Collaborating in a Meritocracy and Post-Crisis Reform

Abstract

It is tempting to see the defensive reaction of the finance industry in Britain to the recent financial crisis as something new; a sign of an industry which has developed a rotten culture of self-interestedness and a devil-may-care attitude to the consequences of its actions. This paper argues that in fact the reaction is a familiar one in the historical record, continuing a long-run debate between the industry and the British authorities on responsibility for liquidity and capital crises. Whilst the details of the debate have changed as the market has changed over time, the contours of the general debate are clearly visible from the end of the nineteenth century to the present day. The paper suggests that what is new is the difficulty of mediating the debate in a more meritocratic age, when the soft controls of patronage, class and deference have largely fallen away. It argues that more law and more regulation will not achieve real reform, if it does not reflect the values of those it seeks to control. Instead, it suggests that we must develop ways to encourage collaboration between market participants and the authorities within modern, merit-based systems.