While the introduction of new regulations following financial crises is important, ultimately human behaviour drives poor practice, says Robert Bruce
This article was first published in the July/August 2019 UK edition of Accounting and Business magazine.
We were visiting friends in Shropshire the other weekend, and instead of going off to see a stately home or a spectacular garden, we went underground – truly underground. We went to a nuclear bunker, preserved and dating back some 60 years, and looking pretty anonymous on the edge of a village.
But once we descended we felt the chill. There was a whole world of survival services preserved down there. Here was the BBC studio where the announcer would broadcast to the country after a nuclear attack. They wouldn’t know who was still alive on the surface. This was the era of the Cuban Missile Crisis, a time when the young, as ever, worried over their imminent destruction. It may be climate change and Extinction Rebellion now; it was eve of destruction and nuclear winter then.
It is a long time ago, but I can recall exactly where I was, mid-afternoon in the art room at school, as we all waited to discover, perhaps in the red arc of the end of the world, whether the Russians would heed the US ultimatum and halt the warships carrying nuclear missiles to Cuba, or not. We had all read the booklets, delivered to every household in the land, so we knew where to shelter (in the cupboard under the stairs). My father, managing a bakery at the time, was bread officer for Warwickshire, tasked with maintaining the supply of bread to whoever remained of the surviving populace after the attack.
But the crisis was averted. Millions upon millions did not die and five years later the hippie generation were celebrating, ‘peace, man’ at Woodstock and other freewheeling festivals. And now, unless you visit a nuclear bunker, people are oblivious to that very real threat to mankind.
This is important. As we enter that part of the summer when, on beaches, back gardens and in contemplative places generally, we take some sort of stock and plan ahead, we should remember that great crises are often of their time, reaching resolution and moving to the backs of our minds. Fashion also plays its part. Today, vegan diets are seen as conquering the world. But who now remembers that back in the days when I was a student it was macrobiotic diets that were expected to revolutionise our eating habits? Avocados are now revered; in the macrobiotic days they were reviled.
Fashions rise, and fall, and are forgotten. This year people look back 10 years to the last great financial crisis. All the signs are that lessons have not been learned and have also been forgotten. A huge amount of regulation has been put into place and banks are, particularly in the US, more stable and solid. But the basic underlying problem remains. And that is people.
Regulation is theoretical and, the regulators hope, logical. People are not. All this was played out at the time of the Wall Street Crash, as the great economist JK Galbraith recalled in his classic book about it. ‘This notion that great misadventures are the work of great and devious adventurers, and that the latter can and must be found if we are to be safe, is a popular one in our time,’ he wrote. And instead of asking: ‘What has happened?’, everyone clamours for an answer to the question: ‘Who has done this to us?’
We saw this again this summer with the crisis over the fashionable stockpicker Neil Woodford and his investment funds. The immediate response was not to say that the investors were foolish to have put all their eggs in one basket but instead to ask why the regulators had not saved them.
In the long term it is worth remembering what we worried about in past decades and what we might worry about in the years ahead. With the wildness of the politicians we currently have and the chances of disaster, from climate change to collapsing financial institutions, it is ever more important that we focus on practical issues rather than the noise around them.
Robert Bruce is an accountancy commentator and journalist.
"Instead of asking: ‘What has happened?’, everyone clamours for an answer to the question: ‘Who has done this to us?’"