Widely expressed among financial market participants is the view that we would never have trashed the house if our parents had supervised us properly. But it won’t do. If self-interested behaviour, inadequately restrained by state actions, leads to social and economic disaster it does not follow that the individuals and businesses which engage in the self-interested behaviour escape culpability. We don’t apply that standard to lorry drivers. We expect them to drive safely and professionally and hold them responsible when their failure to do so causes accidents. “I would have had to slow down” is not an excuse. It is not apparent that we should lower our expectations when it comes to the senior executives of banks.
Funnily enough though, John Kay contributed an essay to an IEA report that made precisely the kind of argument he reasonably criticises -
The prevailing view amongst the commentariat (reflected in the recent deliberations of the G20) that the financial crash of 2008 was caused by market failure is both wrong and dangerous. Government failure had a leading role in creating the conditions that led to the crash.