History has proven that free market capitalism may be imperfect but it is undoubtedly more efficient than any alternative economic invention. Even after the 2008 financial crisis, no rational leader or enlightened economist suggests replacing the free market with socialism. Populist mavericks such as Joseph Stiglitz or Paul Krugman advocate more regulation but are no socialists.
The critics from an ethical perspective are not satisfied, however. I will not elaborate on the recent success of the French neo-marxist historian Thomas Piketty: obsessed by the super-wealthy 0.1%, he has proven unable to see the huge middle class, born from free market all around the world. More seriously, I want to address the actual challenge on capitalism raised by the “BNP affair”.
This global French bank recently pled guilty in front of the New York Department for Financial Services for $30bn of transactions with countries under trade sanctions by the US government, including Sudan, Cuba and Iran. BNP managers are paying a $9bn fine, and a one-year suspension on US-dollar clearing of its oil, gas, commodities and finance businesses has been imposed. As expected, the BNP indictment rekindled anti-American rants in France.
A more subtle criticism against the American sanction emerged from the pro-market magazine, The Economist: why should a non-American bank be submitted to an American law? True enough, American officials use ‘dollar supremacy’ to force all transactions in US dollars to transit through the New York financial exchange. Are the Americans to be indicted for their quasi-imperialism or should the Europeans wonder why their own currencies are not globally accepted? This debate has kept commentators on their toes since the 1944 Bretton Woods conference.
Strangely enough, little is said about what the BNP actually did: in Sudan and Iran, BNP have not hesitated to deal with rogue regimes, notoriously hostile to Western interests and human rights. The bank allowed an Iranian regime building a nuclear complex, and a Sudanese government building a strong army, to sell oil. Those at the heart of operations at BNP tried to hide the beneficiaries of their transactions and we can imagine that these transactions were extraordinarily profitable for the bank.
For sure, banks are not charities: the duty of any enterprise is to be profitable. This is what shareholders and workers expect. Where is the limit, though? During World War II, the French national railway company, SNCF, transported the Jews to concentration camps and was paid by the Nazi government for prompt delivery. Should BNP, a private bank, be more accountable than the SNCF, which was – and still is – a State run company? The BNP managers consider they fulfilled their duty: none of them has presented any valid excuse of any sort and only one of them resigned.
There is no sign yet of remorse from the BNP’s top executives. They even recently informed staff that their annual premium will be erased in order to pay for the US fine, say sources at the bank. From the shareholders we can expect protests, not against the BNP involvement in Darfur and Iran, but against the loss of their dividends. It seems to me that Lenin had a point when he declared that “Western capitalists were ready to sell the rope to hang themselves”.
Is there a way out of the contradiction which may occur between ethics and profit? “Capitalism is globally ethical because it improves mankind’s quality of life”, is the usual answer. Yes, but the usual answer is not satisfactory when the SNCF carries Jews to their death and when BNP facilitates the Darfur people’s annihilation.
Why has the BNP Chairman not resigned? This is the least he could have done after the company he oversees violated French and American laws, having financed crimes against humanity and inflicted an epic loss on his employees and shareholders. I would like to believe that an ethical behavior would have been more rewarding.