Northern Rock and the Little Sods

Nicola Horlick just appeared on BBC Breakfast to talk about Northern Rock and private equity. She said private equity was good because it made companies more efficient and NR shareholders should be looked after as well as its investors and borrowers. The efficiency argument about private equity is irrelevant as the critics of this industry do not attack it for inefficiency but for acting against the public interest, which is not the same thing. Her justification for protecting the NR shareholders was that they would be pension funds looking after the savings of borrowers and investors. This is, of course, completely stupid as, by the same logic, every company in difficulty would qualify for a government bail-out. Horlick was blandly advocating a policy in which the state would underwrite every risk, or communism as we used to call it. (She wasn't challenged on either of these points so I turned the TV off - I intend to do this more often for health reasons.)  Horlick said these things because she had to, she was speaking for the City and she knew she only had about one minute on screen. This is fair enough if you accept that it's okay to say intellectually dishonest things just because you know how television works. But what struck me as odd about what she said was the extremity of it. This was blind market fundamentalism, so blind, in fact, that she appeared to be happy to hand the economy over to the state in the name of free markets. But this is, of course, just another way of playing the markets - in this case the market in question is political. The City is bargaining with the government. Both sides are embarrassed, but, currently, the City is doing a better job of hiding it because of its startling willingness to deploy either capitalist or communist rhetoric as the occasion demands. The government can't deploy any rhetoric at all because of the deep conviction of the Little Sods that everybody who isn't rung up by Gordon Brown every morning is a moron.