1) Do you agree with the analysis out above regarding the supply and characteristics of long-term financing?

We do not agree fully with the analysis presented; it is incomplete in a number of aspects. However, we do not believe that an extensive critique is productive, but will point these differences out in our other responses, wherever in our opinion they are material. Our responses are, in the interest of brevity, sketches rather than detailed implementation plans.    

We are particularly concerned that the paper is single-minded; there are competing demands for capital, notably from households (for housing), together with governments (for investment) and the private sector, over which we would have concerns about potential unintended consequences – particularly over the question of ‘crowding out’.  

There is one significant area where we believe the coverage in the analysis is inadequate and it is an area that should be expected to feed into the responses to this consultation. This concerns short-termism and its role in fostering institutional corruption. This is a strand of research emanating from the Edmund Safra Centre for Ethics at Harvard University. The seminal paper is Lawrence Lessig’s “Institutional Corruptions” . In particular, we would draw attention to Malcolm Salter’s recent paper: “Short-Termism At Its Worst: How Short-Termism Invites Corruption… and What to Do About It”  

We quote from the abstract of that paper: “... The central concern is that short-termism discourages long-term investments, threatening the performance of both individual firms and the U.S. economy.  

I argue, in this paper, that short-termism also invites institutional corruption. Institutional corruption in the present context refers to institutionally supported behaviour that, while not necessarily unlawful, erodes public trust and undermines a company’s legitimate processes, core values, and capacity to achieve espoused goals. Institutional corruption in business typically entails gaming society’s laws and regulations, tolerating conflicts of interest, and persistently violating accepted norms of fairness, among other things. ...”  

Though US-centric, we feel that there are many insights and lessons to be learned from these publications which may transfer to the European context and long-term investment.  This is one of the more mundane questions asked by the Commission. 


Lessig,Lawrence - March 15, 2013 - Institutional Corruptions - Harvard University - Edmond J. Safra Center for Ethics; Harvard Law School - Edmond J. Safra Working Papers, No. 1


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