Industry | 2009.05.17
We've all got scapegoat flu | Seth Freedman
Accusing City types of profiteering from swine fever is futile: it\'s just another face of capitalism
In the wake of the swine flu outbreak, shares in airlines and travel firms fell sharply as investors panicked about the impact of a potential pandemic on their revenues. Airlines saw their share prices collapse , while producers of flu vaccines enjoyed a financial fillip, and their stocks rose in keeping with the buoyant mood around the drugs industry.
Savvy traders and investors who bought GlaxoSmithKline stock were handsomely rewarded by the upward surge. Buying Glaxo equity under such circumstances makes perfect sense, and few would resent those who did so. The short-selling of British Airways shares – in effect betting that the stock\'s value will fall – seems an equally prudent strategy, given the situation – however, there is still a wave of protest at the suggestion that individuals or funds should be allowed to exercise their free will in such a fashion when it comes to trading the market.
In both instances the investor is profiting from the misery caused by swine flu, but only the short-sellers are castigated. This demonstrates the determination of an underinformed public to let the heart rule the head. Few people outside the City have a clear grasp of the machinations of the stockmarket, yet they are happy to be cajoled by opportunist politicians and commentators into condemning that which they do not understand – the bankers, brokers and traders of the Square Mile.
It is of course true that the banking industry clearly played a major role in bringing about the credit crisis. But to scapegoat the City alone is utterly unhelpful, and is simply an easy way for the public to ignore its collective culpability for the financial crisis.
For all its faults, the City is essentially a manifestation of today\'s culture, reflecting, and reacting to, the society that it is a part of. Those working in the stockmarket are not genetically programmed to dispense with morals and ethics in their pursuit of ill-gotten gains. Rather, they are products of a society that uses money to rank individuals in terms of success and status. It is inevitable that young, ambitious graduates will gravitate to an arena where they believe cash rains down like manna from heaven.
But in the boom years, it was not just those working in the City who succumbed to such extraordinary urges, and ordinary people saddled themselves with unnecessary debt. However, as soon as the party ended and the hangover set in, suddenly the only people to blame were the bankers.
The Financial Services Authority, inevitably, performed an embarrassing volte-face after banning the short-selling of financial stocks late last year, having recognised both the immorality of such a stance, not to mention the inefficacy of the prohibition itself. Instead of bowing to public pressure, as it originally did, the FSA would have been better advised to explain to the public why short-selling is as legitimate a strategy as any other. The authority would have won fewer hearts this way, but it would have reached far more minds – and that is what is required in today\'s climate of fear and misconception.
The City does not exist in a vacuum; the stockmarket is the heart of a capitalist society, pumping blood around the system. And until capitalism is rejected by the world at large, to attempt to control it is useless: regulation only encourages more potent strains to spring up.
So long as money still trumps morals in society\'s eyes, it is futile to protest about those who profit from swine flu by short-selling travel shares. Those frowning now at such activities will be smiling again in a few years when the boom times return. Underneath these short-term ups and downs, the corrosive nature of capitalism\'s core still needs to be addressed before any fundamental and far-reaching change can ever occur.
Seth Freedman is the author of Binge Trading : The Real Inside Story
of Cash, Cocaine and Corruption in the City
For more information, please visit
http://www.guardian.co.uk/commentisfree/2009/may/11/swine-flu-city
