16: Samuel Brittan and James Robertson agree: the obstacle to reform is vested interest July 6th, 2012

This week’s FT article by Samuel Brittan, The fight against crony capitalism, written just after the Libor rate fixing scandal broke, resonates – in some respects – with James Robertson’s concluding remarks in his latest book. 

Brittan opens by quoting Adam Smith: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary.”  Wealth of Nations 

A passion for secrecy and a hatred of open discussion 

“What then has gone wrong? In general terms it is difficult to go beyond Adam Smith. . . . success has depended more on whom you know than what you know. Hence the catchphrase “crony capitalism”. . .

“I will risk controversy myself by noting similar, if more subtle, processes in the EU. A group of self-selecting politicians and officials has promoted a bureaucratic and intrusive form of integration, on which they have rarely consulted their electorates. What all forms of cronyism share is a passion for secrecy and a hatred of open discussion . . .” 

Brittan regards measures to limit lobbying as important, warning however, that this will be difficult as insiders can devote time and energy to maintaining their position 

Further insights come from James Robertson in his latest book: Future Money, Breakdown or Breakthrough? 

“Strong worldwide opposition to money system reform may well continue from the still-growing body of more or less reputable professionals and their families, friends and associates around the world who benefit from the status quo.” 

Amongst those who ‘make an unusually comfortable living from the money system, the tentacles of which exert power and influence in many walks of life’ he lists politicians, bankers, government officials, investment managers, accountants, tax consultants, financial advisers, insurance experts, economists, press and broadcasting industries. 

Robertson comments: “Naturally enough, few of those people will be eager to admit that the money system may be in need of radical reform – from its roots up . . .” 

But a growing minority of active money-system practitioners and professionals, some of them among the most able younger men and women, are coming forward to propose and support reform.  Robertson (left) continues: “ They won’t necessarily be inspired only by ethical considerations. Clear-sighted career ambition could also attract them to participate early in the new departure in the history of money they see coming”. 

One such has recently written from India. Former editor of the country’s highest circulating business weekly, now chief editor of India’s NewsX TV station, Jehangir Pocha has ordered copies of Robertson’s ‘important’ book, to send to “various ministers, politicians, businessmen and bureaucrats, including our central bank governors.” 

Brittan counsels optimism, believing that in time the current race of financiers will be ‘brought down’. Is it too much to hope that their efficient successors will make ethically justifiable decisions?