Taking Stock Kudzanai Sharara
Following the 2008 Financial Crisis that was characterised by a monumental collapse of the markets, Unites States President Barak Obama, appointed Phillip Nicholas Angelides as chairman of a 10-member Financial Crisis Inquiry Commission.
The commission was charged with investigating the events that led to the crisis.
Its mandate was to report back to Congress by the end of 2010, “with a series of conclusions about what occurred and recommendations as to how to avoid future market breakdowns”.
During the inquiry, with simply no one accepting their role in the crisis, Angelides made an interesting remark.
Deploring the lack of accountability for the crisis, Angelides said: “Maybe this is like the ‘Murder on the Orient Express’: everyone did it.”
“Murder on the Orient Express” is a fiction novel first published on January 1, 1934.
In the novel, a character was murdered on board a train.
Upon investigations, there was evidence linked to all passengers including detective Hercule Poirot who was investigating the case. All passengers had alibis.
In such a scenario, it appeared everyone had murdered the deceased who had knife wounds equalling the number of passengers in that train.
This is the novel Angelides referenced to during the 2008 Financial Crisis inquiry.
“Maybe this is like the ‘Murder on the Orient Express’: everyone did it.”
And indeed, the final report of the Financial Crisis Inquiry Commission presented to President Obama and Congress in January 2011, concluded that the crisis was avoidable and was caused by widespread failures of regulation, excessive risk taking by Wall Street, government leaders ill-prepared for crisis, and systemic breaches in accountability and ethics. It seemed everybody had a role to play in the crisis.
I was reminded of this statement during the 2021 Monetary Policy post-mortem webinar held early this week.
Participants to the webinar included RBZ governor Dr John Mangudya, Secretary for the Ministry of Finance and Economic Development George Guvamatanga and Bankers Association of Zimbabwe president Ralph Watungwa.
Dr Mangudya was the first to set the ball rolling.
“I think we have done very well on monetary discipline and fiscal discipline, but we have not done very well on market discipline, which is compliance, attitude and self-discipline; these are soft skills.”
Dr Mangudya noted that there is a worrying level of indiscipline in the market.
He raised questions about the values certain directors stand for (including of banks) saying some of them were facilitating the opening of bank accounts for shelf companies, with no history of business, for purposes of getting funding from the auction.
“Banks need to help us so that we nip these kind of transactions in the bud at the bank level,” Dr Mangudya said, adding the first line of defence against such costly malfeasance should be banks.
With these remarks, Dr Mangudya was absolving the central bank and the Government from playing any role in the financial or is it economic crisis the country is experiencing.
His counterpart at Treasury, Guvamatanga was equally scathing.
He said there was now a very clear monetary and very strong fiscal discipline and what is lacking “is market discipline”.
“We are very much worried on the extent of market indiscipline that we are currently witnessing. And sometimes, that market indiscipline translates to what we call market failure,” he said.
Again Guvamatanga’s remarks, and those of Dr Mangudya were more like a “worthy us” and “unworthy them” kind of scenario.
In a paper Olivial Nicol, assistant professor of sociology at SUTD (Singapore University of Technology and Design), called such blame games field accusations.
According to Nicol, field accusations are characterised by actors competing to assign responsibility for a disaster in a game of accusations and counter-accusations.
Watungwa was taking no punches and in his remarks said there was no need for accusations.
In what sounded like a hit back, Watungwa said despite the RBZ accusing banks of not ensuring that there is compliance, banks themselves wanted to supervise a “self-disciplined society where there are less thieves”.
In a way, Watungwa was also absolving banks, putting the blame on the society.
I tend to side with Watungwa’s view that everybody, all the actors, the State, RBZ, private sector and individuals must look themselves in the mirror and correct what has been wrong with their conduct which has resulted in the challenges in the market.
Guvamatanga and Mangudya have absolved the Government, declaring its conduct clean.
The private sector including banks must do the same.
In fact, if the private sector believes the central bank and the Government are not clean and still behind the economic challenges, the grey areas must then be highlighted.
Currently there is no consensus on how foreign currency earnings should be treated and how the exchange rate should be determined. To what extent is this gap being addressed so that there is convergence of thought?
Like Watungwa said, there is need to reduce the finger pointing “because a lot of conversations we have are around identifying who is wrong rather than saying to ourselves what is wrong about me and what do I need to
put on the table to correct it, and hopefully
that everyone in the economy is doing the same”.
Blaming bankers alone serves to displace responsibility from those whose policy choices brought us where we are.