- The current trust deficit is not limited to financial advice, but spreads across peoples’ faith in governments, and private and public institutions.
- It is now widely suggested the excesses of neo-liberalism was a principal cause of the GFC in 2008.
- CAs have an ethical and social responsibility to be involved in the debate around options to achieve a more equitable distribution of income and wealth in society.
And yet the discipline of financial advice, in which many chartered accountants participate, continues to suffer from a frustrating deficit of trust. This is reinforced by a strong perception in the community that the wider financial services industry, dominated as it is by powerful and well-connected financial institutions, is unwilling to genuinely reform itself for the benefit of society as a whole.
Sadly, the trust deficit is not limited to financial advice. Arguably, it is symptomatic of a deeper malaise. It appears that many ordinary people no longer trust in governments and in our society’s public and private institutions to support them and to deliver outcomes in their best interests. We even see this phenomenon in the lack of trust of traditional professions, such as accounting and law. And we have observed it in democracies around the world in which voters appear to be saying “a pox on both your houses”.
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I’m certainly not suggesting that any particular system of societal organisation is perfect, relying as they all do on the frailties of human beings. However, I am suggesting that the neo-liberal free market model of capitalism that has dominated much of the democratic western world since the oil crisis of the 1970s is not working well. At least in the view of the majority of ordinary citizens. Originally championed by Ronald Reagan in the US and Margaret Thatcher in the UK, it is now widely suggested that the excesses of neo-liberalism, particularly as expressed in the deregulated banking and finance sector, was a principal cause of the global financial crisis in 2008.
We’re still paying for this systemic failure; or more to the point, the working and middle classes in the western democracies are still paying for it. The perception continues to grow that powerful elites, including those in the financial services industry, are accumulating wealth and influence to the detriment of the majority of their fellow citizens. This attitude is not driven by the usual crowd of left wing commentators. On the contrary, many of its supporters are ordinary, conservative citizens for whom populist politicians are filling a gap by telling them what they want to hear. In Australia, that includes calls for a Royal Commission into the banks and their activities in the financial planning industry.
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A conversation is needed
So how should we react to this failure? Doing nothing, or engaging in a bit of regulatory tweaking on the margins, is not enough. Arguably, the excesses of the neo-liberal free market ideology are gradually eroding the foundations and credibility of our western democracies by shifting power and wealth towards elites, including large financial institutions, which seek to influence or even control the policies and decisions of governments, particularly governments of the Centre Right. We observe this process in the activities of lobbyists who appear to have unlimited financial resources to promote their clients’ commercial interests over the public interest.
Doing nothing, or engaging in a bit of regulatory tweaking on the margins, is not enough.
Consequently, many ordinary citizens feel that they don’t count, that they are being left behind financially. That they and their children are bereft of opportunity, no one is listening to them, the democratic process is irrelevant to the operation of government and that the capitalist system is stacked against them.
History tells us that we must take these warning signs seriously. We must talk about the role of government, the function and operation of the market mechanism and the desirability of using the tax system and other public policy options to achieve a more equitable distribution of income and wealth in society. The conversation must also involve the desirability of reform and transparency of political donations and lobbying activities.
The role of CAs
As professional advisers, why should we even care about these issues? It’s tempting to walk away on the basis that the discussion is a waste of time, too hard, too theoretical, too controversial and well beyond our limited spheres of influence. Why not limit ourselves to issues on which we can have some impact and get on with our lives as best we can? That would be an entirely logical position to take. However, to do so would be walking away from some fundamentally important questions that professionals should think about and on which we should be prepared to express an opinion.
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We are a privileged and well-educated group of people who have a duty to contribute to society to the best of our ability. So as true professionals (which we claim to be), we have an ethical and social responsibility to be involved in this debate. It is simply not acceptable for us to be passive bystanders.