The Hong Kong edition of China Daily leads with the spread of anti-Wall Street protests across the developed world as ‘cities see rallies against corporate greed’. The other front-page story reports Mainland government intervention after an Internet sales platform raised fees ‘massively’ for small vendors. It is unclear whether we are supposed to infer that China does or does not have a problem with corporate greed.
Is corporate greed any different from the evolutionary impulse that leads a well-disciplined and well-fed dog to gobble up three unguarded steaks on a table? Demonstrating against company managements for trying to maximize shareholder value or giving themselves huge bonuses is missing the point. If the bosses have broken the law, prosecute them; if they haven’t, and their behaviour is unacceptable, blame the lawmakers and regulators.
The current financial crisis is being overshadowed by the nightmare following Europe’s utopian attempt to unify its currencies. But if we follow the problem back to its origins we get: already-indebted governments bailing out the financial system and virtually bankrupting themselves; this followed the near-death of the financial system after it created a mountain of toxic debt; this resulted from the unbridled spread of bizarre derivatives; these were derived from large amounts of securitized mortgage loans, which had received top-notch low-risk status from ratings agencies; these comprised large numbers of mortgages granted to often low-earning people to buy overpriced homes. And at the very end of the trail we get to the root cause of ever-rising property prices and low-earners’ temptation to borrow: low interest rates.
So the person who needs to be strung up is Alan Greenspan. He and his fellow monetary policy-makers thought things were fine because inflation as they measured it – the prices of goods and services – looked low. We now know that these indicators were being depressed by the one-off reductions in costs we enjoyed in the 1990s and 2000s thanks to Internet/telecoms technology and the contribution of low-wage labour in China and elsewhere. When urged to take prices of commodities and assets like property into consideration, he said it wasn’t his job – as if the debasing of a currency won’t show up in such areas. And in addition to piling steaks up on the table, he opposed regulating dogs left unattended nearby, saying after it blew up: “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.”
He was warned, but he ignored his critics. The European leaders who naively unified their currencies because they liked the trendy symbolism had the economic flaws explained to them, but they dismissed their detractors as Eurosceptics. Here in Hong Kong Chief Executive Donald Tsang was advised against continued restriction of housing supply from the mid-2000s, but he waved such ideas away with his usual smug, bureaucratic arrogance.
Perhaps Hong Kong people know that blaming something as nebulous as greed, or assuming that companies can be guided purely by conscience, is pointless. At Exchange Square this morning, the sculptures of Ju Ming and Henry Moore are cocooned by potted plants (perfect, in some cities, for throwing through windows), and the place is packed with police and Hong Kong Land’s regiment of Nepalese security guards. A few media folk have also been stationed there, just in case, but they know better. The Occupy Hong Kong kids camped out at HSBC HQ overnight – and they were just a few dozen strong. They say they are the 99%, but the truth is that the 99% are the people who aren’t there. Even in New York and London, the Western world’s ‘Arab Spring’ is marked by its visibly small scale. If the protests pinned the blame on the genuinely guilty, a lot more of us might turn up.
(Not that I have any fondness or respect for investment bankers. My favourite I-banker moment was when in the mid-90s my mother and I were invited up to a palatial duplex on the Peak rented for HK$250,000 a month by the local boss of one of the Wall Street institutions. He and his family were away; the invitation came from their maid, via mine – her friend – so we could use the swimming pool. My mother soon combed the three-storey property and pronounced it virtually free of books, other than the domestic helper’s glossy tomes of recipes in the kitchen. “Peasants,” she concluded.)