In greed we trust

Greed, whether for political power or money is just not good. Businessmen, bankers and politicians all over the world are tumbling in and out of jail mainly because their greed has led them there. Envy of others inspires greed. For the greedy, happiness will always be the elusive goal. Is greed part of the poison in the Hindu Credit Union, CL Financial and Clico fiasco?

With freedom of choice and private property as constitutional rights, and speculation as a “get rich quick” tool, greed easily becomes a runaway horse. Except, you do what the United States Congress and the European Union are now desperately striving to do – put “stiffer” regulations into the financial sector. But how much regulations can you put and still leave the spirit, the animal spirits, alive and well in the economic system?

Is it greed or business enterprise which has led this country into the current fiasco? Policy holders, well, they needed some security and did the right thing. They took out insurance. These police holders also thought with the statutory fund and Central Bank supervision, their money would be safe. But not so. Trust in our regulators got eroded.

The next part of the sad story is the extent to which the depositors should be held responsible. Responsible for what? you may ask. They themselves didn’t use the money for wild, reckless investments. But they were told to expect a good profit. I now wonder though whether the investors really knew or should have known where exactly their investment would be going so as to assess the risk. If they were told, it might have helped them better understand the risk. But “fund managers” do not usually work this way. They are entrusted with managing the investment and investors are expected to trust the investors’ integrity and judgement. With the Clico and HCU fiasco, however, it was more than that. Through the parent company, a lot of “leveraging” took place, energised by an intense desire to get more and more money. And with brisk risk which grew higher and higher, almost leading towards a Ponzi scheme with new money seeking to pay off earlier debts. Then what about that other poison, profit through “insider information”? Which reminds me of the Wall Street slogan – In Greed We Trust.

The third part of this sad story of broken hearts and a government with its back against the wall is about the bosses at HCU, CL Financial and Clico. Are they really legally liable for the collapse? Breaching ethics and breaking the law are two different things. Adam Smith, one of the founders of economics, never thought seriously about the virtual economy where risk, speculation and financial manipulation appear as admirable virtues, even when they cause heartbreaks for the poor and gullible. No wonder white collar crime is now such a hot topic in criminology.

In today’s world, many people feel that it’s not easy to get rich through the real economy, that is, for example, working for a salary or selling things that you create. One rap artist went so far so as to preach to youngsters: “Get rich or die trying.” We have reached into what Sigmund Freud called “a civilisation of discontents,” no matter how much we may have, there is this intense desire for wanting much more than we need, often driven by glamourously-advertised conspicuous consumption.

Speculation has created many a millionaire – overnight. The question for both law and politics now is when does a money manager become reckless? Finance Minister Winston Dookeran in his budget speech said: “We shall strengthen the legislative framework governing financial institutions and their holding companies.”

With the inherently speculative nature of the investment market, Mr Dookeran will soon find this a gruesome challenge. This whole fiasco – the rage, the debate, the political conundrum – is an education in itself. Though filled with tears, it is more valuable than the Central Bank’s literacy programme. In a climate of caution, fund managers will have to explain more. It should not be business as usual, hopefully. We must not trust greed. In fact, we may do well to remember “what does it profit a man to gain the whole world and suffer the loss of his own soul.”

Professor Ramesh Deosaran (Emeritus) is Professor of Criminology and Public Safety and author of the book, Psychonomics and Poverty: Towards Governance and Civil Society.