A missed opportunity

Tweet I was disappointed, but not really surprised, at the decision last week to allow the short-sellers to start trading bank shares again. Nor was it any great surprise that the announcement was rapidly followed by further large falls in the price of banking shares. It's not yet been entirely clearly demonstrated that the two are directly connected, but there can be no doubt that the recommencement of short-selling in bank shares will inevitably make them more volatile.

No doubt the Tories – largely funded by profits on this sort of activity – will be pleased that their donors can start their gambling again, but it's bad news for the rest of us. Most of all, it looks like a major missed opportunity to reconsider what the markets are for, and how they should be organised and controlled.

To listen to some free market supporters, one might think that 'the markets' have some sort of existence independent of human society, and that we should all accept that we have to do whatever 'the markets' tell us. It's not true of course, and never has been.

Markets are a human invention, and they can often be an efficient way of trading goods and services. But we should never forget that markets are there to serve us, not the other way around; and we should be ready as a society to regulate and control the activities in our markets in order to make sure that they serve our needs as humans and societies.

The problem is – and although this isn't the only cause of the current financial disaster, it's certainly a contributory factor – that some markets, particularly financial markets, have become more akin to casinos than places for the exchange of goods and services. Gamblers and speculators have been betting on future movements of prices – and not just betting on them, but speculating in such large sums that they actually influence prices in a way which enables them to make money. They may become wealthy as a result – but they haven't actually created the wealth which they accrue, they have merely redistributed it – to them, and from the rest of us.

Best of all, from their point of view, is that they seem to have found a way of betting with our money. When they win, we lose, and when they lose – er, we still lose. Now, I don't have any great moral aversion to people betting, as long as they do so in places where they are staking their own money, where all those involved understand that they are betting, not investing, and that they can lose as well as win, and where their betting does not cause problems for the rest of us.

Using the markets as a casino adds no value to human society and works against the interests of most of us. There should be no place in an orderly market for people to use them in this way. Rather than re-opening the flood gates, the government and regulatory authorities should be using the opportunity to look again at how we can ensure that markets are made to operate in the interests of society as a whole.