Column : What bankers and MPs teach us

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: Self-regulation is an implicit but important tenet of liberal democratic capitalism. Sure, there are rules and constraints but more to define the framework of economic and political competition than to direct individual’s behaviour. The underlying belief is that regulation should be applied lightly and that it should not circumscribe man’s ‘animal spirits’. Common sense is an intrinsic attribute of human nature and the collective outcome of individual ‘sense’ will ultimately lead to the ‘common’ good.

This belief has been resoundingly upended in recent months. I am writing this piece from my hotel room in London. Two issues dominate the UK newspapers. The first is of course the financial crisis; the second the shenanigans of the British members of Parliament. Both have had the effect of undermining people’s faith in the ‘soft power’ of self-regulation.

With hindsight, it is clear that it was wrong, indeed perhaps delusionary to expect bankers to self-arrest the momentum of their ‘irrational exuberance’. The belief that the market would self-regulate and that rational and clever people would recognise and then preempt the onset of unsustainable ‘bubbles’ did not clearly take into account the power of greed and complacency and the individual and collective stupidity that this generates.

Equally the case with the British parliamentarians. The people’s trust in the integrity of their representatives to steer clear of the line that divides the bending of rules from the breaking of them was misplaced. Every day, ‘drip-by-drip’, the newspapers reveal the names of those in Parliament that have misused their allowances. The amounts involved are by any standard of corruption trivial. The reasons for the transgressions are, however, uniquely British. One MP for instance claimed Rs 20 lakh towards the reimbursement of the shrubbery planted to protect his trees from pestilence; another claimed Rs 2 lakh for the cost of building an island duck house to protect his ducks from marauding foxes. The public taxpayer is furious and heads have started to roll. The Speaker of the House of Commons has been compelled to resign—the first time in 200 years; several MPs have been heckled into political retirement and there is talk of reducing the number of MPs in Parliament.