Wednesday, December 09, 2009

Bringing down the Temple of Dagon

I listend to Radio 4's Any Questions? last Saturday and a question about bankers' bonuses reared its lovely head. And then the pundits fell down, one after another.

I can't answer the conundrum about the sound of one hand clapping, but I sure heard the sound of punches being pulled. Perhaps some of the speakers have banker friends; perhaps some are hoping not to alienate the Masters of the Universe in the weary stagger up to a General Election. But here's what I'd like to have said, and it proceeds from a simple question:

Did the bankers know the likely consequences of their actions?

If they didn't, they are incompetent and instead of dithering about the threat of the RBS' board to resign, the government should sack them and all like them. Doctors who are that bad at their jobs would be sued and/or worse.

If they did, they should be jailed. In my view, Max Keiser is not exaggerating when he calls them terrorists. They have wrought destruction on our economies and though the human cost may be hard to assess accurately, it is and will continue to be terrible.

So, why isn't it happening? A number of reasons occur to me:

1. It is convenient for politicians to have a few people earn (sorry, be given, legally steal) vast sums of money. The lucky recipients of this largesse can be taxed at 40% (or even 50% as under today's draft Budget proposals) and still have more than they can possibly eat, drink, wear or stick up their noses. "Tax doesn't have to be taxing", as that wretched radio advert chirrups.

2. Clapped-out politicians may one day be looking for a well-overpaid sinecure, like T--- B----. Best not to be too hard on your potential future employer.

3. Embarrassingly, the roots of the credit crunch are not (not merely) in socialist profligacy, but date back to the early 1980s. It was a so-called Conservative government, supposedly a convert to monetarism, that opened the floodgates of credit and tsunamied the economic "boom". Not a genuine boom, and now a very real bust. Criticising the present hapless bunch too sharply would beg a loud, sustained argument of "tu quoque" ("thou also didst so").

4. Just as an addict is partly responsible for the sins of the dealer, the consumer is implicated in the phoney house price rises and the spending spree. But I say that the Devil has the lowest place in Hell, because his knowledge was greater.

5. Nevertheless, if push came to shove, the bankers could point out that effectively, they were acting as the agents of a government determined to win re-election.

Very well, then. Let us have our punishment - we shall, anyway, and the next generation after us. But they must have theirs - the bankers, the politicians and the Fourth Estate that got too close and too cosy for too long.

Go for it.


Paddington said...

According to what I read today, the economic crises since World War II are a tool of Milton Friedman's policies. The idea was to put governments in a position where private industry could buy government-owned assets at pennies on the dollar. Chicago recently sold its parking meters, Akron tried to sell its sewer system, and the House of Congress is doing its best to keep that 40% overhead going to the insurance companies, rather than having the dreaded 'socialist' public health care.

Sackerson said...

Your source?

Paddington said...

This was an on-line discussion forum by a former economics student. However, the writer noted what Friedman had done in his travels in South America, putting ever more power and money in the hands of large corporations. Friedman's basic economic premises, as carried out by his acolytes, was always to starve government, and that private industry is *always* more efficient than the former. Examples from healthcare, the military and education provide great examples to the contrary. This does not seem to affect the 'true believers' in the free market. They either completely ignore the counterexamples, or insist that the things above should be private nonetheless. I see no difference between that, and religious fundamentalism.

Sobers said...

I am of the opinion that what we have now is an utter disconnection between a persons actions and the consequences of those actions.

In all spheres of life, from the individual person on the street, to the Wall Street banker writing billion dollar CDS, there is now in Western nations an expectation that if things go wrong, someone else (almost inevitably 'the government') will pick up the tab.

On a personal level I know someone who has a) not worked for at least 15 years, b) has been a drunk and drug addict for all those years, c) has been convicted multiple times for drink driving, d) been sectioned multiple times. He is currently in one of his phases on the 'outside'. He has a nice little council house, all furnished on the social, cash in his pocket every 2 weeks to live on. Free bus pass. He has more money to spend on himself than other friends who work several jobs. He has been 100% protected from the consequences of his actions. In most parts of the world he would be dead. Society wouldn't have paid for him to live like that at everyone elses expense.

Equally your city banker knows that all financial institutions run on confidence. And that as long as he does what everyone else is doing, however risky, the government will not dare to let him fail, for fear of the whole financial system collapsing. Its a one way bet. Heads I win, tails the taxpayer picks up the tab.

This attitude runs throughout society. Which of us takes any notice which institution we bank our savings with? We all assume that if it goes belly up we get our cash back. If someone steals our credit card number we assume the bank will give us our money back.

When you have such a pervasive attitude, it corrodes the very basis of decent human behaviour. It actually offers incentives for bad behaviour. Instead of saving for your old age, spend it all now, and let the State pay for you. Don't worry about whether your bank can survive if your complicated financial instrument blows up, the Govt will bail you out.

Its a critical mass thing - once enough people begin to realise how to play the system, the system can no longer cope. We have reached that point pretty quickly in the financial world, we are getting there in the personal sphere.

Unless negative consequences are reintroduced for bad decision making, eventually society will collapse under the weight of a decreasing number of people trying to support an increasing number of people.

Sackerson said...

Well said, Sobers.

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