Sunday, February 08, 2009
The professions were invented to let the middle classes partake of the profits of business without partaking of the risks. In that context, I had, until today, thought the banks' big mistake was to turn themselves into businesses rather than professions, taking on risks they did not understand. But a remark of Nassim's - 'profits were privatised, losses were socialised' - has just made me realise I had got it wrong. The banking crisis was brought on by hyper-professionalisation. Bonuses for short term gains were simply the most extreme case of making profits without taking risks. This is why I think there may be merit in clawing back bonuses rather than just stopping further payments. We should see the behaviour of the banks, not as a business failure about which people might say, 'it could happen to anyone', but rather as a gigantic professional fraud about which people should say, 'the guilty must pay'. In that light we can see more clearly what actually happened and what must be done.
Posted by Bryan Appleyard at 8:47 am