Why regulation is the modern day equivalent of a trip to the gallows

All the unscrupulous individuals and industries that put self-interest and profit before social responsibility await a fate worse than horsewhipping

cartoonHuman nature has not changed since the Middle Ages, but the methods of punishment have. At times this seems a pity. Who, for instance, would wish to deny themselves the pleasure of seeing the former bosses of Britain’s failed banks in the stocks?The peasantry – you and I whose taxes came to the rescue – would form a disorderly, boisterous queue eager to pelt the miscreants with bad eggs and rotten fruit, and to heap inventive scorn on their grizzled heads. For some offenders the stocks would be inadequate. Sir Fred Goodwin, who masterminded the biggest corporate loss in history and then arranged to receive a huge pension at the public’s expense, would be whipped at the tail of a cart, this being a prelude to hanging drawing and quartering.

Regrettably, we live in civilised times and Sir Fred, along with his co-conspirators, remains free to draw his pension from the pockets of honest citizens. Such punishment as shall in future apply will be meted out to his successors among the banking fraternity and will take the shape of condign regulation. In future, bankers whose self-imposed task is to take risks with other people’s money will have their bonuses publicly chopped and sliced, which, in the more vigorous judicial climate of yesteryear, is the fate that would have awaited Sir Fred’s organs of reproduction.

We must wait to see whether or not increased regulation amounts to a cruel and unusual punishment, though it will surely be seen as such by those who had become used to drawing thousands, and in some cases millions, of pounds in perquisites.

But before we rejoice in this deserved retribution we should beware an increased taste for regulation on the part of government and all those other organisations – from quangos and local authorities to pressure groups and single-issue fanatics – that thirst to exercise power over others. The signs are already ominous and those who have been careless with their liberty in the past may be the first to suffer.

A prime example is the drinks industry, which with a reckless disregard for its own long-term interests introduced alcopops in the Nineties. The blend of alcohol and sweet soft drinks was sedulously marketed to the young and proved gratifyingly successful. The product was legal and the drinks industry could claim, like politicians caught fiddling their expenses, that they acted within the rules. But they trod on dangerous ground all the same. The alcohol industry knows that it has powerful, influential and unscrupulous enemies against whose assaults the defence of having acted with the letter of the law is pitifully inadequate.

One has only to recall the below-the-belt tactics employed by the anti-tobacco lobby to appreciate the dangers. In the long battle against smoking, every tactic, from unsound science to bogus statistics and invented diseases, was relentlessly deployed to great effect.

The same pattern is being repeated in the case of alcohol. The chief medical officer Sir Liam Donaldson has called for a doubling in the price, ostensibly to combat binge drinking. Although the Government’s initial response was cool, that will not be the end of the matter. The lobbies are tireless and they play a long game. The drinks industry would be better placed to resist such assaults had it been more responsible. Packaging strong drink in sweet wrapping and selling it to the young played into the hands of its enemies.

Similarly, the credit card industry will soon pay the price for past excesses. There are to be new rules preventing companies from sending unsolicited credit card cheques to customers and from raising credit limits when this has not been requested. Neither of these marketing tactics should have been introduced in the first place. Both were the result of overweening ambition and put profit before social responsibility.

Alcopops and credit card cheques served the immediate interests of their progenitors but will ultimately prove damaging. For it is a central weakness of a market economy that it tends to live only for tomorrow. Hence housing market bubbles, bank excesses and get-rich-quick marketing ploys.

By contrast, market regulators are far-seeing and worse, self-perpetuating. That is not to say that we can do without some regulation – Sir Fred’s £13,000 a week pension is a recurring reminder of that – but regulation, once set free, has a tendency to morph into strangulation. And that is a cruel punishment. 

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