New Economics

by Anthony Sperryn

The “nanny state” has had to step in and we now observe the struggles going on between the financiers who strode the globe, the governments cleaning up the mess and the masses of individuals, who are the most vulnerable.

I know a bit about these things, from my own experience in banking and business. There was the early 70’s bust; there was the early 80’s inflation (and bust); there was the Lawson boom and bust of the early 90’s. In the mid 90’s, I joined the Labour Party, getting off the political fence I was sitting on because of my religious faith, because I wanted to help stop the problems recurring.

In vain. We have been witnessing a replay, on a grand scale, of recent history. The Party’s leaders were bedazzled by wealth. “We have to create wealth before we can distribute it,” they said, little realising that much of that wealth came from financial engineering, that wonderful game that distributes wealth from the poor to the rich, our prized financial services industry, that sacred cow.
Sorting out the crunch needs more than stabilising the system and recapitalising the banks. It needs better legislation so that excesses, whatever form they take, are nipped in the bud. This is now the challenge. It will be more difficult than preventing the last crisis by closing the stable door after the horse has bolted.

Christians may well be bewildered by all of this. In the story of the talents, we are told to make money work (even if we hand it over to the “exchangers”1). The curse of humanity is that in the sweat of our faces shall we eat bread.2 Yet, if we succeed and become rich, it may then be harder for us to go to heaven than for a camel to go through the eye of a needle.3

In modern Britain, a Christian may be at a competitive disadvantage. This is no longer a Christian country, not that it ever really was. We want to act decently, but we are up against “caveat emptor” (the legal mantra, meaning “let the buyer beware”), a licence to cheat. Oligopolies and abuses of market power pervade. Naturally, cheating and hypocrisy are rampant.

On top of this, computerisation disconnects customers from the organisation and they just become objects for profit maximisation.
But will they ever learn? The bail-out of the banks looks alarmingly like:- “Give them a few billion, pat them on the head and tell them they can carry on as before.” The new UK Financial Investments Company tells its investee banks to operate on a “commercial” basis.

Yes, but. It was the front-end fees and commissions on mortgages, insurances and all the stuff that people bought that led to the over-indebtedness of the nation (don’t blame the rest of the world). The suckers bought the toxic products. The ordinary salesman was rewarded for raw selling of inappropriate products, mostly, I suspect, to a gullible and greedy public. The fancy salesmen were rewarded for selling the toxic products.

The fat cats of the bonus culture are at the peak of the financial pyramid. They depend, inevitably, on sharp practice at various levels, reinforced by a short-term target and measurable performance-related culture within organisations. We see the consequences.

But, it was ever thus. However, there are some practical steps that could be taken to curb the effects of their testosterone on the entrepreneurs who ought to be the guardians of our money and not the gamblers with it. There has to be a balance.
As one eminent banker said, a few years ago:- “You can have consumer satisfaction, but you can go broke.” Alas, the banks have now had the mishap of not giving consumer satisfaction and still going broke.

How about the following, for starters:

Is it not time to enact that lenders have a duty of care towards their borrowers?
Is it not time to make a loan a risk-sharing arrangement? (In theory, at least, the Islamic prohibition of interest and its concept of risk-sharing does have some merit.)
Is it not time to cap interest rates at moderate levels?
Should not all front-end fees and commissions be scrapped? (They are just devices to hide the true rate of interest.)
Is it not time to tighten the laws on fraud, deception and misrepresentation and to strengthen the enforcement of those laws? (A banker who spins a yarn ought to go to jail, just as much as the customer who fibs about his income to get a mortgage.)

These are not matters of telling people how to run their business. They are, simply, legislating for fairness. This is not just Christian duty, it is duty for all people of good will.

This may be easier said than done. We go through our lives through the grace of God. We often would be in trouble, but for the grace of God. We want to be prosperous, but Christians must accept that globalisation may make them poorer. That is now the challenge for all the world, and don’t forget climate change. We can only pray that our politicians will get us out of the mess that they got us into by kowtowing to the market. Let them now concentrate on serving their own citizens in practical ways that meet their needs.

Matthew 25 v. 14 on
Luke 18 v. 25
Genesis3 v. 19 (Authorised Version)

Anthony Sperryn obtained a degree in mathematics and then became a merchant banker, advising large companies. He is now involved in a small property business. He has provided advice in political circles on banking, pensions and housing and, in 1990, to the African National Congress on land redistribution.

Anthony Sperryn, 05/02/2009