The secret of riches: play by the unwritten rules

Here’s an idea from Winston Peters: when you are in a hole dig faster and heave dirt around.

The idea is to cover so much outside the hole with dirt that the casual observer might lose sight of the hole. You might then be able at some future point to climb out unnoticed.

So Peters has attacked the bearers of inconvenient news. He has offered no explanations for the apparent inconsistencies in his various statements and actions over the years and between his and others’ statements on big-business contributions to various trusts with leads back to him or his party.

If he can keep this bluff going long enough, he could squeeze through the election and even possibly stay Minister of Foreign Affairs.

For this he needs Helen Clark to go on stonewalling — never has he needed her so much. She needs him, this week to get her budget passed and then through to November because it is hard to see how she can get the numbers for a fourth term without him — but only if she doesn’t get covered in dirt.

It is also just possible that National will need him, even as Foreign Minister. That is MMP.

This behaviour is not democracy at its best.

The secret of democracy and its partner, capitalism, is self-regulation. And that depends on observing the unwritten rules. Those rules, as much as the written rules, are the underpinnings of trust. Without trust, democracy and capitalism don’t work as well as they could.

And then we pay a price — in richness of social and political life and in richness of material life.

It is because both Labour and National did not observe the unwritten rule of being true to their traditions and their word that we got MMP. Voters lost trust in the two big parties and in the FPP system that they felt allowed them too much rope.

Similarly, it is because too many “entrepreneurs” did not observe some of capitalism’s unwritten rules in the 1980s that New Zealanders have run shy of the sharemarket. There was too much smart dealing. Too many small investors lost too much money. Too many of the smart set lived happily and richly ever after.

The issue was not whether the smart set played by the written rules — that is, acted legally. What diminished trust in the sharemarket was its breaches of unwritten rules of fair and open dealing, on which in the final analysis markets critically depend.

We have now had another round of smart dealing, this time by finance companies. They have milked and stranded another cohort of small investors, who, scared out of the sharemarket, had gone into fixed interest.

The opprobrium is not confined to the smart set. It rubs off on the vast majority of good capitalists who play by all the rules, who do a decent day’s work, deliver quality and charge a decent price. And the cost is not just to those fleeced; it is to the system. And, in turn, to all of us.

In the United States the subprime mortgage shenanigans have dried up credit to good borrowers for houses and businesses. That in turn has limited credit here. Now the finance companies’ shenanigans are compounding that by scaring depositors out of good lenders like AMP.

It would help if good capitalists bagged the bad. Those best placed to do that are the self-appointed defenders and promoters of capitalism and limited regulation, the Business Roundtable, Business New Zealand and the Chambers of Commerce and the sector lobbies.

The longer-term risk to good capitalists from breaches of the unwritten rules is over-regulation by politicians placating angry voters. And that brings with it a risk to all of us: the attenuation of capitalism’s enriching power.

In short: self-regulate by the unwritten rules or be over-regulated by written rules. We all then lose.

Similarly, the National party’s dallying with the Exclusive Brethren in 2005 broke an unwritten rule that voters need to know who is pushing whose barrow.

National could have steered clear of the Brethren’s grubby tactics. Then we would have been spared the tangled mess that is the Electoral Finance Act.

Come back to Peters, hurling dirt out of his hole: a Peters bent on defending democracy would open the various books.

The issue is not whether he and others acted legally, that is, played by the written rules. The criterion by which voters judge how much to trust the electoral and parliamentary systems is whether parties and MPs observe the unwritten rules of fair and open dealing.

That requires MPs and parties to self-police and to excoriate those who breach the unwritten rules. The past few weeks have not been exemplary.

Free speaking and accountable government are the magic of modern social organisation. Free markets and innovation are the magic of a modern economy. Their symbiotic combination is the most liberating and enriching system we have worked out so far.

But it works well only so long as its practitioners respect the unwritten rules. Even when it hurts.