The City of London is a shining success, the specialist purveyor of complex services to the world, earner of billions for Britain, employer of most of the highest earners in the land, successful practitioner of light-touch regulation for multinational banks, hedge funds and other less visible parts of the financial system and, generally, a good thing – the Minas Tirith of money.
Up to a point. The City is opaque – even Parliament cannot see the City’s accounts, which is possibly the oddest feature of our constitution – and there is no doubt that the actions of many people working in the City support tyranny, fraud and theft, drug cartels and money laundering on a monumental scale.
For the sake of the City PRs – no, the laundering does not happen here, it happens in the tax havens. The money, when it comes to London, is clean enough to handle – or as clean as money can be when it has spent so much time with lawyers and accountants.
You could adopt a do-good attitude and say we should not allow the City to do all this on behalf of nasty people doing nasty things. I would not agree because nothing is black and white. Even if you have signed up to the Declaration of Human Rights, governance of a lot of stuff to do with money – tax collection, for example – is a domestic issue. So let the City get on with it, as far as rich foreigners are concerned.
Merchant banking sums up the type of financial piracy the City invented and is rather good at. This style of finance is archaic. It is tribal, martial and based on ancient notions of usury. In the Judaic and Christian traditions, usury was fine in relation to outsiders – you could gouge them all you liked. What was sinful and banned by the religious authorities was gouging a fellow Jew or Christian.
That view broke down as capitalism and the rationalistic European worldview spread from the 18th century. Today, we are confused about usury because while we feel it is wrong, we have no moral basis for this – humanistically, we would have to say it is right or wrong for everyone.
Which brings us back to the City and its dark twin, money’s Minas Morgul. The City has progressively abandoned rules of engagement with its domestic users based on moral and ethical codes grounded in the Christian tradition. Instead, in line with the fashionable, shallow and false neoclassical economic theory that the rules of money are a given of nature that are the same everywhere, it applies the same gouge and pillage tactics to its domestic customers as it does to foreigners.
The minimum requirement for improving things is recognising the distinction between the City on Planet London, where pinstriped pirates earn millions by fleecing billionaires, and the City that provides essential banking and investment services to Britain.
It is spectacularly failing in this second task – one much more important to us collectively than the welfare of Planet London’s City pirates, whose inflated earnings serve our welfare only by hoisting house prices and private education fees.
Chris Gilchrist is a director of FiveWays Financial Planning. He edits the IRS Report newsletter and is the author of the Taxbriefs Guide, The Process of Financial Planning