The symbolism of the Olympic flame, last seen meandering through Kent, has been much misunderstood. Forget the propaganda about ‘shining a light on local communities’. When Toby Young took his children to watch the relay pass through Dartmouth, he found it ‘not merely tarnished, but ruined by the heavy-handedness of the sponsors’ — Lloyds TSB, Samsung and Coca-Cola — whose lurid convoy preceded the torch itself. The following week, I wrote in defence of the idea that companies cannot be expected to put up seven-figure sums for ‘feel-good causes’ without some high-profile publicity in return.
But both of us had missed the point. A pageant made up of a bailed-out bank, a cut-price Korean consumer electronics giant and a nutritionally worthless fizzy drink that reaps $50 billion a year from the world’s poor is a perfect representation of the man-made monster that is 21st-century capitalism. And it’s been on the run all summer, pursued by a mob with flaming torches.
If the tracksuited heavies who surround the torchbearers had been armed with official pitchforks, the metaphor would have been even more vivid. With a week to go, the beast is cornered and whimpering: Coca-Cola general manager Daryl Jelinek pleads that his product should be seen as part of a ‘holistic lifestyle’, while McDonald’s and Cadbury, purveyors of food to the Olympic masses, tie themselves in knots to avoid suggesting that the best way to watch world-class athletics is with a cheeseburger in one hand and a Crunchie in the other. As for G4S, the contractor that failed to supply the requisite number of security guards and became this week’s political show- trial defendant, many of its recruits were so frightened of public hostility that they chose not to show up at all.
I tell you, there’s an ugly mood out there, and before the final celebrity torchbearer touches the flame to the cauldron at the climactic moment of next Friday’s ceremony, business owners everywhere should check their fire-insurance policies.
The case for separation
A head of steam is building behind the idea that the only way to sort out the banks once and for all is to force the complete separation of investment banking from retail. That means going beyond the ‘ringfencing’ proposed by last year’s Vickers report, as adopted by George Osborne in last month’s White Paper on banking reform, which involves separate capitalisation of retail operations within larger banking groups while allowing flexibility as to where the fence falls and a timetable to 2019 before the new structures have to be in place.
Even Sir John Vickers himself, in a polite way, accused Osborne of watering down the scheme at the behest of the banks. Bank of England governor Sir Mervyn King showed his dissatisfaction with the White Paper in a BBC interview when he said that he ‘saw a real attraction in a complete separation’. Ed Miliband’s banking reform speech, which I reviewed favourably last week, was not so forthright, merely calling for ‘full implementation of Vickers’; but you can bet the Labour leader will be next on this bandwagon as the ramifications of the Libor and mis-selling scandals reveal more about the endemic corruption of banking culture.
It is the cultural aspect of this debate, rather than concern about risk, that may turn out to be the clincher. Like most commentators I accepted the validity of ringfencing as a safeguard against future taxpayer-funded bailouts caused by trading-floor follies. I also took the view, however, that not all big banks are bad risk managers. HSBC and Barclays had both shown themselves capable of running a full spectrum of retail and investment banking activities without losing control, and could both argue that the menu they offer is driven by what business customers actually want.
But what we have learned also is that the ethos of rule-bending and product-pushing which has come to pervade the entire sector emanates from the investment-banker mindset, corroded as it is by the prospect of grossly inflated personal rewards. The way to restore retail banking to a more stable and socially useful role in the high-street economy is — so this argument goes — to minimise that influence. That might be partly achieved, and public bloodlust satisfied, by a wholesale clear-out of directors and senior executives. But where would their replacements come from, and would they be any better?
The alternative is to invite investment bankers to put their money where their heart is, by way of management buy-outs to create independent businesses that would have to live on their wits, rather than on the capital and deposit base of parent banks. Sophisticated investors might choose to invest alongside them, or the new generation of investment banks might revert to the partnership format that worked well enough in an earlier era, not least because it precisely aligned ownership and risk. Corporate clients would have more specialist providers of financial services to choose from, while City reputations might once again depend on integrity and long-term relationships of trust. It’s an attractive argument, and I suspect it will overtake Osborne’s White Paper long before it can be turned into law.
A welcome waft
I regard it as my mission, for the benefit of southern readers, to scour northern horizons for positive economic signs, especially where they concern inward investment. So I’m delighted to see the Japanese-owned Komatsu factory in County Durham celebrating its 25th birthday, having so far manufactured 59,000 earth-moving machines. And I’m even more pleased to hail the opening of the first curry house in Helmsley. When I came to live in this small market town in 1989 I declared that all it needed was a theatre and an Indian restaurant. We built our own theatre, but the waft of tikka masala continued to elude us — until some Bangladeshi investors arrived this month to fill the gap. Now the place is perfect.