consumer credit regulation in the UK
Corporate Governance: origins and challenges
Proposals for a price cap on high cost short term credit
The Need for Roots?
Syria: the Economic Implications of the Civil War
In Praise of Non-Bank Finance
The Price of Money
Numbers 4 Good
Sceptics Knock Success
Life, Liberty and Access to Credit
Osborne's Banking Reforms: A Hedge Too Far
Always Spend Wisely ....
A Truly Ethical Foreign Policy
Southern Africa: 2020 Vision
Mervyn Turns a Tidy Profit
Private Banking for the Poor
Teaching Jurisprudence in Namibia
George - Don't do that!
Do the Math
Two Cheers for the Walking Wounded
That's Fair Enough
How to Stop the Next Bubble
Balstrode: Why not try the wider sea. With merchantman or privateer?
Peter: I am native. Rooted here.
Balstrode: Rooted by what?
Peter: By familiar fields. Marsh and sand. Ordinary streets. Prevailing winds.1
The two great epic poems that mark the start of the Western literary tradition both address the problem of homelessness. Homer's hero spends a decade travelling home after the combined Greek armies had overrun Troy; for Odysseus the journey back to Ithaca is a journey back to his family and his throne. Virgil's hero also travels west from Troy, but for Aeneas the journey takes him away from his former home, now destroyed by the Greeks, towards the new home that he will establish at Rome.
The piety of the ancients was the love of country, according to Fustel de Coulanges: "The possession of a country was very precious, for the ancients imagined few chastisements more cruel than to be deprived of it. The ordinary punishment of great crimes was exile".2 If permanent exclusion from the city of one's birth was a form of death, so too a period of extended absence from home was also deeply felt: as a loss of identity and thus as unhappiness. We need to be rooted if we are to be happy: homelessness, or a lack of roots, is a recipe for unhappiness.
Does this advice still hold for citizens of the modern world? Would we be happier if we were more deeply rooted within our communities? Two modern writers who argued strongly for the need to be rooted within a community - sharing its traditions and it habits, making the home a major influence on the formation of our character and the basis of the possibility of a good and happy life - are Mohandas Gandhi and Simone Weil.
Gandhi's major statement of his political beliefs - Hind Swaraj - was written in 1909, when he was 40 years old, as he travelled by boat from London to Cape Town.3 Gandhi trained as a lawyer in London in his late teens and then lived and worked for twenty years in South Africa. At the time he wrote Hind Swaraj he did not know India at all well. However, he was firmly opposed to British rule in India and firmly opposed to replacing the British elite with an Indian elite that would rule in much the same way. He thought true independence required that the Indian people recover confidence in their ancient civilization. A national renewal of private life, such that Indians once again led well-regulated and disciplined lives, was a necessary precursor to genuine home rule in public life.
Gandhi's solution to India's problems included active non-cooperation with the British; giving greater priority in policy making to village life rather than city life; preferential treatment for local, hand-made goods rather than imported factory goods; religious equality and toleration, among Hindu, Muslim, Sikh and Christian communities leading to a deeply religious society but a secular state; self-discipline in one's private life, together with a respect for the pursuit of truth; and non-violence as a guiding principle in personal and public life.
Simone Weil wrote The Need for Roots in 1943, when she was 33 years old and living in exile in London; the book was published posthumously in 1949.4 A teacher, writer and political activist, Weil fought with the anarchists during the Spanish Civil War and worked as a labourer on the production line at a Renault factory, to discover first-hand the experience of life of the working classes. She was Jewish by birth, Catholic by conviction and mystical by temperament. She wrote The Need for Roots at the request of General de Gaulle, to consider how to restore French morale once the German occupation was over. Weil died of tuberculosis in 1943, aggravated by her insistence on eating only what the poor in occupied France could afford to eat.
Weil's solution to France's loss of confidence and identity was to demand the abandonment of false conceptions of national greatness. A newly independent France should give priority to justice in social life and abandon the idolization of money and luxury. The French people should seek spiritual inspiration from true religion, by which she meant a combination of the mystical tradition of medieval Catholicism with ancient Greek thought, especially Plato and Aeschylus. Once the Germans had been evicted, the French should renew true communal values, based on a respect for manual labour, both in the towns and the countryside.
Despite obvious differences of birth and education, Gandhi and Weil held similar views about the problems that modern civilization had created: religious values had been abandoned; personal self-discipline had been foregone in the search for material success; repetitive factory work had taken the place of manual labour; the growth of cities had led to corruption and a pervasive sense of up-rootedness. What was needed was a return to village life and village values.5
Neither Gandhi nor Weil had much time for the pleasures of family life; nor for wealth and the comforts and opportunities it offers; nor for games and amusements; nor for travel and innovation. It is not clear that their prescriptions would make us happier or more secure, although we would undoubtedly be poorer. Few of us, I suspect, would choose to emulate them. Their lives - like those of Ulysses and Aeneas - are heroic rather than exemplary.
Although Gandhi and Weil both addressed specific political challenges - how to prepare India for self-rule after independence and France for self-rule after liberation - they also grappled with one of the great social challenges of modernity: how to maintain a sense of communal identity and belonging, at a time when the traditional sources of communal identity and belonging had become degraded. The loss of religious belief, the decline in importance of the village, the shift from hand-made to machine made goods, appear to be irreversible changes, not just in the West but everywhere else too. This creates a moral challenge for society: how to deal with the social symptoms of up-rootedness.
I do not think that up-rootedness, and the unhappiness frequently associated with it, is the inevitable fate of humankind. On the contrary, I think the assumption that we must have roots and that these roots must be established in a particular geographical place that we call our home is the source of the problem (and not a neutral description of the problem).
To support this claim I will briefly describe three examples of financial networks that provide support and benefit for people in need. I have chosen these examples for three reasons. First because Gandhi and Weil saw the influence of money in almost wholly negative terms: neither of them would have thought to look to the financial system for a solution to the problems of modern life. By contrast, I want to show that, rather than viewing finance as a principal cause of un-rootedness we should see finance as a possible solution to the problem of social insecurity.
Second, because the metaphor of rootedness relies on a vertical relationship between the community and its geography: our roots anchor us in a particular place, and provide us with security in the place we call home. By contrast the relationship between the donors and recipients of finance is best understood metaphorically as a horizontal relationship: the financial network traverses space to connect people and provide them with security irrespective of their location.
Third, although finance has a long history, its transactions are generally not the subject of epic poetry; there is something deeply unheroic about moving money from one place to another, according to a defined set of legal terms and conditions. Finance is quotidian. For that very reason, I suggest, it provides the ideal material for manufacturing networks of security, which can compensate us for our un-rootedness and provide us with the conditions in which happiness is possible, without our being tied-down to a particular place that we call home. Not roots, but networks are what we need.
My first example concerns the activities of Jewish money-lenders in Italy during the fourteenth and fifteenth centuries.6 In many places Jews were forbidden from owning land and property; therefore they tended to hold their wealth in the form of jewels and gold, which are portable. There were Jewish settlements in many Italian cities and the wider Jewish community kept in touch through a range of family, business and trading networks. While the Italian city states fought with each other for local supremacy, the Jewish communities provided each other with mutual support. Consequently when there were specific, local economic problems - caused by fire or flood, or by war with a neighbouring city - the Jewish community was well positioned to move its wealth from cities that were doing well to cities that were struggling: they enabled the Italians city states to avoid the worst problems associated with economic autarky.
Although the Jewish money lenders mostly provided credit to individuals (and in particular, poorer individuals who were not able to borrow from local Italian lenders) they were also willing and able to lend to the city authorities. In addition, when a city was short of money it might grant credit licences to Jewish lenders, which allowed them to lend at higher interest rates than the church permitted for Christian lenders. The Jews were able to make a good return, from which the city authorities took a fee for itself. This disguised form of local taxation allowed Italian city authorities to raise money for new buildings and infrastructure.
It did not matter that the Jews were not wholly integrated into the local community and did not regard it as more than a temporary home during their exile from Palestine. It did not matter that they did not share the religious beliefs of their hosts and neighbours. The network of Jewish families and businesses spread across Italy provided the financial support that enabled many Italian city states to overcome difficult economic times and, when times were more prosperous, to embark on civic building projects that enhanced the status of the city.
My second example concerns an economic experiment that took place recently in Namibia with financial support from the Lutheran churches of Northern Germany.7 Namibia is often classified as a "middle income" country, with a higher average standard of living that many of its neighbours in Africa, and with a relatively stable democratic political system. The average, however, disguises a wide range: the Gini co-efficient for income distribution in Namibia is one of the highest in the world. There is widespread poverty and under-employment, but like many other African countries Namibia does not have large tax base and cannot afford an extensive welfare system.
The idea of a Basic Income Grant (BIG) is that all adult members of the community (excluding those over 60 who are entitled to a state pension) are given a monthly cash sum of at least N$100 (which is roughly US$10 or €7 at today's exchange rates). This money could be spent however the recipient decides; it is free money for them. The Namibian government were unable (and unwilling) to fund the scheme so the Lutheran churches in Germany raised funds for a 2-year pilot scheme in Otjivero-Omitara (a small settlement of 1,000 people, around 100km to the east of Windhoek) from January 2008 to December 2009.
The pilot scheme allowed researchers to observe the impact of the BIG, to see if the expected benefits were achieved. They noted an increase in economic activity and a fall in poverty rates; health outcomes and employment rates improved and crime rates fell. The evidence from this trial has allowed campaigners to demonstrate the economic (as well as social) benefits of such a policy. However, the pilot project was only possible because of the historic connections between Germany and Namibia; Germany exercised colonial control over the country - then known as South West Arica - from 1884 to 1920. The German Lutherans were willing to fund the pilot project not because they are Namibia's geographic neighbours but because their sense of social justice transcends the lack of physical proximity.
My third example concerns Fair Finance, the London based micro-lender of which I am the Chair of the Board. In 2013, Fair Finance closed a fund-raising deal with Unicredito, the Italian bank, who have provided at least £1mn of lending capital, which Fair Finance will on-lend to small businesses and self-employed entrepreneurs in London.8 The money is targeted at those who have 12-months of trading history and need capital to expand and develop their business. Loan sizes will range from £2k to £20k, which is too small to be of interest to the mainstream banks, and will be priced at around 20%-25%, which is much cheaper than other extant sources of sub-prime business credit.
Unicredito has a small presence in London and its principal activities are investment banking, rather than SME lending. However, the senior management team were very conscious of the huge gulf in opportunity between those who work in the City of London, the most important global hub for financial services, and those who live and work in London but who are excluded from access to basic financial services. Rather than offer such services themselves, they have partnered with an intermediary - Fair Finance - with the expertise to make loans to the self-employed and small businesses.
As well as loan capital, Unicredito also provide Fair Finance with advice and support on technology, business processes and risk management. The relationship is good for their staff, who enjoy being involved with the partnership, and good for Fair Finance which has been able to expand its product offering from consumer lending to small business lending. Although the suppliers of credit and the users of credit live in the same city, they do not share a home. Despite being neighbours the borrowers and lenders have little in common: they are separated by class, culture, opportunity and expectations. Yet, financial intermediation makes possible a connection which benefits both parties to the transaction.
These three examples are suggestive of the need to abandon the metaphor of "rootedness" as the ideal by which to create a sense of social solidarity in the modern world. In each of my examples, one group of people provided financial support to another group, not because they shared a place or a home or an identity, but because they were part of a network. What mattered was neither history nor tradition, but the ability to invent new forms of financial intermediation.
The borrowers did not rely on the relationships and connections they had inherited, rather they created new relationships and connections for themselves. They did not look for roots to anchor themselves more firmly to their existing home; they looked instead for networks that would allow them to organise their home in a new and different way. What mattered was not where you called your home, but to whom you were able to call for help.
Mohandas Gandhi and Simone Weil both looked to the past in order to find inspiration for a better future. However, there is no guarantee that the past will be sufficient; sometimes we need to make our future in a completely different way. In the modern world we cannot always rely on the existence of roots to sustain and nourish us. Nevertheless, my three examples illustrate how financial networks have in certain circumstances supplied the type of innovation that allows us to overcome the constraints of our past.
Even though it took him ten years, Odysseus was able to go home. By contrast, Aeneas was forced to find a new home, because his old home was destroyed. The predicament of modernity can perhaps best be summed up by saying that, today we all sail with Aeneas.
1 Benjamin Britten, Peter Grimes (1945). Words by Montagu Slater, based on a poem by George Crabbe.
2 Numa Denis Fustel de Coulanges, The Ancient City, trans. W Small, Dover Inc., New York, 2006. (First published as La Cité Antique, L Hachette, Paris, 1864).
3 Mohandas Gandhi, Hind Swaraj, Cambridge University Press, Cambridge, 2009.
4 Simone Weil, The Need for Roots, trans. A F Wills, Routledge, London, 1987. (First published as L'Enracinement, Galimard, Paris, 1949).
5 For a discussion of the way in which the journey from the village to the city (and back again) has been understood in modern Indian culture, see Ashis Nandy, An Ambiguous Journey to the City, Oxford University Press, New Delhi, 2001.
6 Maristella Botticini, 'A Tale of "Benevolent" Governments: Private Credit Markets, Public Finance and the Role of Jewish Lenders in Medieval and Renaissance Italy', (2000) The Journal of Economic History, 60:1, pp. 164-189.
7 An account of Namibia's Basic Income Grant experiment can be found at: www.bignam.org/
8 Details of the deal can be found here: www.fairfinance.org.uk/images/PR_Oct7_FINAL.pdf