Archive for SIPA

Taming the Bull: Can Global Finance ‘Save’ Human Rights?

by Genevieve Zingg, editor of RightsViews and a M.A. student in Human Rights Studies at Columbia University

The global financial system has long had a public image problem.

In the United States, Wall Street has become virtually synonymous with greed, power, and ruthlessness, a reputation turned into American lore by a long line of iconic films and insider tales. From the eponymous “Wall Street” starring Michael Douglas in 1987 to Leonardo DiCaprio’s 2013 role as Jordan Belfort in “The Wolf of Wall Street” and the dark story behind the 2008 financial collapse in “The Big Short,” finance has been cast as the epicenter for the self-interested and corrupt.  

David Kinley, chair in Human Rights Law at the University of Sydney, however, sees an opportunity to leverage Wall Street, and its international counterparts in London, Tokyo, Hong Kong and Geneva for the benefit of international human rights and social justice, a chance for finance to shed its bad reputation and become a positive force for socioeconomic impact.

Kinley, an expert member of high-profile London law firm Doughty Street Chambers, spoke at Columbia University in March about his new book, “Necessary Evil: How to Fix Finance by Saving Human Rights.” The book, a ten-year project aimed at bridging the gap between finance and human rights, argues that there is an unavoidable relationship between the two sectors.

David Kinley, chair in Human Rights Law at the University of Sydney, spoke at Columbia University in March. // Genevieve Zingg

Noting a lack of existing scholarship to investigate the intersectional scope between finance and human rights, Kinley says he deliberately chose a broad and accessible lens to kick off the conversation. Human rights, for instance, are defined in the book not according to technical legal instruments and international agreements but by our day-to-day understanding of the term: simply those things that give people dignity, respect, security and equality within a given community.

Citing the drop in global poverty over the last 30 years, Kinley emphasized that his critique of finance is not a rebuke of capitalism as a whole. Capitalism is to a large degree responsible for many positive economic effects, including overall increases in aggregate and global wealth.

“I’m not trying to say, let’s erase the capitalist system,” Kinley said, “but I do think its sharp edges can be dulled. It has become introspective, concerned with its own indicia of success rather than having a consciousness or awareness of its impacts outside finance itself.”

As the sole sector necessary for every other sector, human rights included, finance is in a unique position. However, it is precisely this exceptionalism that has rendered finance a dangerous purveyor of political power.

“There’s a revolving door between Wall Street and K Street,” Kinley said, referring to a corridor of top lobbying firms in Washington, D.C. “This is the same in all financial centers of power. You want the SEC and other watchdogs to know how the system works, but if they come from within, they may start to become protectors rather than scrutinizers of the system.”

He pointed to the recent appointment of Jerome Powell to head the Federal Reserve. Powell joins a growing roster of former Goldman Sachs attorneys and executives appointed to key U.S. economic policy positions. Despite campaign promises to “drain the swamp,” President Donald Trump has stacked his administration with a bevy of Goldman Sachs bankers. The list includes Steven Mnuchin, a former Goldman Sachs partner and current Treasury Secretary; Eric Ueland, a former Goldman Sachs lobbyist, now the Under Secretary of State; Gary Cohn, Trump’s top economic adviser; John Clayton, a lawyer who advised Goldman Sachs during the 2008 bailouts, now the chair of the Securities and Exchange Commission (SEC); and Steven Peikin, another former Goldman Sachs attorney, now one of two directors of the SEC enforcement division.

Wall Street has become virtually synonymous with greed, power, and ruthlessness, a reputation turned into American lore. // Photo by DFLORIAN1980 // Flickr

Perhaps the only thing worse than being ensnared by the unavoidable tentacles of the financial system, Kinley continued, is being excluded from it. However, he argues that the growing use of microcredit, microfinance and mobile money are slowly increasing financial inclusion among those previously left outside the system.

“I’ve just come back from Nepal, and everyone there owns a mobile phone— which allows you to have mobile money. People may be overcharged for it, but they will still go for it because they believe in themselves and their ability to break out of the cycle of poverty,” he said.

Overcharging is just one of many criticisms leveled at the microfinance industry like any practice, it is not without its risks. Predatory loan sharks reportedly thrive among microfinance initiatives in the developing world, and some studies find that overindebtedness can leave poor people more desperate than they were before. 

The talk at Columbia University focused on at bridging the gap between finance and human rights. // Genevieve Zingg

Joel Moser, founder and Chief Executive Officer of AQM Capital LLC and an adjunct professor at Columbia’s School of International and Public Affairs, defended the essence and objective of Wall Street. “It facilitates the movement of money so that companies can get started, so that Columbia can borrow money to build a new medical center, so a government can borrow to build water treatment centers,” he said.

Moser argued that there is nothing fundamentally evil about the system itself, nor is there anything wrong with people wanting to make money— as John Locke said, a central freedom of democracy is the pursuit of money. “There are evil actors, but there are evil actors everywhere,” Moser added.

Like Kinley, he pointed to the political side of finance as the sector’s major fault, pushing against the idea that human rights issues evolve from Wall Street itself. “It’s an issue of enforcement and regulation. When you have the Street controlling the government, that’s the problem, and that’s a problem with democracy,” he said, pointing to the National Rifle Association (NRA) as a pertinent example of lobby groups leveraging their political power to manipulate the very regulations meant to control them. The NRA’s influence on Capitol Hill is undeniable: of the 535 current members of Congress in both the House and the Senate, 307 have received direct or indirect financial contributions from the NRA. Similarly, the finance lobby spent a whopping $2 billion on political activity between 2015 and 2016. 

All this money can, of course, be used to drive human rights forward. Daniel Berezowsky, a second year student in SIPA’s Human Rights and Humanitarian Policy concentration, argued that finance is beginning to look beyond philanthropy to drive social impact. He pointed to the recent precedent of LGBT rights being embedded into World Bank loans, creating a significant incentive for human rights compliance even in countries firmly opposed to recognizing its LGBT members and communities. In 2014, for example, the World Bank blocked a $90 million loan to Uganda on the basis of its draconian anti-LGBT laws, the first time a loan was explicitly tied to the rights of sexual minorities.

The event was one of the first of many collaborations between the Human Rights and Humanitarian Policy and International Finance and Economic Policy concentrations. // Genevieve Zingg

Majda Radovanovic, a first year student in SIPA’s International Finance and Economic Policy program, argued that human rights have as much practical weight as they do moral or ethical. Like Warren Buffet’s classic principle— good practices pay off in the long run— there is increasing evidence that Environmental, Social and Governance (ESG) factors offer investors long-term performance advantages.

The most important issue is figuring out specific, concrete steps that can better fuse human rights and finance. “The broad, open-ended gist of human rights doesn’t help advocates be taken seriously by finance,” Kinley said. “Human rights are aspirational hopes of the most divine kind, but lack real steps describing how you achieve these goals— we need to drill it down to what it means in the specific context of finance.”

Radovanovic pointed out that unmet human rights needs may arise because the sector is simply unequipped to identify and address them. A potential partnership opportunity between government, human rights experts and the financial sector might help provide the missing education and information to fill this crucial gap, she said.

Joanne Bauer, who teaches business and human rights at SIPA and moderated the discussion, sees SIPA as an ideal place for productive collaboration between finance and human rights professionals given its expertise in both fields. She suggests that this event, a co-sponsorship between SIPA’s Human Rights and Humanitarian Policy and International Finance and Economic Policy concentrations, will be the first of many collaborations focusing on finance and human rights as tools for the promotion of corporate accountability.

“If we continue to oppose the bull, we’ll just be run over,” Berezowsky mused, in reference to the “Fearless Girl” boldly staring down the Charging Bull of Wall Street. “We need to learn to tame the bull, and use it for purposes that benefit human rights as well as finance.”

 

 

 

Genevieve Zingg is currently pursuing her Master’s degree in Human Rights Studies at Columbia University, focusing on human rights in the context of armed conflict, counterterrorism and national security. She is interested in refugees and migration, foreign policy and international politics, international criminal and humanitarian law, and intersectional issues of race and gender. She holds a B.A. (Hons.) from the University of Toronto and has professional experience working in Geneva, Athens, Paris, Brussels and Toronto. Connect with her on Twitter @GenZingg. She is editor of RightsViews.