It's a wonderful idea, especially in theory, that basically underlies the whole reason I'm in finance in the first place. In fact, I think ethical banking goes hand in hand with my idea of softening the ideology of self-interest. But as long as infinite self-interest prevails in finance, I don't think ethical banking is viable.
First, two of my favorite economic fallacies
- The partial equilibrium fallacy: This is a common and powerful argument in economics, but which sometimes has destructive consequences. Crouch states "if you decide not to be a charity worker, someone else will take your place, and so the benefit you provide would have happened anyway."
Financiers use the same logic to justify amoral actions: "If I don't rip off this investor, someone else will."
On an individual level, both may be 90% true. But if everyone uses these arguments, there would be fewer charity workers, and there would be economy-collapsing levels of fraud. The partial equilibrium argument thus can lead to disastrous social consequences, and I don't consider it a valid justification for doing an action.
Contrast the economic logic with moral logic:
"Do unto others as you would have them do to you."
"Act only according to that maxim whereby you can, at the same time, will that it should become a universal law."
- The Darwinian fallacy. This follows similar logic as above, that financial agents cannot but exercise infinite self-interest, because if they didn't someone else would and they would be outcompeted in the market.
I agree that there is a coordination problem, but infinite greed is far from inevitable. Greed itself isn't the problem. It's greed at all costs - the willingness to destroy others for a dime - that's so pernicious. If every company acted on Wall Street-level greed, we'd literally be living in Somalia. Other industries seem able to find a balance. Google and Apple are subject to the same capitalistic forces as Goldman, but I think Silicon valley represents a far more benign flavor of capitalism than Wall Street. If Wall Street can even reign it in to Wal-Mart level greed, I think firms and capitalism would find a way to survive.
Cooperation and empathy are, after all, also products of evolution.
Now onto the meat of the argument. The reason I like the black hole metaphor is that it highlights the inherent instability of absolute greed coexisting with good inside the same system - within an individual or in a society.
The black hole distorts the morality of everything around it. When finance makes profits from moral arbitrage, it puts pressure even on people inclined to do honest work. It directly makes honest work less profitable by cheating away retirement funds, punishing savers, and eliminating jobs. Our willpower is also finite. We're less inclined to do honest work in the face of financiers' obnoxiously ill-gotten riches.
Working in finance as it currently exists and donating the proceeds amounts to firebombing civil society and then paying for its reconstruction. Indebting people, kicking them out of their homes, eradicating their jobs, and then giving them charity doesn't make much sense.
There are also reasons why we hardly see any banker-philanthropists in the industry today. A completely amoral financial sector disproportionately attracts sociopaths and people with no interest in doing good. It's hard for anyone with a conscience to work and succeed in such an environment. Loosening the profit motive is crucial to enabling ethical bankers to enter and stay in the industry.
Doing good also requires a lot of effort. I think being a humanitarian is a lifelong process of learning and engaging with others, not just writing checks. Ethical bankers have to think about what causes they care about, how to solve difficult social problems, and which organizations to support. It's hard to put your heart into doing good and then to go to work ripping people off. Eventually one precludes the other.
In the end, I come to the same conclusion. Allowing one industry to completely flout morality destabilizes and sucks away good from the rest of society. Working in such an industry sucks away good from a person.