I’ve just been watching a very poor BBC2 documentary about big, bad bankers. In a tone of impending doom, the narrator catalogued thirty years of now-familiar events which led to the ultimate crisis. For twenty years it seemed delightful: but we knew that it would all end in mis-selling, crash, small business owners in tears, and bankers facing the condemnation of society with a united viciousness I don’t think I’ve ever seen exhibited against any other group of people before.
The condemnation of bankers and their `culture’ is comprehensive. Bankers are thieves, swindlers, lacking `any common decency or honesty’. We will never trust a bank again. I can’t remember ever hearing anybody, politician, commentator or acquaintance, in public or private life, defend a banker since the crash.
Well, the anger of the woman whose hotel will have to be sold to pay for her mis-sold insurance is entirely understandable, and she may easily be forgiven for not having a cool and detached perspective on the question. However, I believe the bankers deserve to be defended.
Not that I never did `trust’ them either (but my friend Rob has already written eloquently on this side of the question, about other forms of business for whom the issues are exactly the same). But I don’t condemn them, and I don’t think anyone else who is in a position to take a considered view of the matter should either.
In fact, this kind of condemnation is the best way to avoid fixing the problem, and so ensure it happens again.
In a capitalist system, banks like all businesses are required to compete. They compete within rules, but within those rules, their task is to do everything they possibly can to out-compete the others. This, we believe, produces better results: if bread-production is nationalised, you will end up with horrible bread. If there is a free market, bakers will compete to produce ever-tastier loaves to entice customers.
Suppose it wasn’t banking: suppose it was the Olympics. Within the rules, the athletes can, and must, do everything they can to win the game. If they break the rules, for example by taking drugs, or sabotaging another athlete’s wheelchair, they will be fiercely disciplined.
But suppose one athlete realised that it would be more exciting for the spectators if she lost a few rounds of the game, so deliberately did so and perhaps then lost? Or suppose he knew that his rival’s grandmother had just died, so let him win out of compassion? Athletes with such attitudes would probably not have made it anywhere near the Olympics. What about the athlete in the boxing, or shooting, event, who had a moral objection to boxing or shooting? That’s just silly — such a person couldn’t even come into existence.
Sometimes the rules of the game require to be changed, to make it safer for the athletes, or more exciting for the spectators. The athletes’ task is not to make the rules, but to compete within them, although a responsible athlete might notify the organisers of a change which they thought ought to be made. If the organisers refuse to change the rules, the athlete can put up with it, or pull out of the competition.
The best, most honourable athlete is the one who, at the end of the games, stands on the top of the podium and is awarded the gold medal. Only in very extreme and unusual situations does an athlete gain more credit for losing than winning. The Boston marathon runners who stopped yards from the finish line to help competitors injured in the bomb attack lost the competition, but were more than compensated, in terms of honour, by the excellence of their unselfish actions.
Sometimes there might be an athlete with a moral qualm he could not overcome which put him at a disadvantage, like the evangelical Christian Eric Liddell who refused to compete on a Sunday. If, despite this, he is selected for his team and wins competitions, he wins extra admiration: he has proved both high-minded and superhuman. Yet no-one expects athletes to handicap themselves with moral qualms, and those of more ordinary abilities who do so will have fallen out at far earlier stages in the competition.
So to return to the banks. The stakes are higher, but the structure is exactly the same. The bankers compete within the rules laid down for them. They are responsible to their customers and shareholders to do the best they can, as the athletes are to their team and the spectators. To discharge that responsibility they must be as ruthless and competitive as they can, within the rules.
The bankers themselves are not required to regulate their competition, but a responsible banker might suggest regulations which ought to be changed, and if they are not he must put up with it or leave the industry. I suspect quite a lot of bankers have done all these things over the past thirty years. However, I suspect the majority, like the majority of athletes, have been content to play their assigned role, and to leave the rule-making to those with that expertise. Indeed, athletes — or bankers — who were continually demanding changes to the rules might be criticised as impertinent, interfering, or not paying proper attention to their assigned task.
So when the banks increased their range of products, centralised branches, encouraged aggressive sales through performance-related pay, they were not thieves, or swindlers, or abusing trust: they were playing within the rules of the game they had been given. If they had backed off sales to allow their rival who had suffered a bad year to catch up, or used company money to give interest-free loans to poor people on a philanthropic basis, they would be rightly fired as ineffective bankers, or even prosecuted by shareholders for misusing company funds. Many people did leave the industry as the competition grew more cut-throat; so the individuals who remained were indeed the toughest and the most ruthless. Yet to condemn them for their culture or their ethics would be like condemning the boxer for hitting his opponent. They played within the rules.
Now, of course, those `values’ of `trust’ and `decency’ to which everyone is appealing have become, literally, valuable. 9 Charlotte Square, Edinburgh, is being redeveloped as the headquarters of Scoban, a new bank promising `stable long-term client relationships’, `no legacy “baggage”‘, `clean reputation’, `respected and experienced banking and treasury staff’ and `risk averse culture’. This is very nice, but I suspect that, in a free market, such commodities will fetch a high price, beyond the reach of most of us. (By the way, I can’t help noticing that they have no women on their board, and only two on their senior staff, one of whom is the HR manager. That’s another product, I believe, of the rules: not of some condemnable mysogyny of bankers — but it suggests to me the rules might benefit from further change).
For twenty years, the game appeared to be benefiting everybody; a banker who foresaw the crisis that evolved would have been more far-sighted than the politicians who encouraged them or the customers who bought their products.
The BBC2 documentary ended with an orgy of vituperation against the big, bad bankers. At the last moment, however, the last word went to Justin Welby, who in my opinion spoke the first sensible words in the programme. He didn’t condemn the bankers, blame them for creating a destructive `culture’, or appeal to vague notions of `decent common basic traditional values’ as voice after voice had been doing for the past ten minutes. He deplored the situation, and said, `we now have a chance to change the architecture, the structure of banking’.
It’s not about trust, or decency, or good or bad. It’s about deciding what rules you want to put in place. Stop blaming the bankers. Give them better rules, and get them back in their game.