‘Real Money’s’ Ali Velshi talks financial markets and morality

So we’re always addressing markets in the context of larger issues: the individual versus the group; equality of opportunity versus equality of outcome; and the difference between legal and moral. In our hierarchy of values, which ones do we place at the top? Ayn Rand would tell you that the individual is all. By contrast, a honeybee would tell you that group welfare trumps everything.

Most of us fall somewhere in between. We’re individuals, but we’re part of — and we have the ability to affect — the group. We have several ways to do this. We do it at the ballot box and we can do it in the markets. In investing, for example, we can choose to restrict our investments to companies that exhibit behavior consistent with our own morality…

The question is, can you make money doing this? Or are your morals impeding your financial returns? Each of us has to decide how far we’re willing to go to adhere to our beliefs…

There obviously are situations in which, it can be argued, entire industries have acted immorally. I’m thinking specifically of the sub-prime lending crisis of 2007 and ’08. Banks pushed people to borrow more than they needed, more than could really afford, because the banks made the most money that way.

In days gone by, the banks wouldn’t have made these loans, because they would have been left holding the bag if things went south. They would have been much more careful. But in this instance, they were basically playing with house money. Because they were able to sell their loans to other financial institutions: pension funds, sovereign debt funds, and central banks around the world. So they were protected. Some of the biggest culprits were deemed “too big to fail,” and were, in essence, granted immunity for their mistakes. The ones left holding the bag were the unfortunate families who’d been talked into these loans by the very people who should have been talking them out of them…

For years, scalping tickets was against the law. You weren’t allowed to buy tickets to sporting or entertainment events and re-sell them for more than you paid initially. Undercover cops patrolled outside stadiums and arrested people seeking to traffic in tickets.

Those days are pretty much gone. Technology made it easy to create a secondary market in tickets. First there were ticket brokers who bought tickets in lots, then e-firms like StubHub allowed individuals to get in on the act. Today, sophisticated ticket-buying computer programs are so common that it’s often impossible to see a major artist in concert without going the secondary route.

Is this immoral? As far as the market is concerned, this is exactly as it should be. If tickets can be sold for two or three times their face value, then they were clearly underpriced to begin with. The market is efficiently finding the balance between supply and demand. That’s exactly what markets were meant to do. It not only makes your tickets more expensive; it makes the chocolate you eat and the coffee you get from Starbucks more expensive so that the workers who pick the beans and the farmers get a fair price. It’s the same market, by the way, that causes you to wear clothing made in Bangladesh. And to buy iPhones made by former peasants in China. Sometimes it works in your favor, sometimes it doesn’t. Sometimes you save money. Sometimes someone dies. Remember, your principles don’t mean anything if they don’t cost you something…

So, what’s the most moral position one can take while still allowing the markets to function freely?

Sadly, I don’t have an answer for you. But I do have faith in evolution. Values evolve, just as societies do, just as species do. As a species, we’ve gone from believing that we’re the rulers of the Earth to believing ourselves its stewards. That’s a more compassionate, more moral view. And as a society we tend to act on our beliefs…

As long as we would prefer to pay more for a good that is produced in accordance with our values than pay a lower price for an article that is made by taking advantage of those without the means to redress unfair conditions, we will be moving the markets toward a more just, more moral position. The fact is we aren’t always willing to do that. Regulation can fix some of the problem, but personal responsibility – knowing what you are investing in and buying can play a bigger role.”