While earlier talk of an EU super-regulator has been dropped, the same goal is being achieved by other means. The plan is to create three \”authorities\” with a permanent staff and powers to impose \”binding\” decisions on states. Appeals go to the European Court. There is to be a European Banking Authority in London, an Insurance Authority in Frankfurt, and a Securities Authority in Paris.
Lord Turner fired a warning shot on Thursday, questioning plans to bring London\’s securities houses under EU oversight. \”Frankly, this is an area that when it gets Europeanized you sometimes get things that are not actually to do with good regulation. If one was absolutely confident that European supervision was going to be completely politics-free, in a neutral, technocratic fashion, we would be more relaxed,\” he said.
There have been two grand experiments in the global division of labour. The last 30 years or so and the period 1870-1914.
In both periods London specialised in finance and Germany in heavy industry. A small point which leads me at least to think that there\’s some comparative advantage that London has in finance. This isn\’t an issue of how Maggie loved The City, or Blair gave himself up to it. There\’s something more fundamental underlying this division of labour.
My guess (and it is a guess, if a lightly informed one) is that it is the Common Law. Precisely because you can construct a contract, create a derivative, make a deal, in pretty much any manner you choose, the innovation will be in that Common Law are. Not in a Roman Law jurisdiction where there is a great deal more approval getting that is necessary.
Extending detailed EU control over these markets will of course wipe out that comparative advantage. For EU law is as (if not more so than) Roman Law.
I would point out that this isn\’t me, given my well known political sympathies, simply snarling at anything the EU does. It\’s something much more basic than that. Finiancial markets are by their very nature innovative. And it\’s te Common Law that allows London to be so. Get rid of that and you\’ll get rid of the innovation, making us all poorer in the long term.