Friday 9 December 2016

Boom and bust boil down to ethical choices – let's hope politicians make the right ones

Published 29/04/2014 | 02:30

Brian Cowen spoke on budgetary policy at Georgetown. Photo: Damien Eagers
Brian Cowen spoke on budgetary policy at Georgetown. Photo: Damien Eagers

Why is finance so often associated with unethical conduct? Was Ireland's economic crisis an ethical one? Did we stop asking ourselves what was right and wrong in the run-up to the crisis, and just consume for the sake of it? Debt-financed household consumption grew like a rocket taking off from 2002 to 2007, a 35pc increase, then trailed off as the boom turned to bust.

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The Regling and Watson, Honohan, and Nyberg reports into the banking crisis all make mention of improper incentives in the financial sector in the lead-up to the crisis, but stop short of calling what went on unethical. Today, any director of a financial institution must be 'honest, fair and ethical', but this requirement didn't take effect until after 2005. Horses and gates come to mind.

That said, while finance exposes people to a lot of improper incentives, it is a stretch to assume those in the industry are characterised by higher levels of greed, laziness, peer pressure or stupidity than other sectors.

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