Sir Fred Goodwin and the toxicity of guilt

March 3, 2009


Sir Fred Goodwin’s payoff has filled the Nation’s headlines. Popular opinion in the UK has developed into an outburst of rage against those guilty of triggering financial losses for others and yet who seem to have escaped relatively unscathed themselves. But can guilt and blame be disentangled so simply?

A public fury rages on over fat cats responsible for our economic woes. Someone must be responsible. Someone must be made to pay. A culprit must be found, and quickly to make an example to the others. As Richard Donkin also noted, it was the libertarian philosopher Voltaire who satirised the strategy of finding a culprit for public execution when things went wrong. Candide learned that killing an admiral from time to time is good, ‘pour encourager les autres’. More recently the theme was reworked in an episode of Blackadder, a much-loved TV series in Britain, where a senior officer announces to a hapless aide that the time had come for a futile heroic gesture.

Sir Fred seems a suitable culprit for the moment, although rather like Blackadder, he is understandably reluctant to participate in the gesture. The case for the prosecution before the high court of public opinion runs as follows: Goodwin (almost always referred to at present as Fred the Shred) was in charge of Royal Bank of Scotland (RBS) which carried out a takeover (ABM Ambro) which eventually went very badly wrong. There were financial commentators at the time suggesting it was a risky strategic move. The kindest explanation on offer was that Sir Fred had acted out of megalomania. He was at the time considered a brilliant financial leader a reputation earned particularly during the earlier successful hostile bid by RBS for Nat West (National Westminster Bank).

Hero to zero and leaders we deserve

That was then. Somehow public mood swings have a symmetry to them. The greater the hero, the more a subsequent judgement swings to the opposite extreme. Sir Fred has more recently acquired the epithet of the worse banker in the world. Perhaps worth mentioning. If so, there are very interesting questions also worth considering about how such a specimen went from strength to strength over such a long period of high office.

Tempted though I am, it is too great a leap of explanation to wrap it up in the bald statement that we get the leaders we deserve. On the other hand, that notion makes at least a reasonable point from which to get beyond the assumption that public opinion once duped has now discovered its previous blind spot regarding towering imposters such as Fred Goodwin.

The toxity of guilt

Here’s another idea. It is, at least, a new way of looking at what might be going on. The current explanatory vocabulary of the credit crisis repeatedly relies on the metaphor of toxicity. Like many figures of speech, it helps us dress up a strange concept in familiar garb. Yes, toxicity. That’s what it is. The economic system has gone toxic.

But as with risk, the systemic toxicity is hard to isolate and destroy. It ducks and weaves. It is distributed and embedded in countless subtle ways. Wait a minute – who signed off the loan? Where were the directors. Why didn’t the Government know. And Robert Peston. Surely he must have known. Then there’s Gordon Brown. Not enough, then, to encourage the others in future. We must act promptly. First Sir Fred, but then the others. And (lest I forget) what about all those Business School Professors who taught all those finance courses, and dreamed up the modern theories of derivatives? That’s more like it. Drastic action is called for. How else can we save the body economic?


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