Aug 04 2014

Why is the City of London so lacking in clues about Britain?

Posted by: Nicholas Shaxson in: Thoughts

There are obviously many answers to this question. Such as the fact that the pervasive anti-tax, anti-regulation, pro-tax haven world view sets many City players against British society, or attracts people with a rather anti-society world view. It’s an age-old thing, which I discuss in some detail in Treasure islands. The wealth of senior City players also can result in them physically separating themselves somewhat from society too. These two factors certainly do nothing to improve the City’s understanding of the world around them.

There’s another little snippet I thought I’d share, after watching a piece on the Renegade Economist site (which I appeared on not so long ago.) It’s from Prof. Matthew Watson of Warwick University, who’d been asked about the narrowness and dominance of Neoclassical economics and its unworldly emphasis on abstract mathematical elegance and high complexity. This school emerged in the 1870s and marked a move away from an earlier focus on production (i.e. industry and stuff) and to a greater focus on consumption and exchange: much more up the City’s street. Anyway, Watson:

“Students come to university for more than purely intellectual reasons. Many treat it in terms of getting to where they want to be on a career ladder. If education is simply a signal to potential employers, a lot of students like the signal that what they are particularly good at is an abstract form of economic analysis – that might not tell them anything about the real world, but might help them to become employable, to become particularly useful doing particular kinds of jobs in particular sectors.

A lot of major employers of economics graduates in this countries have relationships with City firms; for any student that aspires to go work in these firms, an orthodox neoclassical education maybe is the thing for them to have.”

This sounds fair, and it stands to reason that there will be a disproportionate number of people in the City steeped in this discipline which is far removed from the real world in so many respects. Problems get analysed through this neoclassical prism, and they get misunderstood. I see this all the time: people making arguments that take ‘lessons’ from this discipline’ as a starting point and then use those foundations of sand to “demonstrate” that one person or another is an idiot. Garbage in, garbage out.

Despite all this, of course, political capture means that when something ‘economic’ happens in the UK, the BBC and other media outlets will routinely pick up the phone and ask ‘What does the City think?” and leave that as the answer.

Anyway, take a look at the rest of the interview. It’s interesting, and contains observations such as:

“There is an important distinction here. The distinction is between knowledge about the economy, and economics. . . economics is a language and a method and a set of analytical tools, but it is not really anything more than that.”

There is some optimism in there too.

one comment

Steve 1st January, 2015 3.34 am

I think that one day really soon there are going to be a lot of people in the City looking around at the ruins of Britain and the death of their own franchises, asking “What on Earth happened? My neo-classical education didn’t cover this scenario”

The ECB is taking the City to court to prevent Euro denominated securities and derivatives repositories and traders to be domiciled outside the EuroZone. The EU knows that if it doesn’t act quickly, the Euro will become the play thing of the City of London and its octopus of tax and secrecy havens, just like the USD did.

These court cases which are now in appeals are a BIG DEAL, and have a large part to play in what is being conjured in Ukraine even if at first people can’t see the connections. If the City doesn’t get what it needs it funds a war to break its competition.

And the BBC (Ministry of Truth) and the UK Press are completely silent about these court cases! Wonder why? London Bridge is burning down, burning down, burni…..

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