Earlier this month, the financial advisor John Redwood – Chief Global Strategist for Charles Stanley – penned an opinion piece for the Financial Times (paywall) in which he told his clients that it is “time to look further afield as the UK economy hits the brakes.” This is unquestionably good advice. As Frances Coppola at Forbes notes:
“Rising inflation, largely due to the fall in sterling after the shock result of the EU referendum in June 2016, is squeezing real incomes. Continually rising consumer credit is unsustainable when real incomes are falling, so it was inevitable that there would soon be a significant contraction of bank lending. That is now coming to pass.”
Indeed, the crash in UK discretionary spending is signalling trouble across the UK economy. Add in rising interest rates and rising energy costs and you have a recipe for a major slowdown in 2018. For a financial advisor to tell clients to invest in the UK in these circumstances would be tantamount to professional misconduct.
Interestingly, though, while Redwood discusses rising interest rates, tighter mortgage lending standards and higher capital requirements for banks, he is strangely reticent about the biggest threat to the UK economy – crashing out of the European Union without a trade deal in place. One reason for this might be that John Redwood MP – former Secretary of State for Deregulation, Environment, Transport and the Regions, Trade and Industry, and Wales – is currently using his position in Parliament to lobby for a no-deal Brexit which he claims will give a boost to the UK economy.
Understandably, with the UK government making a dog’s breakfast of the Brexit negotiations, much of the media attention has been on Redwood’s hypocrisy. As Coppola explains:
“So the Rt. Hon. John Redwood MP advocated a course of action by the UK government that he knows would seriously damage the UK economy. This is not the only time he has advocated such a course of action: he is a prominent advocate of ‘hard Brexit’, insisting that anything less is not really Brexit.
“And to protect his job as an investment manager, he warned his wealthy clients to get their money out before the disaster hits.”
There is, however, a more serious issue here; one that goes much deeper than Brexit. While choosing between the advice of a politician and the advice of a financial advisor may seem like choosing between sharing a swimming pool with a crocodile or a shark, there is a crucial difference. The advice given by a financial advisor is regulated. Were a financial advisor to knowingly give false advice or to give advice that he or she ought to have known was false, he or she would face being struck off, sued or even prosecuted. It is for this reason that I trust the judgement of financial advisor John Redwood far more than I trust the advice of politician John Redwood. For while politicians are subject to some codes of conduct relating to their expenses and their personal conduct, they cannot be held accountable for their promises and pronouncements.
When John Redwood advises people to vote to leave the European Union without a trade deal, when Bojo the Clown makes a throw away comment, when Tony Blair claims Iraq has weapons of mass destruction, or when former Chancellor Nigel Lawson declares climate change to be a hoax, there are consequences. People take them at their word even though their words can cause great harm (indeed, in Lawson’s case they may have already contributed to humanity’s extinction). But there is no regulatory body that holds MPs to a professional standard for their advice and promises.
The problem is that in a representative democracy anyone can be elected as a member of parliament. The result is that parliament can be packed with several hundred numpties who fail to understand the basic facts behind the policies they make pronouncements upon. This is a problem raised by the ancient Greek philosopher Socrates. He posed the issue this way – if you had to embark upon a difficult sea voyage that would take you across stormy waters and close to jagged rocks, would you choose a crew of knowledgeable and experienced sea farers or would you opt to run the ship with representatives of the general population? In a functioning liberal democracy, this problem is mitigated by the incorporation of expertise into decision making. For example, in a criminal trial an experienced legal expert sits in judgement and deals with issues of law and procedure; prosecution and defendant are represented by legal experts who present and interrogate the evidence; but the determination of guilt or innocence is decided by jury drawn from the general public. Until recently, parliament and governments operated in a similar way. Professional civil servants, advisors and lawyers would keep politicians honest on questions of fact and law; while leaving the representative politicians to decide on matters of policy.
In practice, of course, there was always soft corruption by lobbyists together with a great deal of what we now call “spin.” But it was rare indeed for a politician to knowingly lie about matters of fact or law. But, as UK government minister Michael Gove famously observed last year:
“I think the people of this country have had enough of experts from organisations with acronyms saying that they know what is best and getting it consistently wrong.”
Like judges in criminal courts, professional experts were supposed to stand above the political heave-ho; handing out impartial advice to politicians from all sides. In an era of special advisors drawn from an increasingly narrow elite class, however, only the high priests of finance, econometrics and business law are afforded the privileged status of “expert.” Genuine experts from the breadth of professional experience, who might have something to contribute to policy, have been banished to the margins. The result is a political echo chamber in which each side accuses the other of peddling “fake news” while the economy disappears around the U-bend.
What the two faces of John Redwood suggest is a need to hold politicians – and particularly ministers and former ministers – to standards similar to those expected of financial advisors and similar regulated professions. That is, when they make pronouncements that they know, or that a reasonable politician ought to know, to be wrong, there should be some regulatory or legal mechanism to hold them to account. As the science writer Carl Sagan once put it – if you are going to make extraordinary claims, you must also provide extraordinary evidence. By all means believe that climate change is a hoax, that Brexit will be good for the economy or that the NHS will get £350m per week if we leave the EU; but if you make those pronouncements without good evidence and people are significantly worse off as a result, they should have the right to see you in court.
As you made it to the end…
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