefront of economic decision-making enabling individuals to make complex moral judgements. This is what has been called ‘capitalism with a conscience’. This seeks not to change the logic of economics, but re-evaluate it towards a shared moral sense creating an ethical framework that people can adhere to. “Capitalism is not an entity that has a devious underlying purpose” (Goodman, 2013); capitalism is the actions of individuals, therefore economics must become a technique of thinking. Centering on virtue builds a suitable and sustainable foundation, no longer assuming, as economics has done, that there is a sense of morality within decision-making.


In conclusion, the financial crisis was caused by a moral failure. This failure was ignoring the effects of markets on social values, and allowing the logic of economics to treat life as a commodity - a means of profit. This has only continued after the financial crisis in the absence of moral accountability, yet this problem suggests that it is not the fault of the individual, but rather the system of market-driven politics. Thus, the economic system must be re-evaluated to prioritise virtue. No longer treating decisions as a means to end, a utilitarian framework, creates sustainable economic growth. Capitalism can be moral after the financial crash so long as it realises it must become an ethical theory, not an economic one.


  1. Anielski, M., 2007. Economics of Happiness: building genuine wealth. 1st ed. s.l.:New Society Publishers.
  2. Collier, P., 2018. The Future of Capitalism: Facing the New Anxieties. 1st ed. s.l.:Penguin Books.
  3. Costa, K., 2011. Doing good by doing well: Redefining Moral Capitalism, London: Gresham Lectures.
  4. Craig Freedman and David Colander, 2018. Where Economics went Wrong: Chicago's abandonment of classical liberalism. 1st ed. s.l.:Princeton University Press.
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  6. Frederick R. and Molly S., 2015. Kellogg Biennial Lecture on Jurisprudence, s.l.: Library of Congress.
  7. Goodman, A., 2013. Conscious Capitalism, s.l.: TedTalks.
  8. Kant, I., 1996. Groundwork of the Metaphysics of Morals (Cambridge texts in the history of philosophy). 2nd ed. s.l.:Cambridge University Press.
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  11. Srinivasan, B., 2016. Capitalism isn't an ideology - it's an operating system, s.l.: TedTalks.
  12. Wall Street. 1987. [Film] Directed by Oliver Stone. United States of America: American Entertainment Partners Amercent Films.
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