Remember 2008? Some people would like to forget it. They were the ones running around, predicting – in some cases without bothering to disguise their glee – the end of capitalism.
Some of us kept our heads and said “This too shall pass” – as, of course, it did. Yet the prophets of doom remain in high-salaried jobs with the mainstream media and government departments.
The same people were also very fond of lecturing us on how Spanish banks fared so much better in the crisis of 2008 because they were regulated more comprehensively.
This may be another of the pronouncements they would like to forget.
The EU has just carried out a series of “stress tests” on European banks. The much maligned British banks passed, but five Spanish banks did not.
This should not surprise anyone: more regulators do not mean better regulation – and regulation does not in itself instil a sense of responsibility.
Yet there is a deeper point. Despite over a dozen major crises, the West has enjoyed phenomenal growth since the development of modern capitalism in the late 17th Century. Most of that growth has been due to the relatively high-risk investment strategies of banks following the “Anglo-Saxon model”. The alternative, investing mainly in government securities, would have left us in the Middle Ages, without the growth in private enterprise that is the foundation of modern prosperity.
The irony is that investment in government securities is not the safe option it appears. If the bankers of Spain and Greece thought the government bonds of their own countries were a firm foundation for their portfolios, they have been proved horribly wrong. It might actually be a safer strategy to broaden a portfolio with a few higher-risk loans.
This blog, which looks at things from the perspective of small business, treats bankers with caution, but we cannot deny that we need them – and, although they will never admit it, they need us. It is in our interest and theirs to keep banks lending to business, even when it seems riskier, on a superficial level, than sticking to government bonds or building up reserves. Business and banks should unite – for once – and speak out in defence of the “Anglo-Saxon model”. The evidence is on our side.