Debating the City

In: Uncategorized

7 Jul 2014

Given the unpopularity of those who work in financial services it was perhaps appropriate that there was a constant hissing sound in the background. Only this time around the source of the hissing, at least in the main, was a noisy air pump rather than the audience.

The venue was the Bowler Hat – a large inflated tent serving as a pop-up theatre – in London’s Paternoster Square. Just to the north was the nondescript London Stock Exchange building and not far to the south was St Paul’s Cathedral. So it was almost literally sandwiched between god and mammon.

It was also a strangely suitable place to be debating whether the City is socially useful in a session that was part of the annual City of London Festival. On the critical side of the panel were Tony Greenham of the New Economics Foundation and Aditya Chakrabortty of the Guardian. On the other side, not entirely uncritical but broadly pro-City, were Marc Sidwell of CityAM and Louise Cooper. Angus Kennedy of the Institute of Ideas was in the chair.

Although all of the panel scored some points in the debate no one landed a killer blow. For Greenham the City has become a haven for speculation and rent-seeking – but whether there was a realistic possibility of it being any different was unclear from his argument. Chakrabortty spent much of his time blaming the woes of the British economy on the City without explaining the nature of the alleged connection.

On the other side, Cooper focused mainly on the City’s textbook role as a channel for raising capital for those who need it. Later in the debate Chakrabortty, quite rightly, questioned whether this model bears any relationship to reality. Finally, Sidwell discussed what he saw as the many positive attributes of the City while also pointing out that, contrary to Greenham’s claims, there was a strong regulatory regime in place before the crisis.

It is of course always easy to be wise after the event but it would have been better if the debate had focused on the City’s key role. Does it succeed in channeling capital for productive purposes or not? It seems to me clear that it does not fulfil this rule at present. It certainly is adept at moving capital around but relatively little of it is being used to enhance prosperity. Whether things could be any different should be the nub of the discussion.

This leads to another point that was not raised by any of the panelists. The City’s role has shifted towards redistributing risk as much as about channeling capital. Until this point is appreciated it is not possible to grapple properly with the subject.

Finally, to declare an interest and make a shameless plug at the same time. I will be participating in a debate on does emotion or reason dictate the financial markets in the Bowler Hat on Wednesday 9 July at 6pm. The other panelists are Greg Davies of Barclays, Frances Hudson of Standard Life Investments and Adrian Wooldridge of the Economist. I hope you can make it.

This blog post was first published today on Fundweb.

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