Jul 252012

Hidden Economy vs Shadow Banking?

Social democrats understand that luck plays a key role in determining everyone’s life chances and experiences. The lottery of life, where you are born, your access to intelligent networks, and being in the right-place-at-the-right-time, all have a significant chance of determining the life expectancy and outcomes of your life than any other factor. Social democrats see these as random factors that often impact on our lives but which few individuals can readily control. These random factors can make us incredibly rich or incredibly poor, regardless of the effort that we put in to mitigate where we start from. Social democrats recognises that life, therefore, is often a series of random events, some positive and some negative, that are best moderated through collective action, and about which we should all be vigilant lest the role of the dice lead to divisive extremes and moral cruelty.

Social conservatives, on the other hand, predominantly look for a narrative explanation of why things are like they are. Social conservatives cannot accept randomness. For a social conservative the unfairness of life is explained from one of a number of set and originating stories. From a moral perspective, from a historical perspective, or even from a providential/divine perspective. The world is as it is, so the social conservatives think, and we should do as much as possible to maintain the ‘natural’ order of this world and respect the original forces that often (according to myth) pro-generated the world we are now part of. The debate about gay marriage is an excellent example in which ancient religious traditions and mythology provide the reference points against which choices and beliefs are held in the present.

The poor are poor, according to the social conservatives, because they are feckless shaggers who have too many babies – as Louise Casey, the Prime Minister’s families advisor recently claimed. It is time for the state to intervene, Casey told the Daily Telegraph: “There are plenty of people who have large families and function incredibly well, and good luck to them, it must be lovely. The issue for me, out of the families that I have met, they are not functioning, lovely families.” Miss Casey went on to warn that the state must start telling mothers with large families to take “responsibility” and stop getting pregnant.

Likewise, the ill are ill, according to the social conservatives, because they don’t have the moral fibre to maintain their bodily integrity. The widespread anxiety in our media about the obesity epidemic focuses almost exclusively on individual moral virtues, and does little to challenge the monopoly of junk food and convenience food industries that dominate British towns and cities. As the Welcome Trust points out, there are clear links between obesity and ill health, but Michael Gove insists that the right people to review (again) the standard of food in schools are people from the fast food industry themselves. According to the Daily Mail, the Secretary of State for Education “enjoyed a holiday at a Moroccan villa with a top chef who was later commissioned to carry out a Government review into school dinners.”

Which brings us to the Olympics, were questions are being asked about the role that major convenience food brands have in sponsoring the London 2012 games. CNN asks “Olympic sponsorship – must it be so unhealthy?” According to CNN “the media has, until now, been slow to pick up what health campaigners have understood for some time: there is public unease at some of the world’s biggest junk food manufacturers using the Olympics to heavily promote their unhealthy products at every opportunity, and especially to children. In fact, one might expect sentiment against the company to fall further, now the torch relay — with its super-sized Coca-Cola trucks and brightly dressed assistants handing out free Coke samples and merchandise to children and their parents — has passed through Britain’s streets.”

Then, of course, it’s the turn of the rich to claim that they have achieved their wealth through merit, good stewardship and entrepreneurial zeal. There is not much to add that hasn’t already been publicly aired in recent months, except to offer a reminder that, as Jonathan Freedland pointed out in The Guardian last year, “free-wheeling capitalists should be particularly alarmed… Gargantuan executive pay is sapping enterprise: people who might have been risk-taking entrepreneurs have no reason to start their own businesses when they are so comfortably looked after at corporate HQ. And of course such winner-takes-all rewards warp the wider economy.”


Lord Turner Slams Rip-Off Banking

Lord Turner, chairman of the Financial Services Authority, rightly points out that the public have lost trust in the whole ‘rip-off’ culture of British banks. Reported in the Daily Mail, Lord Turner says millions have lost trust in the financial services industry. He said people were “angry with banks and bankers” and added: “They doubt banks’ values, and they doubt whether banks have their interests at heart.”

Which makes Tony Blair’s untimely thoughts on the financial crisis make him seem increasingly out of touch, with both the facts and popular sentiment. Mr Blair, who was interviewed by the Daily Telegraph, pleads “don’t take 30 years of liberalisation, beginning under Mrs Thatcher, and say this is what caused the financial crisis.” Okay, so the extreme suggestion that hanging bankers from the lampposts is something we can agree on as a bad idea. At last Tony and I agree on something these days. But the fact that no bankers, regulators or politicians have stood in a dock, in a court, or even before an officer of the law, to account for their actions, is astonishing. Just remember that bankers have cost the UK £1.2 trillion.

One thing that we are learning from the banking crisis is that moral certitude and accountability is clearly measured in different ways for different people. It’s a question of doing as the bankers say, and not doing as they do. Daniel Kahneman points out in his book Thinking Fast and Slow, that “our predilection for causal thinking exposes us to serious mistakes in evaluating the randomness of truly random events” (Kahneman 2011, p.115). For Kahneman it isn’t enough for us to seek the simplest answer that comes to mind first, and which feels comfortable with our prejudices. If we want to make lasting change, we have to come up with a diagnosis that is determined by a more rigorous thought process and mindset. The more that we acknowledge that we are subject to forces that are random and unfair, the greater likelihood we have of developing some longer-term and sustainable solutions, and the less likely we are to rely on social myths and fairy stories about why poor people are poor, ill people are ill, and rich people are rich.

Sorry, the comment form is closed at this time.