Finance, Gender, and the Ethics of Care: ideas for human finance

1. Finance, Gender, and the Ethics of Care:ideas for human finance Irene van Staveren, Institute of Social Studies, member of SAC FESSUD, Presentation at Annual FESSUD meeting, 17-20 October 2013.

2. Outline:I. Gender Trends in Developing Countriesduring Financial CrisesII. The Lehman Sisters HypothesisIII. Caring Finance: Ethics for Financial Reform

3. I. Gender Trends in Developing Countriesduring Financial Crises

4. Methodology: comparative analysis, period 1996-2005 • Crisis countries: • 1997: Indonesia, Korea, Malaysia, Philippines and Thailand • 1999: Brazil • 2001: Argentina • 2002: Turkey • Non-crisis countries: • India, Japan, Mongolia, Pakistan, Vietnam, Chile, Mexico, Egypt

5. Average decline: 33 per 100,000 live births Average decline: 57 per 100,000 live births

6. Average decrease: 0.4% Average increase: 9.7%

7. Average increase: 4.4% Average increase: 10.1%

8. Average decrease: 0.95% Average increase: 3.76%

9. Average increase: 5% Average increase: 11%

10. Conclusion part I: gender & crises Widening gap for women’s health indicator (maternal mortality rate) for crisis countries Widening gap for girls’ relative school enrolment and completion rate for crisis countries => financial crises can have disproportionate negative effects on several gender indicators: widening gaps

11. II. The Lehman Sisters Hypothesis “If women had run the financial sector, we would not have found ourselves in this crisis”

12. Survey among Dutch financial professionals • N = 111 • 67% women, 33% men • December 2010-January 2011 • LinkedIn snowball method through a group of women financial professionals • Not representative but exploratory

13. Age differences between men and women (%) Pearson Chi Square test is statistically significant at the 10% level.

14. Educational differences between men and women (%) Pearson Chi Square test is not statistically significant

15. Income differences between men and women in euro per month (%) Pearson Chi Square test is statistically significant at the 5% level

16. Differences in bonus between men and women in euro in 2007 (%) Pearson Chi Square test is not statistically significant

17. Differences in bonus between men and women in euro in 2009 (%) Pearson Chi Square test is statistically significant at the 10% level

18. Self-perceived risk adjustment in volatile markets (%) Pearson Chi Square test is not statistically significant.

19. 80 70 60 Female 2007 50 Male 2007 40 Female 2009 30 Male 2009 20 10 0 Very low Low Neutral High Very high Risk taking before and after the crisis (%) Pearson Chi Square test is not statistically significant for 2007 but is statistically significant at the 10% level for 2009.

20. male female

21. female male

22. Should more women be hired at the financial top when they have the same level of education and experience as men? (%) Pearson Chi Square test is statistically significant at the 1% level

23. Would more female leadership prevent a next crisis? (%) Pearson Chi Square test is statistically significant at the 1% level

24. Conclusion part II: a gender paradox Even though women’s financial attitudes seem more effective to prevent, or reduce the extent of a crisis, men do not as strongly as women support a higher share of equally qualified women at the top of the financial sector Why? Protection of male power? (status quo of gender disbalance) Strong male believe in a linear positive relationship between risk and ROI? (rational economic man) Strong male and female belief that women are less good at calculus and that men are better leaders? (gender stereotyping skills)

25. III. Caring Finance: ethics for financial reform

26. “thick concepts” on the crisis: • “hiding risky situations” • “excessive liberalization” • “extremely high bonuses” • “irresponsible loans” • “failing control”, “regulatory capture” • “perverse incentives”, “moral hazard” • “too rosy assessments” • “excessive liquidity related to consumerism”

27. Conventional ethics & finance: • Utilitarianism: concerned with autonomy and maximizing self-interest • contributed to causing the crisis • undermined the rules that were put in pace after the previous crisis • Deontology: concerned with the right cause of action for everyone • was inadequate to prevent the crisis • is insufficient to deal with the crisis and reform

28. Ethics of care • Concerned with maintaining relationships and caring for each other’s needs • Based on women’s moral experiences as care givers, but recognized as a wider human experience => theorized in feminist ethics • The central value of care is responsibility: • contextual (unlike a rule or right) • relational (unlike autonomy or personal freedom to pursue one’s self-interest)

29. Ethics of care & the crisis • Responsibility in financial relationships: • long-term perspective for sustaining these relationships • recognition of the importance of context rather than universal rules • Reducing risk from the recognition that: • finance is vulnerable to a high degree of uncertainty • people may be affected by risk in many ways

30. Keynes (formulated by Skidelsky, 2009) on a crisis: “The cures are not meant to be definitive; they are subject to all sorts of special assumptions and are necessarily related to the particular conditions of the time.” => not deontology but ethics of care …

31. Two case studies of caring finance in the Netherlands • Open interview with two bankers at a treasury and documentary research • Participant observation, interview on a farm, and price data collection & basic calculation

32. Contingent, cooperative capital • Rabobank: large cooperative bank, AAA • Senior Contingent Note (SCN) issued in 2010: • value of the bond does not appear on the balance sheet unless the bank’s equity capital ratio falls below 7% • in that case the bank’s core capital will be strengthened because the bank receives 75% of the value of the outstanding SCNs (“bail-in”)

33. High demand • 10 year fixed rate Senior Contingent Note • annual coupon of 6.875% • twice oversubscribed (London, NY, Frankfurt) • generated 1.25 billion euro

34. Caring dimensions: • Responsibility towards tax payers: no need for bail-out • Responsibility towards financial sector stability: incentive to keep risk levels low and capital-equity ratio high • Less risk for moral hazard because there are no shareholders demanding high quarterly profits • BUT: not demanded by members but developed by financial whizz-kids

35. Crowd funding for a green future • Organic milk farm (diary, meat, cheese) • ‘Boer-zoekt-buur’ crowdfunding by 30 consumers, 250 euro each, in exchange for 6 vouchers of 50 euro to be spent annually • Products: meat, diary, nuts, ice cream, night in the haystack with farmers breakfast • 50% financed through crowdfunding • => ROI = 3% annually

36. Additional benefits for farmers: • No pay back in money: saves money for other expenditures • Pay back in products ensures the farmers • fixed minimum demand • Increased volume sold => helping to attain economies of scale. • Personal relationships -> ambassadors • Personal commitment -> pool of voluntary labour & management advise

37. Additional benefits for ‘neighbours’ • Known origin of organic food • Opportunities to get involved (adoption iof a cow, voluntary farm labour’ dancing cow event) • Price advantage of products: 30%

39. Social returns • Green energy production • Network supporting transition to a green economy • Low risk due to • Transparency • Relationship building • Reduced volatility in ROI and farm sales

40. Weaknesses • Administrative burden for farmers: transaction costs (but cheaper than bank fees …) • Low transactability of debt & returns: localness

41. Conclusion part III: caring finance • Caring finance helps to reduce financial risk • Caring finance is complementary to regular finance and can reap “normal” ROI • Caring finance has already started ….

42. Sources: • ‘Caring Finance Practices’, Journal of Economic Issues 47 (2), 2013, pp. 419-425. • with Ricardo Crespo, ‘Would We have had this Crisis if Women had been Running the Financial Sector ?’, Journal of Sustainable Finance and Investment 1 (3-4), 2012, pp. 241-250. • ‘The Lehman Sisters Hypothesis: an Exploration of Literature and Bankers’, ISS Working Paper no. 545, June 2012. The Hague: Institute of Social Studies. • ‘Gender Trends in Developing Countries During Financial Crises’, ISS Working Paper no. 511, The Hague: Institute of Social Studies of Erasmus University Rotterdam, 2010, 20 pp. • ‘Post-Keynesianism meets Feminist Economics’, Cambridge Journal of Economics 34 (6), 2010, pp. 1123-1144. • ‘Caring for Economics’ in Ananta Giri (ed.), Creative Social Research: Rethinking Theories and Methods. Lanham: Lexington (imprint of Rowman and Littlefield), 2004, pp. 83-111.