The global recession wasn't caused by greedy bankers but by naive and inadequate politicians
Published 04/08/2010 | 05:00
THE bankers have done it again. After almost destroying the economy and strangling small businesses by refusing desperately needed credit, they are now declaring record profits and are again enjoying giant bonuses.
That is the standard interpretation of the latest twist in the credit crunch morality play and it contains more than a germ of truth. But economics is not a morality play. While bankers are cashing in outrageously, the primary responsibility for this perversion of justice lies not with the bankers, but with populist politicians who have been most vociferous in demanding punishment for the banks.
There are three broad reasons for this paradox. First, and most important, the recession and sudden disintegration of government budgets around the world was not caused by the greed and stupidity of bankers but by the naive and inadequate responses of politicians to this behaviour.