As Justin Fox put it, "in the 1980s, investment banks, encouraged by regulators, began a transformation from stodgy, tradition-bound institutions to restless, relentless seekers of profit. Some of that change was good but, ultimately, it gave us a few powerful, global companies bound by no clear standards of behaviour, where appalling conflicts of interest were accepted and pay practices encouraged the most greedy, short-sighted thinking imaginable. The culture was toxic."
The toxicity Fox describes arguably led to the recent Great Recession, and it seems that it could happen again. The financial agents of this catastrophe (investment bankers, traders etc) argue that the economy has merely suffered an accident - and thus the status quo ante ought to be reinstated sooner than later. That's a clever metaphor. Arguably, they want to preserve how things worked for them, the systems, the rules, the loopholes and carry on doing the very thing that led us to a financial apocalypse.
It is comforting to know that a number of changes are underway. Reforming regulatory agencies and boosting regulation are two common options employed by many nations across the world.
But perhaps we're missing the point.
When criminals get tougher, our natural reaction is to increase the police force, provide the latter with more weapons and improve detection mechanisms. Flood our streets with CCTV cameras and erode our civil liberties. But those responses don't always usually work. Surely a more efficient response would be to tackle the root of crime: human behaviour. And arguably education is the optimal weapon to achieve that objective.
Business education ought therefore to play a greater role in the regulation of the markets. But you might say hey! That has already been done! Indeed, many MBA programmes already include compulsory "Business Ethics" modules covering topics such as CSR and environmental ethics. But that also misses the point. Ethics should not be an isolated topic or module - it should be pervasive across all modules. Ethics should be instilled systematically across all fields of business studies - not a single module where you cram most of the material 1 week before the exam and then forget about it for the remainder of your professional life. Alternatively, business schools and economics faculties should seriously consider including a "Financial Ethics" course in their curriculae. By educating the minds of the world's future financial agents we may perhaps change their behaviour and attitutude towards risk - and thus prevent another catastrophe from occuring.
A quote from the Nei Jing (an ancient Chinese medical text that forms much of the basis of Traditional Chinese Medicine) sums it up well:
"The sages of antiquity did not treat those who were already sick, but those who were not sick... When a disease has already broken out and is only then treated, would that not be just as late as to wait for thirst before digging a well, or to wait to go into battle before casting weapons?"
Education is one of the most powerful tools we hold in order to prevent another man-made financial disaster. Institutions of Higher Education ought to take a leading role in ensuring that such an event doesn't happen again - a "don't follow the path, set the trail" approach.