Brown: Free markets can fail without values
Prime minister Gordon Brown has said a free market system cannot work in everyone’s interest on its own and needs to be underpinned by values.
In an article in the Telegraph newspaper, the former chancellor explained the need for supporting some of the country’s biggest banks and the importance of the financial system to society.
Mr Brown stated that he believed in markets and competition as they encouraged people to be dynamic and creative. However, he said the correct functioning of markets needed a base of common values.
The prime minister wrote: “I have long understood that markets rely on values that they cannot generate themselves. Values as important as treating people fairly, acting responsibly, co-operating for the benefit of all.
“And these values that our economy and society need in order to flourish are not born in markets, nor are they born in states. These values – fairness, stewardship cooperation – are learned in families, neighbourhoods and communities and developed in the relationships we enjoy as a society.”
Mr Brown said markets had been allowed to act in an “unbridled” way which had eroded trust in financial institutions. He added that the credit crunch had raised important questions about the “right relationship between markets and governments”.
The prime minister said action would not only be taken to support financial institutions but also to set the foundation for fundamental values which would help shape a stronger economy and fair society for the future.
He said measures would thus be taken to reward hard work but not reward excessive risk taking or gambling with other people’s money. He said the financial services watchdog, the Financial Services Authority, would have a new code of conduct which would enable it to crack down on the bonus culture and thus encourage long-term success rather than short-term gain.
Explaining the need for banks to be supported by taxpayer money, Mr Brown wrote: “Quite simply: banks are unique because they are stewards of the people’s money. That’s why we have acted not just to stabilise the banking system, but to ensure that financing is passed on in turn to small businesses and families who want to get on with ordinary life in these extraordinary times: banks doing what banks were built to do and the best banks have always done.
“We are also finding that in an interdependent global economy the ethic of cooperation matters more than ever. We are in this together. Risk has been globalised, but the responsibilities to act when problems arise have not been,” he stated.
Mr Brown also reiterated the need for a global early warning system and the reform of international institutions to ensure global economic stability.
The government purchased large stakes in three banks last week as the Royal Bank of Scotland, Lloyds TSB and HBOS accepted public funding as part of the governments £37 billion bailout plan.
