John Kay

The theory that the right answer to the gap in information and knowledge between the investment bank’s structured products division and the person in the street is to give the person in the street more information is absurd.

The books that Britain exports have long been made from trees grown abroad. Then globalisation meant the paper was also made abroad, and increasingly the printing took place overseas. Soon selling a book will involve no physical objects. The division of labour becomes ever finer and generally increases the wealth of all involved in the production process.

Good quangos have specific technical expertise and their purpose is to take issues out of politics. Bad quangos have no distinctive skills and are designed to put issues into politics.

A business secretary should focus on issues that enable business to improve how it serves the public. He should not act as a super lobbyist collating the suggestions of the chief executives and public relations consultants constantly banging on his door.

The housing market is like other financial markets: price expectations create momentum that drives prices arising from normal affordability ratios. But they must eventually return to these norms through “mean reversion”, creating the endemic booms and busts of cycles.

At the medieval courts Shakespeare described, the exercise of power was not a means to an end, it was itself the end. The political and economic environment has been transformed. But human nature has not, and the factors that drive powerful men today are little different from those that drove them five centuries ago.

Shamefully, the purpose of current stress tests in the financial sector is not to ensure that depositors’ money is safe or that taxpayers will not be called on again, but to reassure banks and their shareholders that they will not be required to provide significant additional capital.

The risks that the financial sector has devised techniques to manage are not the everyday risks of an uncertain world: they are risks almost entirely created within the financial sector itself.

While there may be some economies of scope in the provision of financial services, they don’t in any event compare in order of magnitude with the collateral economic damage imposed by recent failures in the financial sector.

Today’s managers are victims of the tyranny of the quarterly earnings report. And that is why yesterday’s cost-savings are so often today’s corporate crisis.