It’s been a grim week already on the economic news front, as we bounce from the Libor rate fixing scandal to resignations and fines in the face of wrong-doing. Just a quick look at this week’s headlines in the FT shows Bob Diamond leaving Barclays, GSK fined $3billion by the US authorities and an ex-Glencore staff member being sued for fixing the price of cotton.
I’ve just been listening to George Osbourne on the Today programme and was interested to hear him say that the regulators failed and ‘this causes the current crisis’ (that’s not an exact quote btw). I find this comment quite astonishing as it implies that we all need someone watching over us otherwise we’ll be dishonest. Obviously that’s nonsense, but the role of the regulators is important.
We are in a period of significant change at the moment. Our institutions, and our trust in them, is part of the glue that holds society together. David Brooks talks in The Social Animal about how institutions pass on knowledge, and norms of behaviour, and are subject to incremental change over decades and generations. However, at the moment, trust in key institutions is low. We have been rocked by the Parliamentary expenses scandal, the media’s phone hacking, the police taking cash for information and now the banks fixing rates that ultimately impact my, and your, mortgage.
I think we will look back on this period as being significant because these institutions are important, not only for what they do, but also for providing the checks and balances on each other. At the moment, with scandal after scandal, it is difficult to see who should be trusted to play that role. There has to be change, because the economy will never recover unless we have trust and confidence in the country’s ability to make sure the game isn’t rigged. Why would I, as a small business owner, go to a bank right now if I needed capital? Especially when I hear from my peers that it isn’t lending. Why would I be going through tender processes for new work if I think there is an old boy network in place and the winners will be the same companies as usual?
Confidence is key. I’m a positive person, so think that the change will happen and that it will set us on a slightly different and better course. I also think that at some point the sun will come out this summer, so don’t put money on anything I say! The important thing is that with so much uncertainty it is difficult to have positive growth plans; better to sit tight and wait and see what happens next. We need our institutions to be strong and trustworthy. If we don’t think that we all have an equal chance of making it (in however we define ‘it’) then why bother trying?