So, who to blame for the curse of red tape? Politicians and bureaucrats are the obvious targets, but let’s not forget the lobbyists. By and large, corporate interests love regulation – the more complicated the better. Not only is the regulatory thicket shot through with loopholes for those in the know, it also acts as a barrier to market entry – thereby protecting established positions.
Trying to outwit the lobbyists with evermore elaborate rules is like trying to drown a fish – pretty pointless. In respect to the banking sector, Steve Baker MP argues for a radical alternative. Instead of expecting financial regulators to keep up with financial innovators, he wants to make bankers personally liable for any losses their banks incur:
- “The obvious question is who would become a director of a bank under a regime of unlimited liability. Actually, unlimited liability banking has an illustrious history. The two greatest bankers of the 19th century, Nathan Rothschild and J. P. Morgan, both operated highly successfully under unlimited liability. It made them conservative in their risk-taking and reassured counterparties who appreciated what they stood to lose if a deal went wrong.”
Read the whole of his speech to Parliament, here.