Last night under Chatham house rules I sat through a fairly tedious & stereotypical dose of miserabilism from a leading financier at the Carlton club.
It was very predictable stuff:
- we don’t make anything any more (his method: to list industries he’s heard of, and shrug)
- Horrible, irrelevant, jingoistic reasoning like “can you name 6 head offices based in Wales”
- government spending destroys growth (a ludicrous figure unqualified. We grew far faster Post War than we did in the C19).
- such spending has rocketed, threatening to destroy our future growth (when in fact what has happened is the denominator has fallen)
- you can’t solve debt crisis with more debt
- people don’t do useful degrees any more (yeah, Britain built its commercial and industrial hegemony on people doing the right degree, no they never wasted years learning Latin)
Possibly the worst bit – against some strong competition – was when he said “I’ve got nothing against foreign ownership of companies but . . .” and then went off on one. You know: you lose control of them, you can’t choose what they do, and (chipped in a fool from the audience) “they can they charge you more”. Honestly, there is nothing that you could slip between this sort of saloon-bar industrial policy and Labour’s Statist post war way of doing things. Just change the names of the Bores who Think they Know Best, but the same lazy protectionism, the same Manufacturing is Best, the same Foreigners are Bleeding us Dry stuff: almost, in fact, as bad as this dreadful letter to the FT yesteraday by Doctor A Young:
One after another, an astonishing number of our great companies have been surrendered to foreign predators, with little more than token resistance by the boards concerned . . . As usual, loyal long-term private shareholders have absolutely no influence on events . . . If foreigners recognise the company’s long-term value, why don’t we? Have we lost the will to manage our own great companies? Have we forgotten that foreign owners make decisions on future investment and employment in their own interest, not ours?
Only those elements of the audience that were very ignorant could be very impressed with The Wise Bearish Financer. That is still quite a few. But some positively kicked back, citing real examples of innovation & entrepreneurship in their locality (and look at Lowestoft). And the ex-minister who replied was far more sensible, pointing out how his constituency has lost plenty of big name factories, yet had an UE rate of 2pc. He had some interesting observations about cost-cutting; how a local health authority had approached his department, after cutting 10% of costs, asking how much more they would be expected to do. The XM asked “how much could you do?”, and the Health Authority said “ooh, 10%, 20% perhaps, but are you going to ask us?”
He also observed how economic projections always over-react, on both the upside and the downside, before dashing off to vote on the Financial Services Bill . . . .
. . . which is what a bunch of lobbyists and the like were in a cold room off Tower Hill to talk about with Mark Hoban MP, Tim Montgomerie, Allstair Heath of City AM, and Anthony Hilton. Much of it was a little dull; I had an irrepressible urge to put on my iPod and listen to Fleetwood Mac’s “I need your love so bad”, particularly when the MP was stolidly and unconvincingly explaining how better regulation (i.e. how the Tories left things, the Bank in Control) would have prevented the crisis. Or words to that effect.
Tim Montgomerie gave an introduction explaining who was who in the Conservatives.
The one worth turning up to watch was Anthony Hilton, who tore into Tory plans in his kindly Scottish way, saying they will add costs, ‘planning blight’, and brazenly ignore the lessons of the past. Giving power to the Bank is gesture politics – popular with the grass roots (as Tim M confirmed) but doing nothing for regulatory efficiency going forward.
His overriding point, IMHO, is that regulatory will is what matters, and pointed out this excellent speech by Alistair Clarke of the Bank in 2004 that seemed to recognise most of the problems that in fact occurred. The problem is that everyone enjoys the party when it is lasting. This is something Persaud recently pointed out when he wrote “Boomtime politicians will not rein in bankers“. I have made this point before, but his words are better:
Separate but related to regulatory capture is the politics of booms. A boom persists because no one wants to stop it. The government of the day wants it to last until the next election. The early phase of a boom brings extra growth, low inflation and falling defaults. Governments tout this as a sign of their superior performance. Bankers argue such alchemy justifies their golden handshakes and excuses their golden handcuffs. Booms spread cheer by providing finance to the previously unbanked. Donations to worthy causes and universities temper traditional channels of criticism. How easily can the underpaid regulator stick his hand up and say it is all an unsustainable boom?
Hilton reminisced about the 5 banking crises and four recessions he had witnessed; how every crisis had seen new regulation, new organisations, a new Banking Act, but same old faces like David Walker being ‘chuted in to fix them every time. His answer: build on the 90% that is working perfectly well. Politically motivated changes that just disrupt people (he pointed out how the FSA’s 1999 banking staff was largely led by Bank of England people) achieve nothing.