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The Dishonor Of A Rhodes Scholarship

April 20, 2012

Economy, Finance, History, Politics

Rhodes Scholarships are one of the oldest and most prestigious awards worldwide for graduate study at Oxford University. Win a Rhodes Scholarship and you are set for life. The scholarships are funded from the estate of Cecil John Rhodes, who was founder of the De Beers diamond mining company, as well as founder of the state of Rhodesia (now Zimbabwe).

Presumably, most Rhodes scholars are not aware that there were few crimes that could not be laid at the door of their benefactor. Having just finished reading Martin Meredith’s excellent book Diamonds, Gold and War: The British, the Boers, and the Making of South Africa, I can say with confidence that Cecil Rhodes was responsible for crimes ranging from fraud, theft, bribery, vote rigging and stock manipulation to racism and murder. Of course rich men that do bad things are not unusual. Indeed, our current financial crisis is littered with them. Moreover, recent research has shown that wealthy people are actually more likely to act unethically than those with less money.

What distinguished Cecil Rhodes was the fact that wealth, for him, was secondary to power. Above everything Rhodes sought power and, given virtually unlimited financial resources, the easiest way to obtain that power was to buy political influence. Without political influence the harm that Rhodes could cause was very limited. Sure, he could treat his employees and shareholders badly, cheating them where possible. He could even bamboozle native chiefs into selling him gold mining rights for virtually nothing. But what he could not do was invade those native territories, destroy the native population and give the land and mineral rights to his cronies. That required political power. In other words, the government had to be captured and maneuvered into supporting Rhodes’ objectives. This was exactly what happened, and the end result was the Boer War, one of the costliest and most shameful periods in British colonial history.

Today, our financial elites have captured the government and persuaded Congress that what is in the interests of the big financial institutions is also in the interests of the American people. Without political power many of our largest financial institutions would have gone broke. On their own, they could not have persuaded any individual or financial institution to bail them out. However, using political influence they stole virtually unlimited bailout funds from the U.S. taxpayer. Without political influence the harm that can be caused by a private individual or institution is limited. With political influence the harm they can cause is unlimited (Fannie Mae and Freddie Mac anyone?).

How can we stop this happening in the future? Is more or better regulation the answer? What stops the elites from capturing the regulators? Didn’t the recent financial crisis happen while Tim Geithner was President of the New York Federal Reserve Bank and therefore Wall Street’s chief regulator? We never had a problem with the big investment banks when they were private partnerships with relatively little regulation. It was only after Merrill Lynch, Bear Stearns, Lehman Bros, Morgan Stanley and Goldman Sachs went public, and were consequently subject to much more stringent regulation, that they colluded to capture the regulators, getting the SEC to change a key rule in 2004, permitting investment banks to take on more debt.

Contrary to popular belief you don’t need big government to regulate big business or, for that matter, big unions. Big business or big unions will just use their financial muscle to capture big government and make sure that big business or big union friendly laws are passed. Reduce the size and power of government while ensuring strict enforcement of the rule of law (the essence of which is that laws should apply to everyone equally) and you reduce both the incentive and ability of individuals and institutions to capture the government to obtain special treatment for themselves.
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“Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich person to enter the Kingdom of God.” Matthew 19:23

“There is no class so pitiably wretched as that which possesses money and nothing else.” Andrew Carnegie

“People who grow rich almost always improve their sex life. More people want to have sex with them. That’s just the way human beings work. Money is power. Power is an aphrodisiac. Money did not make me happy. But it definitely improved my sex life.” Felix Dennis

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About Malcolm Greenhill

Malcolm Greenhill is President of Sterling Futures, a fee-based financial advisory firm, based in San Francisco. I write about wealth related issues in the broadest sense of the word. When I am not writing, reading, working and spending time with family, I try to spend as much time as possible backpacking in the wilderness.

View all posts by Malcolm Greenhill

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