How the big banks have created a faculty ex-nihilo, all at the service of the interests of deregulated markets.
Teacher. Marc Chesney (initially published in Le Temps, 07/19/22)
Recently the Uber Files revealed that professors of finance or economics, known in their respective countries, France and Germany, had written in 2016 reports commissioned by Uber, to praise the merits of this company in terms of supposed opening up suburbs or increasing productivity. Highlighting the salaries of drivers, 20 euros per hour, without taking into account insurance and gasoline costs, while these authors would have received 100,000 euros each for this lobbying work, does not lack spice …and cynicism. More generally, it was a question of promoting the uberisation of the economy, that is to say in reality an accelerated precariousness of working conditions.
The academic world in economics and finance, hushed par excellence, thus plays an essential role in the defense of very specific interests. Receiving salary supplements from large institutions, or hoping to have access to them, encourages it. The press occasionally provides a few examples. According The diplomatic world in May 2011, before the financial crisis of 2008, a well-known professor from the London Business School was well paid to appear as the author of a report extolling the prowess of the financial sector in Iceland. We know the rest, the three major banks in the country went bankrupt in a few days in 2008.
The tree that hides the forest
These publicized examples are the tree that hides the forest. They highlight a phenomenon of corruption within the academic world. To better understand and situate this phenomenon, it is necessary to go back in time to notice that the first full-fledged finance departments were created in the 1980s and 1990s.
Previously, the few professors active in these fields were part of departments of economics or management. This was the time when neo-liberalism, with its waves of deregulation and privatization, began to play a dominant role. Professors with a classical background in economics or management could not really answer the new questions that financial institutions were now asking themselves. It was neither more nor less than changing their business model. The classic task of banks, which is to generate a profit on the basis of the difference between lending and borrowing rates, was and still is a slow activity, not to say boring for the new generations of bankers. Waves of deregulation and privatization, on the one hand, and computer progress, on the other, have allowed other activities to emerge, sources of large and rapid profits. The management of mergers and acquisitions as well as the development of huge trading rooms, where stocks, bonds, derivatives, etc. were traded, respectively gave rise to corporate finance and market finance. In the latter case, an initial training in mathematics, physics or computer science often became more useful than a degree in economics.
Casino finance has thus developed rapidly. The big banks have acquired an international dimension and have become systemic. That is to say, they take disproportionate risks and benefit from state aid, in the event of excessive losses, all of course in the name of liberalism. It was therefore necessary to create a faculty from scratch to train future specialists in these two fields.
The costs of this training, initially often borne by the private sector: in particular business schools, have often been socialized, in the sense that they have been borne by the taxpayer, within the framework of university training. This is how, for example, public budgets are used today to train future hires of hedge funds, whose priority objective is to allow individuals who are already extremely rich to become even richer… A minimum of decency would like these costs to be borne by these private structures.
White Collar Mercenaries
By pushing for the creation of this faculty, the big banks also aimed to wrap themselves, if necessary, in the clothes of science. For example, being able to “scientifically” justify, that is to say based on “scientific” publications, the grotesque remuneration of the directors of these institutions, despite sometimes catastrophic performances, is particularly useful to them. Wanting and, if necessary, being able to have academic mercenaries, who speak out publicly in favor of these institutions, or simply servile lackeys, who prefer to keep quiet, became strategic in the face of those who dare to criticize these grotesque remunerations and more generally the excesses of casino finance.
In many public universities, and particularly in Switzerland, professors of finance, have, thanks to the taxpayer, good salaries. It would therefore be logical that instead of focusing their teaching and research activities on the needs of the financial sector, they seek to promote the common good and the interests of the greatest number, by analyzing these abuses and proposing solutions.
A critical analysis of the exorbitant power achieved by this sector and the uberization of the economy is on the agenda.