‘Sanctions,’ said Kofi Annan, ‘are a necessary middle ground between war and words.’ Neither the EU nor the US will deploy troops or missiles to defend Ukraine against Russian-backed separatists, while Vladimir Putin basks in hostile Western words and turns them to domestic advantage. That leaves sanctions as the only means of seeking to influence him. But do they work? Evidence is not persuasive: in 200 cases studied by academics in Washington, from the League of Nations action against Italy’s aggression in Abyssinia in the mid-1930s to Russia’s assault on Georgia in 2008, sanctions were judged successful in one third of cases; in many of those, success was ‘partial’. In all other cases they not only failed but frequently made matters worse by reinforcing bad regimes, intensifying poverty and offering a field day for profiteering.
Recent sanctions against Syria and North Korea have arguably had no effect at all. In Libya, they may have persuaded the venal Gaddafi to renounce terrorism, but he went on brutalising his own people for years. In Iran, sanctions have obstructed the nuclear programme but not the supply of Iranian weaponry to Hamas in Gaza — where the economic blockade by Israel and Egypt has fuelled one of the most explosive conflicts on the planet.
This is a hobby horse on which I have occasionally lectured, most recently at the Nato Defence College in Rome (email firstname.lastname@example.org if you’d like the text). The truth is that generalised sanctions are useful only as a token of disapproval and an action on which uncertain allies can agree at minimal direct cost; but they have all kinds of adverse consequences. In the case of Russia, Jaguar Land Rover exports from the UK are likely to suffer, as are the fortunes of upmarket London estate agents; BP shareholders, having just enjoyed a bumper quarter, should worry about the future flow of profits from their stake in the Kremlin-controlled Rosneft oil company.
More effective (so western governments now believe) are targeted sanctions, including travel bans and offshore asset freezes, against the power elites of corrupt regimes — though such measures famously failed to spoil Mrs Robert Mugabe’s overseas shopping trips. This is the approach now being taken against ‘Putin’s cronies’, the circle of oligarchs and fixers who form the core of his power base. The key issue is whether these 50 or 60 individuals are driven more by self-interest than by belief in Putin’s resurgent Russian nationalism. The boardroom of what is sometimes referred to as ‘Kremlin Inc’ is filled with men who have bagged themselves a grotesque slice of Russia’s wealth while delivering little or no benefit to their fellow citizens. Now these greedy wheeler-dealers have a reason and an opportunity to do something for their country at last, by whispering to the chairman of Kremlin Inc that he must stop. Let’s hope he is self-interested enough to listen.
A bankers’ oath
Congratulations to the think tank ResPublica for its brave paper on ‘Virtuous Banking: placing ethos and purpose at the heart of finance’, published this week. I call it brave because it’s the sort of thoughtful work which many bankers will dismiss as ignorant of the competitive commercial pressures that drive their working lives. But in fact it makes a number of practical recommendations for socially responsible banking — about encouraging shareholder activism, diversity of ownership, localism, and attention to customer satisfaction — which I have been making here for years. It also ventures into philosophical realms reminiscent of my shipboard conversation last year with the Bishop of London, Dr Richard Chartres, who spoke of the need for ‘restraint and awareness’, in contrast to excesses committed within the self-reinforcing closed circles of the financial world in the past decade.
But the most eye-catching part of ResPublica’s thesis is its call for a ‘bankers’ oath’, akin to the Hippocratic Oath sworn by doctors. The former CBI chief Sir Richard Lambert, invited to launch the paper, could not quite bring himself to endorse this idea, which he described as ‘putting the cart before the horse’ of other necessary reforms to banking standards. It does indeed seem a touch portentous, conferring a lot more professional dignity than most customers might think their bankers deserve.
And ResPublica’s draft oath, running to 220 words, really is a bit unworldly, since it refers to the profit motive only obliquely in terms of an aspiration to ‘benefit from the prosperity that comes from serving customers well’. How else to encapsulate what’s needed? Other examples quoted include the Dutch Banking Association’s (‘I swear that I will do my utmost to preserve and enhance confidence in the financial services industry. So help me God’) which says nothing much and might even invite deception; and the Harvard MBA oath, which speaks more usefully of acting with ‘utmost integrity’, and ‘guarding against decisions and behaviour that advance… narrow ambitions but harm the enterprise and the societies it serves’.
Readers are invited to email their own bankers’ oath to me at the address above: I’ll publish the best. Meanwhile let me throw in a couple of other models to help you. The first is the Honor Code of the US Military Academy at West Point: ‘A cadet will not lie, cheat, steal, or tolerate those who do.’ Sadly, managers at Lloyds Banking Group seem to have breached every syllable of that one in what Governor Mark Carney condemned as their ‘highly reprehensible, clearly unlawful’ manipulation of benchmark interest rates, among other misdeeds, that have attracted fines of £226 million.
And finally let me remind you of the wisdom of Haimchinkel Malintz Anaynikal, the imaginary ‘dean of business philosophers’ much quoted in management memos by former Bear Stearns chairman and Wall Street trading legend Alan ‘Ace’ Greenberg, who died this week: ‘Stay humble, humble, humble’, and ‘Thou will do well in commerce as long as thou does not believe thine odour is perfume.’
You might disagree with half of it, but you’ll enjoy reading all of it. Try your first 10 weeks for just $10