Notes on Trump 42 – Are Commissioner Haynes and Ross Gitttins closet Stalinists?

Having reached the answer to Life The Universe and Everything, I’ll talk about something else.

But first, Trump’s approval rate among likely voters has already bounced back since ending the shutdown and the latest (2019-02-11) hit 52% approval to 47% disapproval, with 39% each for “Strongly”. That may be an outlier but the Democrat celebrations have certainly proved premature.

It seems plausible that the prospective meltdown of  aviation as air traffic controllers called in sick after missing two pay packets was a major factor:

If that had been organised by Democrats they would have a victory to celebrate. But it wasn’t. Democrats and the media are still just milling around in confusion.

I started this post immediately after reading this item that wasn’t about Trump from Ross Gittens in the Fairfax press dated 3 October 2018.

…Some people were disappointed the interim report contained no recommendations – no tougher legislation, no referrals to the legal authorities – but I was heartened by Commissioner Kenneth Hayne’s grasp of the root cause of the problem and the smart way to tackle it.

Too often, he found, the misconduct was motivated by “greed – the pursuit of short-term profit at the expense of basic standards of honesty . . . From the executive suite to the front line, staff were measured and rewarded by reference to profit and sales”.

Just so. But what induces seemingly decent people to put (personal) profit before people? That’s a question for psychologists, not lawyers. We’re social animals with an unconscious, almost irresistible urge to fit in with the group. A tribal urge.

Most of us get our sense of what’s ethical behaviour from the people around us in our group. If what I’m doing is no worse than what they’re doing, that’s ethical. Few of us have an inner moral compass (set by our membership of other tribes – religious or familial) strong enough to override the pressure we feel under from what our bosses and workmates are saying and doing.

Sociologists call this “norms of acceptable behaviour” within the group. When regulators first said that banks had an unhealthy corporate “culture”, business leaders dismissed this as soft-headed nonsense. Now, no one’s arguing.

But, we’re told, how can you legislate to change culture? Passing laws won’t eliminate dishonesty.

Fortunately, that’s only half true. Rationality tells us people’s behaviour flows from their beliefs, but psychologists tell us it’s the other way round: if you can change people’s behaviour, they’ll change their beliefs to fit (so as to reduce their “cognitive dissonance”).

Hayne says “much more often than not, the conduct now condemned was contrary to law”, which leads him to doubt that passing new laws is the answer.

So what is? His hints make it pretty clear, and I think he’s right. Make sure everyone in banking knows what’s illegal, then police the law vigorously with meaningful penalties. Fear of getting caught will override greed, and a change in behaviour will be reinforced by an improvement in the banking culture.

Ross Gittins is the Herald’s economics editor.

The above long excerpt and the following sentence is as far as I got.

Or as Uncle Joe put it, change the situation and the beliefs will follow. Assign somebody to do a task and somebody else to check.

That sentence explains the title. But I didn’t have time to read the interim report so I decided to wait for the final report.

I don’t have time to read the final report either and am doubtful that the news reports I have read were written by people who did. I guess my uninformed opinions are as useless as the rest, but here goes.

There are many abuses that have been fixed by enforcement of legislation. Adulteration of food, the factory acts etc. All required inspectors. I have no idea whether or not there will now be some improvement in enforcement and inspection of retail banking. I gather Ross Gittens is still more optimistic but his optimism seems to be based on a prospective shakeup of the agencies that were supposed to enforce banking law. That may happen but there would be more grounds for believing it if whoever was responsible for prosecuting people who take money for services not rendered to dead people was themselves prosecuted for misconduct in public office rather than merely reminded of their duties.

Naturally a billion dollar commission conducted by lawyers will be oriented to solutions that require more lawyers and that do not disband agencies staffed by lawyers or send their leading personnel to prison. But it seems obvious that a culture of greed cannot be avoided by enforcement of laws in a system of property relations oriented around greed as the driving force.

Those abuses that can be fixed eventually will be. But changing business culture requires changing the ownership of business. A working class that owns the economy will certainly need a system of inspectors to enforce laws and prevent the re-emergence of greed as the driving force. Perhaps some smart former corporate lawyers could be retained as technical advisors. But those inspectors cannot be regulatory bodies staffed by lawers. They will have to be based on full transparency enforced by workers doing the checking themselves. The name “cheka” has good historical connotations.

For regulating banking we will have to understand how banking works while actually running it.

Far more important issues than retail ripoffs depend on understanding how banking and finance works. The financial crash we are headed towards as a result of the underlying economic cycle will have much more devastating consequences. As long as workers don’t understand it but “only work here” we are stuck with whatever our saviours from on high deliver.

There seems to be only one recommendation from the inquiry that will remain controversial. Eliminating mortgage brokers. This favors the bigger banks and eliminates about 20,000 sales commission workers pretending to be brokers acting as intermediaries between workers financing homes and banks that are themselves supposed to be financial intermediaries between lenders and borrowers.

I guess its probably a good idea. But its food for thought as to how such matters should be handled in transition from capitalism.

We would still have working class households that want to own their home. As well as the actual construction and urban infrastructure development there will have to be facilities for allocation, transfer etc. People administering “social property” will be in the same position as bankers etc today and as the herd managers who became herd owners in primitive societies.

Under capitalism, without mortgate brokers, workers will go to the big banks for their mortgate loans and be “helped” by bank sales staff paid on a commission basis by banks to increase bank profits. The advantage I see is simply that they will have to learn more about banking.

That will be helpful in figuring out how to organize things ourselves in transition from capitalism. Otherwise such matters that we don’t understand must continue to be organized by people doing it for their own benefit.







Just finished this book and VERY strongly recommend it.

First do this quiz is at the main site for the book (with lots of other very useful material):

Do above first for quick preview without spoilers. Numerous surveys done with this quiz. Consistently show that most people including most “experts” do worse on choosing between 3 plausible answers to basic factual questions about the world than random one out of three guesses of “Chimpanzees”.

Continue reading