Back to basic values

"That’s a big call," anchorman interrupts a panellist in an on-air discussion on what caused the global financial crisis.

Private wealth adviser Thomas Murphy, in the company of two of his peers on national TV, had accused investment bankers of having perpetrated a massive fraud on the American people.

Murphy, barely breaking stride, goes on: "I would argue that the problem is as much social as economic, because what we are seeing now is a class struggle between the haves and the have-nots, and it's the kind of struggle we've not seen in America previously."

Huh? Class struggle? In a panel discussion on Inside Business on ABC TV?

We heard right, Murphy assured me when I caught up with him. And it wasn't the inspiration of the moment that led Murphy to that conclusion.

The expatriate American had come to that view for at least the past five years, having identified a trend going back to the 1980s bubble economy of California, which Murphy holds as America in microcosm.

The American dream, as with that of Australians, as Murphy tells Inside Business, is to own a family home.

What's happening is that people have been "cheated by the system in the sense that they've been led to believe they can afford mortgages (that) they cannot", says Murphy.

People, "many of colour ... whose parents did not have the ability to achieve the dream of owning a home".

Murphy is no loony social activist in business suit. In the 26 years he has been in Australia, he has made a mark in fund management.

A decade ago as head of asset allocation in Australia's biggest bank, the Commonwealth Bank, he once managed A$16 billion in investment funds.

More recently at Deutsche Bank, Murphy managed A$1.4 billion before he left in June to set up his own wealth advisory consultancy.

A self-described social economist schooled in Latin American history, Murphy would relate to the values on which British Prime Minister Gordon Brown grounds his understanding of the market.

Murphy's analysis of the financial turmoil - and looming consequence of a world economy in reverse - is one that observers outside of the financial circle hope will penetrate the focus on "market" solutions at global forums such as the Group of Twenty summit in Washington on Saturday.

As head of a Labour government, Gordon Brown sees no contradiction in his admiration of the ability of the market "to release the dynamism and enterprise of people".

Thus his government is "pro-business and pro-markets, and always will be", Brown writes in a commentary in The Daily Telegraph, attributing his received value system to the generations of his father's family who worked the land.

But "I also know that we do not live by markets alone", he writes. 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 ... are not born in markets, nor in states. These values ... are learned in families, neighbourhoods and communities, and developed in the relationships we enjoy as a society."

Scholar Joe Camilleri is encouraged by the emergence of political leaders such as Brown, Australia's Prime Minister Kevin Rudd, and now, US president-elect Barack Obama.

"Markets are terribly important in the buying and selling of goods and services," notes Camilleri, internationally regarded professor of international relations at La Trobe University in Melbourne and dialogue partner in interfaith forums.

The problem has been since the pendulum swung too far over the past 30 years to the mistaken view that the "free" market should be left to operate, regardless of social norms.

One consequence of this Thatcherite "there is no such thing as society" view has been the rise of what Camilleri describes as a small group taking advantage of the system, leading to market failure such as the crisis on Wall Street.

"We do need to watch the market, and the state needs to intervene from time to time," says Camilleri.

The problem is that with the global nature of today's economy, individual states alone cannot correct market failure.

"We have arrived at an extraordinary moment when the international community has to set the norms, and to internalise the values, norms and surveillance mechanisms to govern the market," says Camilleri.

"They can no longer be Western values, Chinese values, Malaysian values, but shared common values."

China expert Andrew Godwin. associate director (Asian commercial law) at the Asian Law Centre at the University of Melbourne, shares Camilleri's assertion for an openness to incorporate possible alternative ideas.

In Godwin's analysis of China's paternalistic approach and the laissez-faire of the US, he suspects the balance lies somewhere in the middle.

"The US will have to be more open to the possibility of learning (from the experience of others)," says the Mandarin-speaking Godwin, who practised finance law in Shanghai from 1996 to 2006.

He observes that China has made a strong case for itself on these "big picture" issues. He expects these to come up at the G20, now the financial crisis has put the US and the West "on the back foot".

Such work towards global consensus is already happening, in Camilleri's view. On issues such as climate change, which Camilleri sees as a parallel of the financial crisis as matters of global concern.

Yet, as Obama cautions of the "change we need" in his victory speech last week, change "cannot happen if we go back to the way we were".

Murphy, in the context of medicine for the Wall Street blues, favours tough love.

"In the financial world, excessive leverage (borrowings) changed the nature of banking," he says. "The pain needs to work through the system (for long-term gain)."