I respectfully disagree with Dr Rowan Williams, the Archbishop of Canterbury, over his views on the City and its finance industry. He regrets there has been “no repentance for the excesses which led to the economic collapse,” and describes a feeling of “diffused resentment” that bankers have failed to accept their responsibility for the crisis.
While the archbishop is entitled to express his views, I am sure he will not mind me pointing out that these are somewhat uninformed views. He admits to not being an economist, saying the crisis has taught us that “economics is too important to be left to the economists.” I am sure he will not mind me pointing out, either, that financial services are not founded on greed. For the most part they represent honest trading by well-intentioned people whose skill lies in the efficient allocation of resources. This skill, internationally, has lifted more people from the blight of poverty and hunger than any other force in history, including religion.
Few economists think that the crisis was caused by greedy bankers. In increasing numbers they are coming to the view that recklessly loose credit created by politicians and central bankers sent false signals to the financial industry, causing them to act inappropriately and take on undue risks. Dr Williams describes a sense of “muted anger” at the bonus culture, pointing to a gap between what people are paid, and the worth of what they do. He might just as well criticise the huge rewards gained by footballers and pop stars, but the fact is that their pay reflects what people are prepared to pay for their services. The “bonus culture” is no different; it reflects the economic worth of people whose financial skills can add value to transactions.
Of course we can learn something from the crisis. Perhaps that banks should be encouraged to align bonuses with long-term returns rather than with short-term turnover. We can also learn that when governments try to “smooth” downturns for political advantage, it simply stokes up future calamity.
Everyone admits that there have been bad eggs in the City, as there have been in the Church, and perhaps in every walk of life. That is why we need institutions and practices to restrain them, and to improve these when they fall short. But to taint the financial industry with “idolatry” is to veer dangerously close to populist sloganeering.
Published on Telegraph.co.uk here.