Accountability is the best food for the confidence fairy
by David Atkins
The New York Times has yet another story about Iceland's remarkable recovery in the wake of bailing out their people instead of their banks' foreign creditors. We've heard this story in many ways and highlighted Iceland's positive example of refusal to enact austerity before, but one of the most important features is also this:
Some Icelanders say they have been soothed, too, by the country’s bold decision to initiate an extensive criminal investigation into the financial debacle. Many members of the old banking elite have been identified as possible suspects, and some of their cases are beginning to come to trial; several people were convicted of financial crimes last month.
People in Reykjavik say that while things are hardly perfect, they are certainly better.
Chris Hayes' book Twilight of the Elites shines a spotlight on the crisis of confidence in America's major institutions. One of the many reasons that there has been this loss of confidence is the sense that the guilty are never truly punished; instead, the worst actors seem to fail upward in an endless stream of promotions, bailouts and golden parachutes.
People will regain more confidence in the economy itself when the economy's bad actors are finally held accountable. As the JP Morgan and LIBOR scandals demonstrate, the sorts of regulatory and cultural changes that would need to take place in the financial sector have not even begun to be implemented. Criminal recklessness is still the name of the game, and will remain so until major bad actors are held to account and major regulation put in place.
Austerity won't feed the confidence fairy. But accountability just might do the trick.
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