Hardly a week goes by without another disclosure of machinations by the financial sector to maximise profit at the expense of the general public. We are seeing the repercussions of the worst financial crisis since the Depression. Yet for many it looks as though our mighty legal system has been outmanoeuvred by the ingenuity of the bankers, the Masters of the Universe, and their slick legal and accounting advisers.
Despite the mis-selling of dodgy financial products, despite reckless risk-taking of a venal kind and despite the rigging of the interbank interest rates, the law appears supine. Where are the prosecutions? Where has the law been when we needed it? Where’s the justice? The relationship between law and commerce is historic. These two fundamental elements in our society have been intertwined. It has always seemed to me that capitalism has flourished particularly well under the common law because unlike other legal systems the common law is permissive. We can do what we like, unless it is specifically prohibited by law. We are not as rule-bound and codified as other legal systems. We vest real discretion in the hands of judges. Our law is flexible. It adapts to the new.
However, that same permissiveness has probably allowed abuses that should never have been countenanced. I wonder whether the law, just like politicians, has been somewhat half-hearted in its attempts to call modern day merchants to account, allowing a financial elite to dance too close to the threshold of law, playing fast and loose with legality. Perhaps the law has been too deferential, with its main players too close to the groups who claimed they were producing the nation’s wealth but were really only increasing their own.
It has clearly been forgotten that when Adam Smith wrote The Wealth of Nations about the role of markets and the benefits of capitalism, he partnered it with another book, The Theory of Moral Sentiments. His argument was that markets had to travel alongside a framework of ethics, a sense of honour, a belief that the purpose of creating wealth was for the common good, for the betterment of the nation as a whole not just for individual enrichment. That piece of his work seems to have bitten the dust. The decline of ethics across our great institutions – parliament, the press, the police and the City – should be a source of national grief.
People are angry at the perceived injustice of a system that jails people who steal shoes, trainers and flatscreen TVs but seems incapable of dealing with high-level fraud and profiteering. The public abhors benefit scroungers and fraudsters but they are now feeling just as strongly about white-collar deviance. What is so interesting, to me, is that already the cry is going up that this is mob rule, that bankers are being unfairly vilified – a call for fairness that is noticeably absent when it is the poor who are in the firing line.
There is also a fear being expressed that Britain will lose its place as a global financial centre if we talk about curbing salaries and bonuses or creating a better regulatory structure. Caution is urged about shining too much light on the City’s shortcomings because of negative consequences. But we may be losing something more valuable if we play by the gamblers’ rules. Markets are essential to our commercial viability, but the development of turbo-charged capitalism is becoming a corrupting force in our society. The cost to the social fabric is huge.
Law needs public trust. Of course, we should not succumb to populist fury and a desire to put in the dock people whose offence is ethical rather than criminal. However, this crisis may be a moment to talk again about ethical standards and about the role of law. It might also be a time to revisit what we mean by justice.