"Without a stable economy, the rest is idle dreaming." So argued Rowan Williams, the Archbishop of Canterbury, in a speech at a TUC/Guardian conference on the economy on Monday. Entitled "Beyond Crisis", the conference was about developing a progressive answer to the challenges faced by the financial meltdown and the consequent recession. Rowan Williams was the keynote speaker. In a thoughtful speech, he argued for the promotion of virtue in society. However, the way markets are organised can work against this.

The Archbishop noted that the word "economy" in Greek means "housekeeping" and he expanded on this theme. Thinking about the economy in terms of family housekeeping was a good way of keeping economic discussions rooted in the real world. He suggested the economy should enable people to make and sustain a home and continue to flourish as human beings.

Williams argued we should promote "three-dimensional humanity", formed of three components: family, imagination, and mutual sympathy. All human beings begin in a state of dependency and the human family is the indispensable foundation for this, with unconditional family love mirroring the love of God. We are imaginative beings who can look to broaden our understanding. We have the capacity to sympathise with others, which challenges individualism. Christians believe that if one suffers, all suffer.

Echoing Gordon Brown's call for moral values in markets, Williams called for a rediscovery of virtue: " ... the qualities of courage, intelligent and generous foresight, self-critical awareness and concern for balanced universal welfare which, under other names, have been part of the vocabulary of European ethics for two and half thousand years: fortitude, prudence, temperance and justice. In the Christian world, of course, they have been supplemented by, and grounded in, the virtues of faith, hope and love that, in their full meaning, are bound up with relation to God."

Recognising that a stable economic environment was necessary, the Archbishop challenged the British Labour movement to "revive the passion for humane social existence; to reflect on what human character is needed for stability and justice to prevail; and to resist the barbarising and dehumanising of economic life which jeopardises natural and human capital alike."

In this speech, Williams built on his call for repentance in the financial community by focusing on the values required for a moral and better balanced society and economy. He moved the values debate on by linking values now with a vision of a better society in the future.

The promotion of virtue is an essential part of a rebuilt economy. However, this argument can sound as if we wish people had behaved better in the past and not got us into this financial mess, and as if we are imploring them to behave differently in future. This is also seen in practical calls for, say, pension funds to vote against more executive pay packages. Even if we managed to persuade all of the current generation of bankers, fund managers, pension fund trustees and advisers to behave differently, there would be no guarantee better practices would be passed on to new participants. Financial memories are short. We certainly need to reform the culture in which banking operates. But ethical behaviour needs to be entrenched and supported by institutional reform to help prevent another systemic crisis with devastating consequences for millions. People of integrity are required, but they need to be running new banking institutions. Otherwise surely, "the rest is idle dreaming."

In a panel discussion after the Archbishop's speech, John Kay repeated his calls for banking activities to be separated (also a Christian Socialist Movement campaign) but this was the only institutional reform mentioned. Many campaign and faith groups claim to "speak truth to power". As Kay noted, the financial services sector is a powerful political force in the UK and US. The Archbishop was speaking along the lines of his predecessor William Temple, outlining the values and broad policy aims needed in our society but not claiming specific policy expertise. Nonetheless, he could reflect further on how we should engage with people in powerful organisations such as banks and how we can identify institutional structures which hinder virtue. The church, often an institution which has learned such hard lessons itself, should have much to teach us.