When politicians, financial commentators, and senior bankers speak conscientiously about their determination to tackle “bank culture” problems, everybody should start to worry.

Corporate culture may be changed -- by management -- in an organization. In contrast, the big problems faced today are sectoral and societal, i.e. lying in areas where the special manager-employee relationship ceases to be relevant. The hard issues stretch across and between economies. Market economies are systems, and systems are the antithesis of organization. By all means enjoin managers to set to work recreating their organization’s culture or ethos if it does any good. With few honorable exceptions, however, managers are likely to do so beneficially only if governments perform their primary function which is to supply incentives -- rewards and punishments -- that make public and private organizations compete honestly for survival in free market places for the loyalty of consumers and voters.

The fervent commitment to change bank culture is a reminder that for at least two decades there was a comforting association of high culture and high finance in high brow media and arts. A simple turn of a newspaper page elides corporate finance into personal finance into the operas, galleries, and theatre productions that were both privately sponsored and publicly subsidized. Today, talk of reforming “bank culture” is a nervous initiative in the teeth of possible criminal proceedings.

Contrition about “bad apples”, regret for having allowed “standards” to slip, and grim undertakings to “restore moral integrity” suggest, without saying so, “we are civilized people”. It is theatre in the best tradition. But it is drama that belongs in parliament or courtroom rather than the pulpit, bear pit, or orchestra pit.

Rightwing concern over “moral” self-destruction in capitalist society is not necessarily wrong-thinking. There are countries where it may still be ideologically useful to promote “the vocabulary of virtue”, “honor”, “stewardship”, “earned success”, and “right and wrong judgements” in the effort to preserve a true capitalism. Even Charles Murray concedes the “values” approach is a complement -- not substitute -- for market freedoms bounded by rule of law: “formally, government [should] vigorously enforce laws against the use of force, fraud, and criminal collusion, and use tort law to hold people liable for harm they cause others”.

It may be possible to enact or enforce laws and/or inject new ideologies into government policy and thereby contribute to arresting the decline of a society’s morals. However, let’s not forget that the Bourgeois Virtues, where it all began, were more ideological than they were moral.

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One would deceive oneself by thinking culture (morals, virtues, ethics, etc.) can be deliberately changed in the ways that count or by methods that are politically acceptable. The fact is, informal culture *matters less* than political ideas, public policies, and formal laws. To think otherwise is to get things the wrong way around. Culture has a role in change over the long term. Anyone hoping for change in periods of one or two decades needs to focus on how ideas, policies, and laws deter unwanted behavior and incentivize desirable behavior. It is counterproductive to prettify or spiritualize economic problems -- such as financial regulation -- by dressing them in opera robes, cassocks, or hair shirts.

Morals grew into law. There is no turning back. More importantly, there is no need to turn back. The baddest child of the worst educated family in the poorest country of the world’s most obscure cultural region knows full well, in principle, that it is “wrong” to steal and “honesty is the best policy”. By a long process more nuanced and sophisticated moral codes emerged. Almost everywhere, that complex of morals becomes a joined-up web, consolidated finally into formal code as law. It took hundreds of years.

Sociologists call it the uneven historical progression from unthinking custom to informally enforced convention, and finally to impersonal formal law with state-organized coercion. Why do the moralists pretend there was no practical reason for it, no lesson to be learnt? Why do many people choose to swallow the lazy or duplicitous rhetoric about culture and moral rebirth? It is unlikely today that there exists -- hidden away or newly born -- any functional, realistic, or desirable moral which the existing institutions do not already encompass within statutes and precedents. If this moral has been lost from sight in the mud of excess legislation then scrape away the mud; there ye shall find it. Reinventing wheels is useless activity.

Tocqueville described culture in elevated fashion as “the whole moral and intellectual state of a people”. For better or worse, culture might simply be a form of group identification. It is noticeable that culture is always a one-sided category not easily amenable to objective scientific analysis. “I do not know”, said Max Weber, how one might decide scientifically the value of French or German culture; for here, too, different gods struggle with one another, now and for all times to come”. We confer meaning on culture; it does not confer meaning on us. This explains the rise of philosophies or the social sciences which search for real-world values, universally valid concepts to employ in studying each fragment of reality.

Culture is difficult to test empirically. It tends to be vague, over-inclusive, and often circular or tautological. Despite trying long and hard, studies of comparative managerial culture could not come up with a useful casual association between culture and economic development.

Sometimes even a great political scientist can fall prey to the temptation to regress into cultural explanation. It is easy to outsmart a culturalist. Francis Fukuyama, for example, suggested the distinctiveness of a political culture might be measured by how a country ranks in comparative indices of corruption and governance. If this were true, however, then all countries at the bottom levels of such indices -- be they in Africa, Southeast Asia, or Latin America -- should therefore share the culture. Then you see how meaningless the concept of ‘culture’ might become. What Fukuyama meant to say, quite reasonably, was that progress in development is impeded by variables like patronage, clientelism, privilege, cronyism, disregard of law, tribal politics, strongman politics, and so on. These things are empirical.

My own hostility to culturalism is deep-rooted in culture. As a child I was brought up in Latin America. Later I studied Latin America at university, and eventually worked in several Latin American countries (each one culturally quite different). At one stage in my career I switched to Southeast Asian studies. For five years I taught courses on Southeast Asian political development and government-business relations at the University of London. My students were heading into careers in development, business, or government. So I gave much thought to applying economic and institutional policy advice in cross-cultural contexts.

My reading on Southeast Asia and my empirical research in that region taught me essentially one thing -- in terms of basic criteria for development progress such as market expansion, rule of law, and effective public administration and political representation, the problems and the solutions were identical in Southeast Asia and Latin America.

Take away the cultural surface, and the essence is universal. The crisis-prone Western countries are in trouble economically because in various degrees and forms they regressed to the universal essence of under-development. The difficulties in banking, to take just one dimension, are universal problems of government-business relationships. The variables that matter -- including patronage, privilege, cronyism, disregard of law, and tribal politics -- flout the impersonal procedural norms that undergird effective state governance in capitalist economies.

Calling the problem or solution ‘culture’ delays the day of reckoning.

