This speech was delivered today at the Chautauqua Institution in Chautauqua, NY.

Are the markets moral? Should we expect them to be? Moral according to whom? And if they’re not moral, are they immoral? Amoral? Or value-neutral?

The bigger the questions, the more likely we are to be heading into some abstract—albeit very interesting—realms. But I work in cable TV and, as you know, we have a propensity for reality, so lets stick with that.

Let’s rather discuss the interaction of markets and society, and how that interaction both supports and offends our sense of morality. Once we understand the way markets and morality influence one another, we can try to develop strategies to help the markets promote the values we hold dear, and change practices that are inconsistent with our beliefs.

Now the first pitfall here is defining morality. Philosophers tell us “morality” describes the codes of conduct put forward by a society. More broadly, it can refer to a system of conduct to which all rational persons, regardless of culture, would subscribe.

So, when we talk about morality, we’re generally referring to the ethical glue that holds society together. Morality deals with our sense of fairness and our sense of responsibility to others. Implicit in morality is the idea that there are right ways—and, by contrast, wrong ways—to act.

Now when I talk about markets, I’m not referring to stock markets, although they do fall within my definition. I’m referring to the myriad institutional structures human beings have established to facilitate commerce. For purposes of this discussion, a market is any structure under which commerce takes place: the purchase of land, stocks, airline tickets, vegetables, sporting events, whatever it may be. In my view, these structures begin as neither moral nor immoral. They are as indifferent as water. Markets are meant simply to be vehicles for finding the most efficient way to balance supply and demand.

The freer the market, the less encumbered by regulation, and the more efficient it should be. But from a social standpoint, unfettered markets can lead to situations most of us would consider immoral: vast populations of have-nots, a ruined environment, plutocracies and other dystopian scenarios.

The question then becomes, “Are market values and social values congruent?” And, if not, how can we bring them closer together? How can we influence markets so that they can help us build the kind of world we believe we should have?

The misalignment between markets and morality—often a proxy for arguments about the public good versus individual rights—has engaged thinkers since the birth of commerce. From Karl Marx to Ayn Rand, capitalism’s most rabid opponents and the markets’ most fervent supporters have given us tracts, books, broadsheets, movies, tweets and more in an attempt to persuade us of their specific points of view.

At its heart, the discussion of markets and how they should be governed, or whether they should be governed at all, is a discussion about capitalism itself. My own view of capitalism is this: No other system has brought so much to so many in so short a time. Is it perfect? No. Is it amenable to change? So far, yes.

The difference between today’s markets and the markets of 100 years ago is the difference between a herd of dairy cows and a buffalo stampede. The first is fairly docile and adheres to certain patterns, though it can still deliver a painful kick if you don’t know your way around a milk pail. The latter is terrifying and unpredictable.

The robber baron era of the late 1800s and early 1900s—the buccaneer days of capitalism—nearly led to a revolution in America. The pervasive sense of systemic unfairness helped fuel the growth of socialist and even anarchist movements in the nineteen-teens and -twenties. During the depths of the Great Depression, there was a real danger that the country could slide into fascism or communism, the two systems that vied for supremacy in 1930s Europe.

Many credit Franklin Roosevelt for finding a third path for the United States. Roosevelt’s New Deal programs offered protections to workers, and limited the more egregious expressions of capitalism. From unionization to social security to the Federal Deposit Insurance Corporation, Roosevelt changed the way the game was played. All of those things, though, are considered by some to be massive perversions of capitalism.

Many did then and continue today to grumble that Roosevelt was the individual most responsible for creating a big, active—and by some measures, intrusive—government. He shouldn’t have done A, or B, or C, they say. But it’s easy to assume that the things that didn’t happen would have been perfect. People speak of the government’s more recent intervention into the economy in the same way, as if they know how things would have turned out if the government hadn’t become involved. Reality is always much messier than pithy opinions.

And today’s reality is nothing if not messy. Even as our free-market system has raised living standards to levels once unimaginable, the backlash against the markets has gotten louder. The Occupy Wall Street movement is the most visible, but hardly the only, example. Why should this be the case?

Most of the protesters say they aren’t against the markets per se: they’re against injustice and inequality and that the system is rigged against them. It’s criminal, they say—or it should be—for a CEO to make several hundred times the earnings of an average employee. It’s disgusting for a company to shut down a plant, throw workers out on the street, and, perhaps, destroy a town’s economy for no reason other than that a cheaper source of production has been found elsewhere.

The complaint is a familiar one: “It’s unfair. It’s immoral. Someone should do something.”

And even in this nation, where government is increasingly reviled with each passing day, the “someone” being summoned is the government. Former British Prime Minister Gordon Brown is just one of thousands who have articulated the notion that markets are inherently immoral or, at the very least, selfish, and that they need active policing. He says “Only government can make the markets work in the public interest and not in their own interest.”



And he added, “Markets need not just money men but morals, (we believe) that being fair matters more than being laissez-faire and that banks must always serve the public, not just serve themselves.”



Mr. Brown is giving voice to the public’s legitimate concern. There is certainly a feeling—and it’s supported by evidence—that something in our society is out of whack. The stock market is up but people don’t have jobs. The gap between the rich and everyone else is growing.

There’s an international super-class traveling the world in private jets, living in a series of penthouse apartments in the leading cities of Europe, Asia and the United States, while the rest of us can only shake our heads, grow embittered, and soothe ourselves with reality programs that exploit some of society’s most pathetic individuals so that we can feel superior to somebody, thereby mitigating our doubts about our own positions in the socio-economic hierarchy.

Many of you are students of history so you know well that neither these problems nor these feelings are new. One hundred and fifty years ago, leading British Art critic and social commentator John Ruskin confronted many of the same issues in an England that had gone from an agrarian economy to a manufacturing and financing economy in little more than two generations.

All systems tend to perpetuate themselves, to act in their own self-interest until curbed by some other force. Ruskin was appalled by the greed he saw, and by the corrupting influence of money itself. So, as a respected and influential writer and thinker, he proposed some basic rules for this new social class: the corporate leaders. Now some of these may sound quaint. But they shouldn’t, because his rules simply reiterate what we would want from anyone in a position of authority.

First, he thought leaders should “provide for the nation.” In other words, he advocated looking beyond fast profits. He thought corporations should benefit society as a whole, as a matter of their basic nature and charter.



Many corporations, then and today, agree. They’ve learned that corporate social responsibility isn’t just charity: it fosters long-term value. Business is the most powerful force in the world, and when approached in a certain way, it promotes both economic and social good. To cite just one example, when Wal-Mart embraced the concept of sustainability it not only lowered its carbon emissions, it saved itself $200 million in costs.



Another Ruskin rule was “be honest.” This seems so obvious as to barely require mention. But remember, Ruskin wrote 150 years ago, when markets were much more volatile and substantially less transparent than they are today. It was the Wild West back then. Ruskin believed that honesty wasn’t just the best policy; it was the only policy that would allow an economy to steer clear of chaos.

Honesty fosters trust, and trust, ultimately, is what allows markets to function. When trust fails—as it did during the recent financial crisis, when no bank would lend money because it didn’t trust the credit-worthiness of any potential counterparty—markets crash.

Ruskin also advocated strong leadership from those who had the ability to effect change. Take those skills, he said, take those assets and use them to help build a better world.

In a way, it was the “enlightened despot” idea, transferred from a feudal society to a market-driven one: in Ruskin’s view, those with great power and wealth have a responsibility to use it for good. I suppose it’s a bit glib to cite Spiderman as an example here, so I’ll use Bill Gates as a more appropriate illustration. Having accumulated more wealth than several men could use in several lifetimes, Mr. Gates has devoted his fortune to initiatives aimed at eradicating disease and poverty in some of the world’s most backward geographies.

Ken Costa, the Chairman of Lazard International, seems to support Ruskin’s ideals when he notes that “markets consist of people, and the global market is no exception.” Costa tells us that society at large is the “ever-present invisible partner in business, not least in finance.” Therefore, he says, markets should be servants of the people, vehicles through which we express our moral and spiritual dimensions as we create wealth.

In the liberal democracies of the West, the free-enterprise system is not designed to enrich the few at the expense of the many. A model that held the vast majority of people in a kind of economic serfdom wouldn’t fly. You’d have a revolution. We’ve seen it happen elsewhere.

In our society, one that takes its legitimacy from the consent of the governed, we all have a stake. We all have a voice, though it’s diluted when each of us represents only one three-hundred-and-fourteen-millionth of the body politic. It can be tough to be heard.

And the markets, in the purest sense, aren’t listening. They tend to follow mathematics, not morals. So it’s our job as citizens to turn their cold calculus into social good.

We enact laws to rein in the more extreme behaviors of unfettered self-interest in order to protect the social fabric. Our society says you can be as ambitious as you want; you can achieve as much as your abilities allow; but you have to play by the rules. And we try to structure the rules to make the markets more open, more transparent and more, if you will—fair.

Finding the most appropriate balance between individual rights and the public good is an ongoing challenge. It’s ongoing because we’re never dealing with a static environment. If there’s a new opportunity, the markets will find and monetize it. Markets are dynamic things, driving change as much as responding to it.

So we’re always addressing markets in the context of larger issues: the individual versus the group; equality of opportunity versus equality of outcome; and the difference between legal and moral. In our hierarchy of values, which ones do we place at the top? Ayn Rand would tell you that the individual is all. By contrast, a honeybee would tell you that group welfare trumps everything.

Most of us fall somewhere in between. We’re individuals, but we’re part of—and we have the ability to affect—the group. We have several ways to do this. We do it at the ballot box and we can do it in the markets. In investing, for example, we can choose to restrict our investments to companies that exhibit behavior consistent with our own morality.

Naturally, the stock market is happy to help us. It has created a range of socially responsible mutual funds—SRIs in industry parlance—which screen out companies that offend particular sets of investors or, conversely, that buy into companies with policies attractive to certain investors.

These funds may cater to investors’ desire to help the environment, or boycott certain practices. These funds help you “put your money where your mouth is.”

If you don’t approve of smoking, buy a fund that doesn’t hold tobacco stocks. If you believe fossil fuels are dangerous, invest in alternative energy sources rather than petrochemical companies. It’s easy to buy funds that eschew companies in alcohol, gambling, pornography and weapons industries.

The question is, can you make money doing this? Or are your morals impeding your financial returns? The industries I’ve cited are all quite profitable. It stands to reason that the more restrictions a fund has, the more difficult it’s going to be to generate consistently high returns. Each of us has to decide how far we’re willing to go to adhere to our beliefs.

Bill Bernbach, the legendary advertising executive, famously resigned a lucrative cigarette account after the Surgeon General linked smoking to lung cancer way back in the 1960s. He felt that he couldn’t in good conscience continue to promote a product that, when used as directed, killed people. His decision cost his agency millions of dollars. His comment? “Principles aren’t principles until they cost you money.”

Many SRI funds, though, have done quite well. But that’s not an automatic endorsement. It can be difficult to determine the extent to which their screens affect their returns, either positively or negatively. Larger factors, such as market cycles, sector performance, and the overall economy are likely to have greater influence on performance than any particular screen.



There are other ways markets can help to produce social justice. A few decades ago, when South Africa’s apartheid regime held power, many Americans urged corporations to stop doing business there. Corporate shareholders, too, told directors that they opposed involvement in South Africa because the corporation was, in essence, providing support to a racist government.

After three decades of apartheid, economic instability within South Africa proved to be a decisive factor leading to the decision to dismantle it. While many of the problems resulted from the difficulties inherent in administering a cumbersome and expensive system of legalized discrimination, international economic condemnation played a significant role in the eventual elimination of apartheid.



But that was a protest against legalized immorality. Much of what we witness as immorality in the markets today IS illegal. Some people think the financial scandals of the past decade—WorldCom, Enron, Bernie Madoff—prove that the markets are inherently corrupt. But are they?

Rule breaking is an example of personal wrongdoing, not evidence of a corrupt institution. Professional baseball itself has not caused players to consume illegal performance-enhancing drugs, has it? Are the markets themselves, which have provided access to capital to business that have gone on to employ millions on people and solve problems across society, themselves also to blame for thieves like Bernie Madoff. Do markets create greed, along with motivation?

Now, for me to say “you’ll find a few bad apples in every bushel” seems callously trite when we look at Madoff’s sixty-billion-dollar swindle. He caused tremendous damage. He bankrupted successful businesses and charitable organizations. He reduced families to penury. His own son committed suicide. But anyone who considers Madoff a representative money manager is mistaken. He is simply a criminal who is spending the rest of his life in prison, a punishment that, unfortunately, comes nowhere near fitting the crime. The question remains, though, would he have been a criminal of the same sort under a system that rewarded wealth and innovation differently?

There obviously are situations in which, it can be argued, entire industries have acted immorally. I’m thinking specifically of the sub-prime lending crisis of 2007 and ‘8. Banks pushed people to borrow more than they needed, more than could really afford, because the banks made the most money that way.

In days gone by, the banks wouldn’t have made these loans, because they would have been left holding the bag if things went south. They would have been much more careful. But in this instance, they were basically playing with house money. Because they were able to sell their loans to other financial institutions: pension funds, sovereign debt funds, and central banks around the world. So they were protected. Some of the biggest culprits were deemed “too big to fail,” and were, in essence, granted immunity for their mistakes. The ones left holding the bag were the unfortunate families who’d been talked into these loans by the very people who should have been talking them out of them.

And we know that pharmaceutical companies and cigarette companies before them have committed their share of immoral, institutionally sanctioned acts, some of which they have been called upon to pay for. But even without these horrible instances of malfeasance, we would never assume that everyone is honest. We know better. So we regulate markets. We try to pass laws that prohibit practices that tip the scales in favor of some over others. When something bad happens, we try to make sure it won’t happen again. That’s why we have Regulation FD, which stands for Fair Disclosure, to make sure companies disclose the truth about their financial condition to all shareholders fairly. Society wants—and has a right to expect—a transparent and level playing field. But we still have more people without homes and jobs, through no fault of their own, than we have bankers or CEO’s in jail. Those bankers and CEO’s may not have violated the letter of the law, but many did behave immorally.

The thing is, society and corporations have different charters. A moral society seeks the best opportunity for all its members. It protects the weak while allowing ambition to express itself fully. A corporation seeks to maximize its profits while staying within the law and hopefully in the process doing right by its other stakeholders, namely its customers, workers and the community in which it undertakes its activities. Some corporations expect more of themselves. They take it as a point of pride to create excellent working conditions, encourage social commitment, and to act as a moral society in miniature.

A couple of years ago, while attempting to study the markets through a moral lens, two economics professors threw up their hands and decided to take morality out of the mix entirely. “Let’s assume,” they said, “that the markets are just as fundamentally immoral as people seem to believe.”

They came to a surprising conclusion: that markets are moral, even if they don’t try to be. In their words, “the superiority of markets is the result of their ability to generate desirable outcomes without relying on what is widely seen as moral behavior.” This led them to argue that markets are essential for decent and humane social order, because they can be substituted for the morality of caring that is necessary for decent and humane relationships.

In other words, whether markets seek to be moral or not is irrelevant, because—objectively—they have proved an effective tool for improving lives. As Deng Xiaoping once put it, “It doesn’t matter if the cat is black or white as long as it catches mice.”



I wonder, sometimes, if we value too highly the concept of “markets as arbiter.” As a business reporter, markets fascinate me. But I realize that the idea that everything in life can be reduced to supply and demand may not be the most valid way to look at all human interaction. At what point does that premise begin to corrupt the social fabric?

In his book What Money Can’t Buy, Michael Sandel—who lectured here on Monday—used New York City’s Shakespeare in the Park series as an example of “creeping marketism.” The city offers free Shakespeare plays in Central Park to anyone who wants to attend, but tickets are limited and you have to line up for them. It’s first come, first served. Or it was, anyway. A cottage industry of line-standers has now grown up around it. You can hire people to stand in line for you in case you have more money than time.



From a market perspective, this makes perfect sense. One could even argue that it creates a positive good: two people—the line-stander and the playgoer—benefit, instead of just one.

But from a social standpoint, the view is different. We no longer have a level playing field. We’ve taken an event that was intended as a public good, open to all on an equal basis, and turned it into something else.

It’s true in Washington as well. There, line-standing companies employ homeless people to stand in line for clients who want the limited seats available for Congressional committee hearings and Supreme Court sessions open to the public. Lobbyists and others are often happy to pay for access. From a market standpoint: supply and demand. Socially? It kind of doesn’t smell right.



Let’s take it further. At Disney World, people in wheelchairs and their families don’t have to wait in long lines for rides. They’re placed at the front of the queue. That seems morally correct. So some people of means have paid disabled strangers to pose as their family members. Of course, this is immoral and dishonest.

But what if, instead of sleazily hiring someone to fake being part of your family, you could simply pay more to go to the front of the line? Is that wrong?

The question is worth asking, not least because Universal Orlando, the giant theme park, recently introduced the Universal Express Pass, a $35.99 add-on to the admission cost, that allows you to bypass the regular lines and gain faster access to popular attractions.

So: is anyone being hurt here? Regular payers already know that they’ll be in long lines. Universal gains additional revenue. Those willing to pay for an Express Pass get faster access. And when too many people start buying the Express Pass and even those lines get ridiculous, Universal can just hike the price to bring down demand.

But I presume Mr. Sandel would argue that something is being hurt here: our understanding of what a theme park is all about. Instead of a day in which we all have equal access to thrills and boredom, we’re now in a two-tier system in which haves and have-nots are clearly distinct from one another.



When a family spending 35 minutes in line for a “Terminator 2” ride sees a similar family stroll up to the gate and get waved onto the ride, does it make that first family feel just a little bit bad? Do the kids ask Mom and/or Dad why those other people don’t have to wait? Do the other people feel just a bit smug and superior? Does the practice in some way change our understanding of the experience? Of course it does.

Because all of a sudden, people who heretofore had been treated no better and no worse than anyone else are suddenly sailing either first class or steerage. We’re in the same park, but we’re no longer in the same boat. The market has separated us, not brought us together.

For years, scalping tickets was against the law. You weren’t allowed to buy tickets to sporting or entertainment events and re-sell them for more than you paid initially. Undercover cops patrolled outside stadiums and arrested people seeking to traffic in tickets.

Those days are pretty much gone. Technology made it easy to create a secondary market in tickets. First there were ticket brokers who bought tickets in lots, then e-firms like StubHub allowed individuals to get in on the act. Today, sophisticated ticket-buying computer programs are so common that it’s often impossible to see a major artist in concert without going the secondary route.

Is this immoral? As far as the market is concerned, this is exactly as it should be. If tickets can be sold for two or three times their face value, then they were clearly underpriced to begin with. The market is efficiently finding the balance between supply and demand. That’s exactly what markets were meant to do. It not only makes your tickets more expensive; it makes the chocolate you eat and the coffee you get from Starbucks more expensive so that the workers who pick the beans and the farmers get a fair price. It’s the same market, by the way, that causes you to wear clothing made in Bangladesh. And buy iPhones made by former peasants in China. Sometimes it works in your favor, sometimes it doesn’t. Sometimes you save money. Sometimes someone dies. Remember, your principles don’t mean anything if they don’t cost you something.

Back to the tickets for a moment: it could be argued that the promoters set their prices as they did for a reason: they hoped that people from a range of economic backgrounds would have an opportunity to see a performer who mattered to them. The performer, too, may have wanted to attract a wide cross-section of fans, not just the ones with the biggest bankrolls. How should one parse the morality of this dichotomy?

At the same time that we tolerate—or even embrace—these expressions of class differences, there’s clearly a longing for corporate decency. That’s a different thing from a company’s simply staying within the law. In a recent survey, 60% of people said that buying from socially responsible companies was important to them, and 76% say that it’s important for companies to make a positive social difference even as they make a profit.



Technology has had a very democratizing impact on markets. It’s given individuals around the world the opportunity to work together, collaborating across distances. Words like “crowdsourcing” and “crowdfunding” describe new and viable ways of financing that were impossible even a decade ago.

If I want a logo for my website or my business card, I don’t have to rely on a design firm anymore. I can put a request online and have hundreds of well-qualified artists bidding for my business within an hour. I pay the designer directly, cutting out the design-firm middleman, and the designer keeps 100% of the money, instead of only a fraction of it. So technology has flattened the pyramid, speeded up the process, and delivered the reward to the appropriate party.

And me? I’ve got the logo I want for substantially less money than I’d have had to pay a design agency. It’s a great system.

But—and you knew there would be a “but”—an arrangement in which an unknown number of competitors blindly bid on an assignment inevitably puts downward pressure on price. These designers, given direct contact with clients, may not earn what they once did. Those years of art school may not pay for themselves any time soon. The balance of power may have swung too far in my direction.

It’s not terribly different from the garment factories of 100 years ago. Owners paid the least amount of money they could get away with. If you didn’t like it, fine—someone else would take the job. So what happened? Labor unions.

Unions fought for the right to organize workers, so that they could bargain collectively for better wages and better conditions. Many people, especially business owners, felt that unions represented the first step on the road to socialism, but it’s hard to believe that a system in which a few had the right to keep others in a state of servitude could have maintained much long-term traction.

Still, morality here, like beauty, may be in the eye of the beholder. If you were a high-school graduate in the 1950s—or even a high-school dropout—you could get a factory job with good benefits, a good wage and even a good retirement. Given the role of unions in raising living standards and broadening the middle class, most people would probably consider them to be a socially responsible, and therefore a moral, force.

In the 1950s, unions represented more than three in every ten American workers. As wages and benefits increased, though, our national competitiveness declined. Other countries were able to produce satisfactory goods at a much lower cost. Unions more or less priced themselves out of the market. Today union membership is down in all industry segments except the public sector, which is widely seen as inefficient compared to private industry.

The average American city now outsources 23 out of 65 basic municipal services to private partners. These cities have been hit by declining tax revenues, and they no longer have the money to perform these services themselves. What’s interesting, from an efficiency point of view, is that governments typically realize cost savings of 20% to 50% when they involve the private sector.



It’s one thing for a union to picket a factory in order to promote collective bargaining. It’s another for all the designers bidding on my logo assignment, who don’t even know each other, to come up with some way of grouping together to ensure that I don’t take advantage of them. The system is efficient, but it might not be so moral.

So, what’s the most moral position one can take while still allowing the markets to function freely?

Sadly, I don’t have an answer for you. But I do have faith in evolution. Values evolve, just as societies do, just as species do. As a species, we’ve gone from believing that we’re the rulers of the Earth to believing ourselves its stewards. That’s a more compassionate, more moral view. And as a society, we tend to act on our beliefs.

We can see morality in action when we consider the power of public opinion on market behavior. Look at the growth of Fair Trade coffee, the international ban on “conflict diamonds,” or the scramble of fashion companies to disassociate themselves from Bangladeshi sweatshops. Those are only a few of the public’s efforts to see that farmers and workers the world over are paid—and treated—more fairly.

As long as we would prefer to pay more for a good that is produced in accordance with our values than pay a lower price for an article that is made by taking advantage of those without the means to redress unfair conditions, we will be moving the markets towards a more just, more moral position. The fact is we aren’t always willing to do that. Regulation can fix some of the problem, but personal responsibility—knowing what you are investing in and buying—can play a bigger role.