No accountability means more failure

I understand that last night was not a good one for English football. Apparently, the team lost to Croatia and as a consequence, the team won't be playing in some competition in the summer.

Frankly speaking, I gave this sorry development little attention until I heard this afternoon that the England manager had been suddenly sacked. I thought that this was extraordinary. The team loses just one match, and the manager is held accountable and loses his job. Obviously, there is little tolerance of failure in the world of football.

I thought it was extraordinary because the degree of accountability in football stands in stark contrast to the total lack of accountability the world of finance. Move across town from Wembley to the Bank of England and the situation is very different. Here we have an even more egregious case of mismanagement lacking any accountability. Here we have the central bank pumping in countless billions of pounds into a failed financial institution with no obvious plan to protect taxpayers money.

Likewise, we see a similar skilful evasion of responsibility over at the FSA. Here we have an agency who is supposed to watch over the financial system to ensure that banks like Northern Rock don't take unnecessary risks and jeopardise the system as a whole. Unfortunately, the FSA failed lamentably to carry out its responsibilities.

On a related matter, the FSA should also be watching over Paragon, another financial institution who continues to carry on at the same caper that sent Northern Rock sliding towards oblivion. Again, we see the FSA more concerned about covering the proverbial rear end, rather than carrying out its assigned responsibilities.

In none of these cases do we see the senior management of the Bank of England or the FSA being held to account. There are no early morning meetings a day after the disaster, asking the main man what went wrong and then offering him a "good-buy and good riddance" financial package.

Whoever is appointed as the new England manager, they will start the job with a clear understanding that failure will be punished. Whether this is sufficient to ensure future success, personally, I have no idea. However, I am certain that if the manager was guaranteed that failure would not be punished, then the England team were always keep on repeating the same mistakes, and invariably fail.

This is certainly the lesson that comes from the lack of accountability in the world of central banking and financial regulation. Even though we are in the midst of a financial crisis, caused by inappropriate monetary policy and lax financial supervision, the Bank of England is considering further ill-conceived interest-rate reductions next year.

With inflation raging, such a move would be highly counterproductive and damage the long run prospects of the UK economy. Nevertheless, the MPC can take comfort in the fact that since they were not held accountable for the inappropriate interest-rate cuts that generated the current mess, they know that their future mistakes will also be similarly tolerated.