Guest column: “Market fundamentalism” should be consigned to scrapheap
April 22nd, 2009
It’s all too easy for apologists for Sir Fred Goodwin and his ilk to claim that the former Royal Bank of Scotland chief executive was only doing what other bank chief executives were doing at the time – or to feel dismayed at the way he has become the victim of a witchhunt.
What such people are missing is that a lack of regulation, and by extension the whole financial and economic mess we now find ourselves in, were the inevitable outcomes of unquestioning acceptance of the flawed, Thatcherite model that the market always knows best.
Defenders of the leadership of reckless banks like RBS, HBOS, Northern Rock et al are being disingenuous.
They appear to see nothing wrong with the payment of huge salaries, multi-million pound bonuses and share options to a select group of high-level employees, most of whom are already rich beyond the dreams of avarice, at a time when their average employee is earning less than £20,000 a year.
It’s not simply a question of the people at the top being over-rewarded irrespective of whether they succeed or fail. The problem goes deeper than that. This crisis was ultimately caused by intellectual dishonesty: the governing elite and broader society effectively surrendered, without a fight, to the voodoo economics of the untrammelled free market.
Thatcher may not be dead yet, but the baleful influence of the libertarians and neo-cons behind the monetarist project can still be felt. The nauseating “New” Labour project was simply a pale shadow of Thatcherism, and was less forgivable because of its lack of ideological commitment. It can hardly come as a surprise that all the Labour leadership can now do is hide behind the lame excuse that we have been hit by a global crisis – and that somehow nobody was really to blame (except Fred the Shred, of course).
It’s all very well to insist on tighter regulation of the financial sector now, but you can bet that most of those who were responsible for the mess are sitting pretty on their huge pay-offs, guaranteed pensions and years of vastly inflated salaries.
Supine acceptance of an economy whose manufacturing base has been sacrificed on the altar of Thatcherism is now coming home to roost. An over-reliance on the services sector, unsustainable levels of consumer debt, an inflated housing market, an inadequately regulated financial sector, an inability to take tough decisions on taxation: all of these were conscious choices made by the governments of Tony Blair and Gordon Brown.
You didn’t need to be a professional economist to see that something was badly awry, that the bubble would burst.
There is more than enough blame to go around: the regulators for not performing their function; governments for their craven acceptance of what amounted to a giant Ponzi scheme and a naive assumption that the good times would never end; and last but not least …. Yes, of course, I give you ….. all of us!
Whether that is as members of society who fell in love with easy credit, or as members of other groups (for example as alumni of St Andrews University, an institution that inflated the hubris of Sir Tom McKillop and Sir Fred Goodwin by awarding them honorary degrees in 2004), we all share some of the blame.
The more interesting question, perhaps, is whether we’re going to learn anything from what has happened. Our children and grand-children are going to end up paying for our mistakes. Sir Fred Goodwin’s decendents, however, will still be enjoying the fruits of his failure.
It is earnestly to be hoped that the “market fundamentalism” will come to be seen for the freakish aberration it was, and consigned to the dustbin of history along with Communism. Remember that in 1980 George Bush, pere, when campaigning against Reagan for the US presidential nomination, described the economic policies espoused by the Reagon-auts as “voodoo economics”.
Sadly, the voodoo spell appears to have held large sections of our political and business establishments in its thrall for long enough to bring about the worst recession since the second world war.
Perhaps there is no way to avoid cycles of boom and bust, and they are an inherent part of the capitalist system. However, that acceptance doesn’t mean that we have to swallow the lie that there is no alternative to embracing voodoo economics. To paraphrase Napoleon, to do so would be to act like the Bourbons who, in their exile had learned nothing, and forgotten nothing.
For me, the most depressing aspect of the current situation is that no-one, nor any political party, seems capable of providing the kind of visionary leadership that we so desperately need. When you think back to 1997 and the sunny refrains of “Things Can Only Get Better”, it makes you put your head in your hands and weep.
This guest column was written by Andrew Ellis, senior consultant at one of the UK’s leading management consultancy firms specialising in IT. It grew out of a discussion on whether Fred Goodwin should be stripped of his honorary degree by the University of St Andrews.
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