Several years ago, the soccer player Papiss Cissé became the center of a controversy when he refused to wear his team’s branded kit, bearing the logo of Wonga – the payday loan company that sponsored his soccer club Newcastle United in the northeast of England. Wonga began its lending with an effective annual percentage rate (APR) of 4,000 percent. Islam prohibits usury, and Cissé refused to wear the Wonga logo because it offended his Muslim faith.

Last year Wonga went bust after a cap on interest rates ruined its business model. This was compounded by a wave of compensation claims and a sustained campaign against “legal loan sharking” that targets vulnerable borrowers with small loans that quickly spiral out of control.

There is another way for banking and sports, and it is not very long ago that it was thriving. Before being sponsored by Wonga, Newcastle United was sponsored by the building society Northern Rock, whose origins go back to the Northern Counties Permanent Building Society established in 1850, created by local people to serve local needs. Northern Counties grew gradually to be one of the main building societies in the country, owned by its members and offering financial services such as savings and mortgage lending to communities that had been previously excluded.

Northern Counties flourished and so did countless local people. During the strikes of the 1980s it suspended mortgage payments for striking miners. It was at the heart of the local economy and society, a trusted financial institution that reflected England’s civic inheritance.

But then the greed of reckless executives wrecked it all. Rather than using customer deposits as the source of funds, the management decided to borrow cheaply in international money markets and thereby inflate the balance sheet. When the sub-prime crisis hit America and led to a global “credit crunch” in 2008, those markets froze and cut lending to overexposed banks like Northern Rock. After the first run on a British bank in almost 150 years, it was nationalized with a government loan totaling over 40 billion in US dollars. An old city was dispossessed, and the century-old soccer club accepted the sponsorship of a purely usurious lender. The financialization of the building society betrayed its original vision and betrayed the people of England’s northeast.

The Rise of Neoliberalism

It was not supposed to be that way. After the end of the Cold War, capitalism had seemingly triumphed over communism, and a global convergence towards liberal market democracy, one which would be not consume itself, appeared to be underway. Twenty-five years later the reality is largely one of monopoly markets in the West and state capitalism in the East.

What are the principles that have promoted that – what’s the “recipe” for the kind of economy that leads to Wonga? They’re the collection of principles known as neoliberalism, the version of capitalism that has led to our current crisis. These principles are written into law and custom, and these laws and customs go on to shape the lives of communities and people.

First, there’s the idea that all contracts are valid so long as they are voluntary, with no consideration given to the power differential that may exist between the employer and the employee. As unions have weakened, thanks in part to open border policies that promote the free flow of capital and labor so that companies can shop around for legal regimes that provide the cheapest possible workforce, these power differentials have only gotten worse.

Second, there’s the requirement that a corporation must maximize profits for its shareholders. This means that if a corporation expends any money on, for example, improving worker conditions, it must do so only if such improvements would boost profits. Corporate social responsibility thus rarely goes beyond what it might be pressured into by shareholders and consumers who “vote with their dollars” for companies with more humane policies – or companies that can present themselves as working with more humane policies. It’s public relations over substance all the way down.

Third, there’s the disconnect between the price of something and its real value. The “economy” of quick stock market and financial market exchange is unmoored from any object or experience or service that might have value for a human.

This is neoliberalism. It systematically undermines the foundations of wealth and value creation in ways that harm everyone except perhaps the top 20 percent, as evinced by the sub-prime crisis that brought down Northern Rock. Even the middle class is up to its neck in debt, and rising real estate value doesn’t buy food. Instead, it prices the next generation out of the market and reinforces a general slide into a society of winners versus losers. Then there are the cleaners, caregivers, garbage collectors, nurses, shop workers, and those picking crops – the forgotten people of the economy. Their hard work is neither properly rewarded nor recognized, and their meager pay means that they struggle to make ends meet. “Working poor” is the technocratic phrase for a life devoid of dignity.

Ecological and Social Insanity

The ecological insanity of many contemporary corporate practices have been thoroughly discussed. Treating places merely as reserves of “natural resources” or as receptacles for the sludge that production creates rapidly undermines their capacity to sustain production. This works as a metaphor for what we’re doing socially, but many have not understood it as vividly as they do the costs of clearcutting or irresponsible toxic waste disposal.

Still, the sheer economic costs of socially unsustainable action are increasingly clear. If one overcontrols or overworks one’s labor force, shifts one’s labor base too often, pays suppliers as cheaply as possible, extends the division of labor round the globe, fails to support one’s workers’ attempts to start and care for their families, buys out local rivals and fails to benefit local communities, then eventually the costs outstrip the benefits. One is left with unreliable and lackluster workforces, poor-quality suppliers, botched components shipped round the globe at enormous cost, falling demand in local hinterlands and weak local supplies of talent in increasingly impoverished and undesirable places. Wall Street is on steroids while thousands die of opioids.

Concrete alternatives to this insanity are available. The pursuit of long-term stable and steadily augmenting profit requires, even for strictly economic reasons, an attention to mutual benefit. Corporate contributions to social and ecological costs should not, therefore, be thought of as “coming from without” and as constraining business, but rather as something businesses naturally embrace. The role of the state is to promote mutual benefit and the common good by getting businesses to factor in the social and environmental costs of their activities or to compensate for them. It is not a question of the state imposing draconian or arbitrary extra regulatory burdens on companies, but, rather, of the laws persistently requiring that companies take responsibility for their negative social and ecological externalities. “Squarely face the results of your economic choices,” we might imagine legislators saying to corporate executives, “and make choices that will allow you to continue in business for a long time, and that will contribute to the ongoing wellbeing of the political community that you depend on.”

Originally, only companies that could show that they were providing some social good – some good beyond merely financial profit for their shareholders – were granted corporate charters, which limit liability of owners and thus encourage investment. These charters are not rights in the way that property ownership can be said to be a right, but legal structures made available at the discretion of those who have the care of the community. It is not alien to our legal tradition to return to these principles.

A Moral Market

This alternative to the neoliberal capitalism we currently have is not communism, but rather an ethical, social market economy. Getting there would involve rebuilding the everyday economy made up of services, production, and social goods that sustain people’s daily lives – agriculture, manufacturing, hospitality, as well as manual jobs such as construction and security. At present this part of the economy is characterized by low wages, low productivity, and low skills. Tackling these structural failures must be central to a program of renewal that can provide shared prosperity for neighborhoods and nations.

One starting point has to be the reintroduction of the “living wage” or, better, a “family wage” that allows people to feed themselves and their loved ones without the misery of holding down several jobs. The word oikonomos originally meant “the law of the household.” A political economy that enables households to thrive, to raise and educate the next generation of men and women, is surely the very first measure of a political economy that is doing its job. This return to a “family wage” must be part of a recovery of the idea that goods and services have a certain moral as well as economic worth, a role in the good life as well as just an exchange value.

It ought to be a fundamental role of law to combine sanctions for human vice such as greed with incentives for virtue – rewards for actions that contribute to mutual benefit, such as shared prosperity based on more ecologically and socially sustainable growth. This idea may seem radical – and those who value absolute freedom of exchange as the highest good will object. But the reality is that every economic decision is, in truth, a political decision, and every political decision involves a claim about the good life. Libertarian visions of unfettered markets, driven by no goal but short-term profit maximization, are visions of what libertarians take to be a good. But this vision has failed. In light of ever-more frequent and catastrophic financial crises and the impact of mega-corporations on the world’s ecological and social patrimony, the prevailing model encourages the vice of greed and selfishness.

The existence of markets, however, is not the issue, and the market economy need not be immoral. The Northern Counties Permanent Building Society was both an ethical enterprise and good business. One fundamental problem today is that goods and services are dominated by abstract numbers rather than real values.

Abstraction from reality does not make sense even in narrow economic terms. Since humans are embodied creatures, disembodied capital must ultimately be measured against material resources. Otherwise we have no way finally to guarantee its value, without which it loses its function. Put differently, in conditions of capitalism, value in every sense is uncoupled from fact. But this division is alien to human beings: the house I live in, for example, affords me at once material shelter and emotional stability. People usually live in this more integrated way.

Neoliberalism goes against the grain of humanity. And that means that, eventually, such financial “experiments against reality” will fail. Meanwhile, the world goes round and round: financialization and globalization can only encourage nomadic remoteness from reality for a limited time. If you live on one planet, there is eventually nowhere to hide, not even in exotic tax havens. Finally, we will find that only a market re-embedded in the physical and social world can promote the wellbeing of free men and women; only a moral market is a free market.