[OPE] Gillian Tett on the "social silence"

Eliminate financial double-think
By Gillian Tett
Published: August 20 2009 15:17 | Last updated: August 20 2009 15:17

(...) For the first seven years of this decade, most politicians, voters
(and journalists) effectively ignored the extraordinary revolution brewing
in the debt and derivatives world, because these areas of finance were
widely (and wrongly) believed to be very boring, or so complex they could
only be understood by a tiny technocratic elite. That essentially left
bankers free to operate with minimal external scrutiny. It also meant there
was little discussion about the inconsistencies that plagued the free-market
rhetoric - or intellectual map - that ruled the day. And these paradoxes
were numerous.

One of the founding principles of free market theory, for example, is the
idea that markets work best when there is a free flow of information. Yet,
some of those bankers who have been promoting free market rhetoric in recent
years have also been preventing the widespread dissemination of detailed
data on, say, credit derivatives prices. Similarly, while bankers have taken
the idea of creative destruction as an article of faith, in terms of how
markets are supposed to work, they have been operating on the assumption
that their own industry would never suffer too violent a wave of creative
destruction.

And securitisation has produced a particularly curious - or absurd -
paradox. A few years ago, it was widely assumed that the process of slicing
and dicing credit would create a more "complete", free-market financial
system. But by 2005, credit products had become so complex and bespoke, that
most never traded at all. Thus they had to be valued according to models,
since they could not even be priced in a market - in a supposed free-market
system.

These days such paradoxes look so extraordinary that it is hard to believe
they went unnoticed for so long. But the really interesting question about
all this "complicitous silence", as Bourdieu says, is not simply why it
arose in the past - but what it implies about the future. After all, one
reason why this double-think persisted for so long is that bankers and
policy makers alike have all been trained in recent years to take economic
theories at their face value, shorn from social context, or power
structures.

But if regulators and politicians are to have any hope of building a more
effective financial system in future, it is crucial that they start thinking
more about power structures, vested interests and social silence. That might
sound like an irritatingly abstract or pious plea. However, it has some very
practical implications about how policy is formulated. I will seek to flesh
out some of those in next week's column, in relation to some striking ideas
being quietly developed by a few financial officials, such as Adair Turner,
Britain's chief regulator (and, by a happy chance, a former McKinsey
consultant too).
http://www.ft.com/cms/s/0/96810a0e-8d8f-11de-93df-00144feabdc0.html

Well, what pop song could crown such a marvellous newspaper article? "Should
I stay or should I go", by The Clash? Or, "The sounds of silence" by Simon
and Garfunkel?

Actually, I had to think on the theme of the first hit single I ever owned
in the days of vinyl (just being the innocent 12 years old I always am, mind
you). There's a youtube version of it here:
http://www.youtube.com/watch?v=k0ADlr_fo98

There is also a documentary about how they made that song, for seriously
interested buffs: http://www.youtube.com/watch?v=K_d8oUhv1tU

Jurriaan

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Received on Thu Aug 20 18:55:47 2009