27 June 2012

In the first of this year’s Reith Lectures, Niall Ferguson found few admirers on the BBC blog. Last night’s second lecture fared little better!

Professor Ferguson’s theme last week was that a society governed by abstract, impersonal rules will become richer than one ruled by personal relationships. The rule of law is crucial to the creation of a modern economy. Its early adoption is the reason why Western nations grew so powerful in the modern age.

He asked whether the institutions of the West are now degenerating because of a breakdown in the compact between generations. Is the transfer of the costs of today’s society to future generations a fatal flaw in our democratic system?

He went further last night. He argued for deregulation, indicating that the financial crisis is a result of over-complex law making. The failing was a sense of impunity within the banking industry. Offenders were not punished. The cause was a failure to apply the law. In this second lecture, there was an undercurrent of ethics. Too few bankers were imprisoned. “There will always be greedy people around banks, after all they are where the money is – or should be … but greedy people will only commit fraud or negligence if they feel their misdemeanour is unlikely to be noticed or severely punished.”

Ferguson made three proposals to reform government finances. Two (already in force in New Zealand) are public sector accounts that enable liabilities to be compared with assets, and using Generally Accepted Accounting Principles, now standard in commerce. The third is the duty of governments to be clear about the inter-generational implications of fiscal policy. 

However he doesn’t want these practices entrenched in law.  That won’t improve the economy. The benefit will go to lawyers. The legal profession will get lucrative business explaining to financial institutions what the inevitably dense rules mean.

In what may be an unreal perception, he thinks that young people should welcome austerity.

Some might see greater excitement in the ideas of his spouse.  While Ferguson is concerned about enemies of the rule of law, his wife, Ayaan Hirsi Ali (a Somali-born former Dutch MP) is encouraging ways to anchor the changes initiated by the Arab Spring.  At a conference on ”Tomorrow” in Jerusalem,  with what some consider to be Islamophobia, she spoke about a need to embrace personal autonomy and abandon the Arab subservience to paternal, religious and political authority. Women must be free from constraints. There is a need for compromise. Arabs must give up the pursuit of total victory, and their fear of losing face. They must stop looking to the Koran for the answers to every problem.

Ali was advocating the strengths of the West – personal autonomy, willingness to compromise in political situations, and rejection of religious rules in public life, while contemporaneously Ferguson was expressing concerns about the decline in the West of those principles on which its institutions – and its advantage – have grown.