As a good classical liberal I am normally mild mannered when it comes to crime. There must be a trial, evidence, a fair decision, and so on. Punishment should fit the crime, to be sure, but also only so much as to dissuade others from following that same path to perdition. Normally, there is one specific time when I start shouting that jail's too good for these people. Once I've calmed down again I do still insist upon those trials, evidence, and fair decisions; but then insist that very long sentences -- the kind where the key to the cell seems to have been “lost” -- are justified.
Unlike almost everyone else I insist that these times are when people steal through documentation, through swindles, rather than through violence. This newspaper reports that there are four scam-hit mutual funds where the asset manager “fled with Tk158 crore embezzled from the funds.”
The standard thought in such cases is that, as no violence was used, the punishment will be fairly light. A couple of years perhaps. I argue entirely the other way -- the crime damages the entire system so must it be punished more harshly, not less. For what such -- and yes, obviously, evidence trial, fair decision, and all that -- crimes do is make people more hesitant to do what will benefit them: Save. Such crimes damage the entire economy by reducing the investment in it. Less being saved necessarily means less that can be invested. And it is investment which is going to make our children richer and our grandchildren more so.
Killing, or even damaging, trust in the financial system that collects savings and propels investment is a crime that reverberates down the years on a system-wide basis. The punishment should reflect that.
The analogy here is with perjury, the crime of telling a lie while on oath giving evidence in court. This is the one that the system itself punishes very harshly. Rightly so. In my native Britain, two senior politicians -- one in the Cabinet I seem to recall, the other a Lord -- have been jailed in recent decades for this. One of them was just lying about his mistress -- something that doesn't normally attract a jail sentence whatever his wife might have thought about it. But the lies were in court. They were giving evidence, while under oath, and they decided to lie. One of the sentences was for seven years and rightly so.
Because if people think they can lie under oath then the entire idea of trials and justice becomes impossible. So, to protect that whole system of at least trying to jail the guilty and free the innocent we've got to be able to rely upon evidence given in court -- again, whatever people tell their wives.
Perjury is a crime against the entire edifice of the law and, as such, is significantly and seriously punished.
This is not true of all crimes with money. The pickpocket has not just made banking, or capitalism, less attractive. The bank thief rather underlines the value of banks -- better their building be attacked than our own. But the syphoning off of money from savings schemes, that strikes at the very heart of the entire reason that we have a financial system in the first place. To move the desired savings of people around the system to become the desired investments by that same system. This is the very process that allows the future to become richer, for this is what finances the investments which make it so.
To steal, sorry, to “allegedly embezzle” from mutual funds is the sort of crime which does undermine trust in the entire system. Because the one thing that capitalism and markets do run upon is trust. Sure, we all know the other guy is trying to make something out of us, no one's in the business for our benefit after all. But agreements are kept, and those contracts mean something. That we can trust someone to do something on our behalf, these are what make the system work.
Without that we would retreat into a clan- based society -- if I can't trust a contract, or the law, or the system, then we would only trust those we were related to, and not even all of them. You know, like Pakistan -- but we're better than that right? Significantly richer as a result too.
Steal the money of savers from mutual funds? Off to prison with you and for a very long time.
Tim Worstall is a senior fellow at the Adam Smith Institute in London.