Daily Archives: January 14, 2011

Why Bankers Who Think Their Time For Remorse Is Over Could Hardly Be More Wrong


JOYCE MCMILLAN for The Scotsman, – 14.1.11

ON TUESDAY, A MAN CALLED Bob Diamond appeared before the Treasury Select Committee of the House of Commons, and announced that in his view, although there had been “a period of remorse and apology” for the banking industry, that period now needed to end. Mr. Diamond is the new chief executive of Barclays Bank, one of the least damaged of our financial institutions; and he must therefore be assumed to know a thing or two about the industry in which he works.

As the chief executive of a leading British bank, though, he also needs to understand something about the society in which he operates, and about the ordinary people whose money he aspires to bank, invest and husband. For let’s be clear; through mismanagement of their own resources, through unwise lending, through ill-judged takeovers, and through flawed payment and incentive structures for senior management, Britain’s major banks helped, three years ago, to plunge the global economy into a crisis which could, if governments had not stepped in, have led to a complete breakdown in economic activity across the western world, along with public panic and civil disorder on a scale painful to imagine. The idea that the public should be willing, just a couple of years on, to completely forget this trauma, and to return to “business as usual”, is therefore absurd in itself.

When the cost of the UK bailout of our failed banks is taken into account, though – variously estimated at between £100 billion and £1.5 trillion pounds – such amnesia becomes a practical and ethical impossibility, and something no thinking citizen would suggest. Mr. Diamond is not alone, of course, in his view that we should “just move on”. The financial and political establishment is now involved in a major effort to shift blame for the economic crash, and its continuing costs, away from the banks, and towards the politicians who failed to regulate them properly; and to convince the public and the government that any attempt to subject them to tighter regulation now will simply lead to mass flight from the UK.

That argument, though, is based on a series of assumptions so flawed that they amount to big lies; and we in Britain now have to decide whether we roll over and accept those falsehoods as truth, or start to carve out a more realistic alternative. The first lie – now being energetically promoted by David Cameron and his ministers – is that the whole fiasco was the fault of Labour politicians, and of failed government regulation. There is, of course, a grain of truth in this; the banks, for the last two decades, have not been properly regulated at all.

To suggest that this is exclusively the fault of politicians, though, is to go into a weird kind of denial about the extent to which all politicians, and their cash-hungry political parties, are now subject to the colossal power and influence of the new plutocracy, and dependent on their approval. If the banks had wanted better regulation at any time during Tony Blair’s premiership, they could have had it on request. But they wanted ever more deregulation, as did their supporters in the Conservative Party, and that is what they got; nor would they have hesitated to make mincemeat, using every means at their disposal, of any politician or party who failed, at the time, to go along with their wishes.

Even more important, though, are the three other big lies surrounding the defence of the bankers, which concern the significance of the economic sector over which they preside, the talent involved in operating it, and the alleged lack of an alternative to the world they have given us. The bankers’ mantra is that they are the people who create wealth, whereas the public sector merely spends it; but this is self-serving tosh. A man sitting in an office at Canary Wharf shifting virtual money around the globe on his desktop screen is not creating wealth; he is trading in it, which is something else entirely. A good reception-class teacher imparting the basics of literacy to a new generation of five-year-olds, on the other hand, is clearly creating social wealth in a way that delivers incalculable economic benefits; and no economic theory which denies that truth can form a basis for good governance.

Along with this overweening view of the special role of the financial sector as wealth creator, too, goes the myth that its senior managers are people of such outstanding talent that only seven-figure salaries and bonuses will keep them in Britain. But as a long-term student both of the cultural sector in the UK, and of our political scene, I have seen many people of immense talent and creativity, and I have seen bunches of mediocre men lucky enough to be in the right place at the right time. And it is clear which group our current banking bosses most resemble; apart from anything else, truly gifted people tend to be motivated less by financial reward, and more by the actual quality of their work.

And then finally, there is the depressing and disempowering myth that we have no alternative but to accept all these injustices, because this is the way the world wags, in a 21st century global economy. For if there is one thing that human history teaches us, it’s that any society – national or supranational – which becomes too unjust, too divided, and too arrogantly ruled by an out-of-touch elite, needs to change or die; even if change at first seems unthinkable. And insofar as our banks have embodied, and continue to defend, the ideology which has driven that destructive shift in western society, it seems to me that their period of remorse and regret has barely begun; nor the long journey back towards a sustainable model of capitalism, that allows for the expression of the whole range of human nature, rather than emphasising the most blinkered excesses of personal greed as its main motivating principle, and its only God.