Every day sixteen major UK banks submit their best guess of the rate of interest they are expecting other banks to charge them to lend to each other at the end of the working day. This is then averaged by the Bankers’ Association to give the london interbank official rate of interest or LIBOR. Barclays is accused of manipulating this rate between 2005 and 2008 in order to make the rate they were expecting to be charged lower than it should have been, so that the Bank appeared to be in a stronger position at a time of global financial crisis.  Is this apparent dishonesty evidence of a failure of business ethics?

Plato mentions in the Republic a shepherd called Gyges who discovered a ring. When he turns the ring, it makes him invisible. He goes and seduces the king’s wife, murders the king and assumes the throne using the power of the ring. Could anyone, argues Plato, resist the power of invisibility?

Bob Diamond , former Chief Executive of Barclays, defined an ethics of integrity as “what you do when no-one is watching you”. I’s not a bad definition of virtue – acting on principle when no-one is watching you. Yet the bankers are accused of doing just this: of acting immorally when no-one was watching, or even, when the Bank of England or the Financial Services Authority were turning a blind eye.

It’s interesting that utilitarian ethics actually encourages you to act immorally as long as you aren’t caught. The bankers, taking a utilitarian perspective, could easily have reasoned that they served the national interest because the markets generally would have perceived the expectation of a higher interbank lending rate as a sign that Barclays was in difficulty. Bob Diamond was desperate not to be seen to be weak, he was fighting to prevent Barlcays being taken into state ownership, as had happened to Royal Bank of Scotland. The apparent deception proved that Barclays was in a stronger position than was in fact the case: this action saved the state money; it saved other banks from a domino loss of confidence; it saved the nation higher interest rates all round as uncertainty tends to require higher interest rates that costs every mortgage holder something. Deception, so the utilitarian could argue, served everybody’s interest. It is win-win immorality.

So why is it wrong? Because it undermines trust. Lies and deception destroy the very thing they are defined in terms of…truth and promise-keeping. If everyone tells lies then we cannot trust anyone and society loses the ability to function effectively. Lying is corrosive and expensive – think of all the checking you need to do when you don’t trust someone, and the suing that follows fraud.

It also undermines moral integrity. This was Bernard Williams’ great objection to utilitarian ethics – that it undermines the idea of our moral integrity, of the things we stand for and believe in. Reliability and trustworthiness are also key virtues to build a flourishing life – and deviousness and pragmatism are guaranteed to create the opposite – an unfulfilled life that’s way below the best it could be.

The difficulty is, it seems, many of us fall prey to Gyges’ ring. We keep things we find (theft), we avoid tax by paying in cash (deception), we slip the odd pen into our pocket even through our employer paid for it, we secretly surf internet sites that damage or psyche or our ability to form proper relationships. And so on.

We say to ourselves “no-one is watching, no-one will know”. But things done secretly actually define who we are. And secrets return to haunt us.

And so fundamentally I disagree with Plato for the same reason Bernard Williams finds utilitarian ethics unworkable. Plato felt none of us could resist the power of the ring – we would be tempted to do all sorts of evil.  But as Williams points out, doing just anything offends against our idea of integrity.  Just as I wouldn’t search through my partner’s handbag or her emails when she was out of the house, it would go against my integrity to do so, so I wouldn’t do anything very different if I was invisible.

Not least this ignores the place of conscience in guiding human affairs – more on this another time!

Image: copyright the author, photo with permission, Laing Art Gallery, Newcastle

For more on Gyges’ ring:
http://aphilosopher.wordpress.com/2009/12/29/summary-of-platos-ring-of-gyges/