Hacking, expenses, banking – what went wrong?

Hacking, expenses, banking – what went wrong?

How did so many lose the plot over the last decade?

Banking, politics and journalism have in the last three years been engulfed in their own crises. Is this just a coincidence? In some ways yes – the problems in finance were international in scope whereas those in politics and the media were domestic – but there are still striking similarities in behaviour and timing.

Ed Miliband spoke about it in quite a good speech earlier this week, which touched on a lot of the reasons but without going more deeply into the cultural changes that happened in the three sectors.

He was certainly right to flag up that the regulation was inadequate, either because it was insufficient or because it was ineffective. A second, and equally contributory factor was the opaqueness that surrounded each scandal. The details of MPs’ expenses were kept secret; the true nature of the risks banks were running were buried in impenetrable financial instruments; illegal activity in newspapers took years to surface. People did it because no one could see.

They weren’t the only reasons though. They also did so because they felt entitled and justified in doing so. A belief built up of ends justifying means, almost irrespective of the means. That was a change, otherwise these scandals would have happened earlier. What happened to the self-restraint that previously prevented or mitigated the sort of actions that ultimately brought opprobrium on each sector?

Miliband spoke much about responsibility in his speech but is it coincidental that these scandals happened at the same time as the growth of the compensation culture and the passage of human rights legislation which effectively transferred to the state responsibilities that previously lay with individuals? Both trends encouraged the belief in rights without counterbalancing responsibilities.

If that belief becomes engrained, it follows that so will the belief that it is the state’s job (i.e. not the individual’s or the organisation’s) to stop bad things happening – and that if the state hasn’t prevented it then it must be OK. There becomes an expectation that regulations should exist, and be enforced, to stop us acting against our own interests. Self restraint becomes unnecessary because others will restrain us.

It is not just the left who must shoulder the blame. Both the banking and hacking crises arose because competition got out of hand as companies took huge risks chasing higher profits and market shares. The state failed to protect the public interest and ensure adequate regulation. While the events may have take place under a Labour administration, the reforms that unleashed the forces that led to them date back to the 1980s.

Finally, society at large has to accept its responsibility in the crises and scandals, especially the media and banking ones. How many people who’ve been disgusted by the actions of the News of the World avidly purchased a copy precisely because of the details those actions discovered? How many borrowed what they couldn’t afford because they believed (and still believe) the lifestyle that money bought to be a right? In the light of the assumed response, it is surprising that politicians refused to play the killjoy and instead rode (and fed) the tiger?

There has been much soul-searching in recent years as each element of each new scandal became apparent, as to how to prevent recurrences in future. Regulation is always part of the answer but deals poorly with unknown unknowns. Without a fundamental reassessment of the relationship between state and individuals / organisations, and the respective responsibilities of each, some other, similar, scandal is highly likely to occur in the not-too-distant future, if it hasn’t already.

David Herdson

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