Thursday, October 30, 2008

The reasons behind 'regulatory failure'


If you wanted to boil down the reason that Peter Mandelson has been an important – perhaps defining – political figure over the past twenty years, I’d suggest it is because he possesses these attributes:

  • He has an unerring instinct that tells him where real power lies – who exercises it, how, and on what terms. I suspect that we are all capable of doing this to some degree, but not as well as he does

  • He recognises that you can achieve a good deal more (on a personal level) by slipstreaming the movements of those with power. As such, the people that he promotes are promoted on his terms, and they succeed. This makes him a very good negotiator

  • He is very early to pronounce on major developments. He knows that history tends to be written by the victors, and he is very quick to decide what version of recent events they will prefer.
In the early years of the Blair government, Mandelson had a reputation among his civil servants as being an exemplary minister. He was fairly widely spoken of as ‘the best’ in this respect (though I can’t prove this – it’s largely hearsay). He knew which bits of his job were important, knew how to interpret advice, was prepared to stick to his brief and to stand up for his staff.

None of this endears him to people who either want to achieve something that doesn’t come into the ‘low hanging fruit’ category of policy-formation (and I’d put myself in that box). This view decrees that no policy that will be opposed by a couple of newspaper editors or a noisy pressure group should be pursued as it will sap time and energy that could be spend achieving the achievable - doing stuff that involves swimming with the tide.

It is this that gives him his reputation for being right-wing, anti-radical, and so-on. It also doesn’t endear him to those who simply don’t have his built-in SatNav – the one that tells him how things are going to be. If you are crap at modern history, you will hate him. If you don't have a realistic progamme of your own, you will also hate him.

So, when Mandelson says, of the current economic SNAFU, ... "I don't believe what has happened is market failure in the financial sector. I believe it is a regulatory failure", the point isn’t to question the accuracy of this assessment: It is to recognise that this is the one that will frame the political response to it over the medium term, whether you like it or not.

Now, all of this is throat clearing – it’s a prelude to the point I want to make here.

If the current problems are down to regulatory failure (and just to restate, I'm not convinced that it's the sole cause in reality), let’s look at the causes of regulatory failure. Like every other failure, it can probably be explained in the following way:

It was done by the wrong people, in the wrong way for the wrong reasons. Regulatory failure, I would suggest is the result of under-resourced regulators who have gone native, and are out-gunned by the competition lawyers of the businesses they are supposed to be regulating.

And if this is the case, it begs the following questions:
  • Who should frame regulation?

  • What influences should they be free of?

  • What resources should they have?

  • What kind of power should they exercise?
I’ll spare you a rehash of old arguments and a confetti of links to old posts here and simply say this: It should be done by independent-minded individuals who have been elected by the people with a single mandate – to represent the interests of the nation as a whole as they see fit, as opposed to a representation of regional or sectoral interests.

They should be given sufficient resources – and by that, I’d say – conservatively – about ten times the resources that they currently have – to do this job, and once they make their decisions, there should be fewer avenues of appeal against their decisions.

Not only should they be given the resources to compete with commercial pressure groups that seek to curtail their power, they should also seek to reduce the influence of those pressure groups by demanding more transparency, regulation and spending-caps.
And here’s where they can start. Now that Her Madges Government is the largest single shareholder in the UK’s High Street Banks, why are we finding no echo of the government’s thinking in the pronouncements of the British Bankers Association? Surely, the Chief Executive of the BBA should be replaced with a suitable Labour MP immediately?

You see? I’m at it again. This is something that Peter Mandelson would never propose – for the reasons that I set out earlier. It’s also the reason that representative democracy – while still being the least-worst form of government – will never completely satisfy anyone of a radical frame of mind, and will never be a perfect form of government either. Because people like Peter Mandelson will always dominate representative government.

And a final point: The political right understand all of this in a way that the left don't. It is right-wing newspaper and commentators that continue a low-level campaign to oppose the resourcing of MPs or measures that will enable them to be more independent. It is the right that understands that MPs should be lobbyable, because if they aren't, they may go all progressive. And it is right-wing newspapers that concentrate all of their fire on politicians instead of the pressure groups that oppose them.

It is the right that frame the debate in this way, and left-ish newspapers just don't understand this. No newspaper takes up parliamentary sleaze stories more enthusiastically (and, annoyingly, as skillfully) as The Guardian does.

1 comment:

Luis Enrique said...

"I don't believe what has happened is market failure in the financial sector. I believe it is a regulatory failure",

I agree with your interpretation of the significance of that statement - but it is an odd statement, a false opposition. Regulation can prevent market failures, and regulatory failure can lead to market failure. The financial crisis is a pretty text book example of a market failure.