September 15, 2009
This is a digression from the subject of Ireland and Lisbon but I was “provoked” – which was Declan Ganley’s excuse for reversing his previous “No” when he was asked last year if he would campaign in a second referendum. Good to see that No does not always mean No in his case and that he recognises that it is sometimes good to change one’s mind, when circumstances change – which has been precisely my argument for a second referendum and a Yes vote on this occasion.
But back to my digression, which was provoked by a speech by Commissioner McCreevy in London on 10th September. See: http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/09/386&format=HTML&aged=0&language=EN&guiLanguage=en
He made a good point, to which I will return, but I was provoked by the following sentence “Failure of the education system which rarely encompasses sufficient emphasis on the life skills needed to understand, manage and mitigate personal financial risk has been another factor.” – leading to the cause of the current financial crisis(JM).
To cite David Cronin in the Guardian today this sounds like saying that the financial crisis was caused partly by the fact that ordinary people haven’t figured out how derivatives work. (http://www.guardian.co.uk/commentisfree/2009/sep/15/accountants-g20-eu-neoliberal).
Neither had ther people buying and selling these derivatives.
More generally, I was alternately irritated or bored in my years as a consumer advocate by the many industry voices I heard claiming that any failure in the market could be solved by “better education”. Whether it was financial services, nutrition, environmental choices, or whatever, regulation was not the answer, consumers had to be “educated”. Never mind that if consumers were “educated”, they would not buy half the financial services or food products on the market, never mind that the educational system could not possibly “educate” everybody to avoid all the market pitfalls, while still helping to become good citizens and efficient workers. The plea for “better education ” is a cop-out, it shifts the blame away from market operators (and market regulators), it is something that will never be achieved to the extent necessary. The plaintive cry for “better education” for consumers is essentially a claim that we have the “wrong kind of consumer”.
To be clear I am absolutely in favour of more and better consumer education but the plea for “better education” that concludes too many conferences and public discussions is just a comfortable alibi for not directly tackling market failure where it occurs. Market regulation should be based on consumers as they actually are, and not as someone thinks they should be.
Having gotten that off my chest, the Commissioner made one good point, and identified one real problem, although he offered no solution for it.
Speaking about one of his previous legislative proposals he said “Their lobbying resources are massive. But the “buy” side of the market – who I know largely supported my proposal -went virtually unheard, because they are largely unorganised for the lobbying task“.Well, I suppose “unorganised” is one way of describing the consumer movement in relation to financial services but there are other words like poor, having no money, under-resourced, hopelessly out-spent etc Years ago in BEUC, under intense and sustained pressure from DG Markt we had to waste our scarce resources over three years negotiating a useless Code of Practice on Mortgage Information with seven different European financial service industry associations. One thing we were not was “unorganised”.
Having diagnosed the problem Commissioner McCreevy admitted he did not have “an immediate solution to this but I do strongly believe that much more engagement of -and by- the buy-side of the market will be imperative in the period that lies ahead- in order to ensure that investor interests – as opposed to just distributor and trader interests – are properly taken account of”. Mirabile Dictu. END