jazz & plastic
This page considers public and private sector regulators.
It covers -
In some sense we are all Thatcher's children, affected
by the deregulatory zeitgeist of the 1980s and 1990s.
Part of the excess of speculative investment in dot-coms
and telcos is attributable to reliance on self-regulation
by financial markets. It is also attributable to the weakness
of government regulators in the US, Germany, Australia
In retrospect agencies such as Australia's ASIC took too
positive a view of those they supposed to regulate. In
some cases, such as insurance sector regulation by the
Australian Prudential Regulation Authority (APRA) the
lack of will appears to have been compounded by lack of
expertise and resources, resulting in the HIH,
OneTel, Froggy.com and Enron debacles.
Blame must be shared with private sector financial service
providers, in particular global groups such as as Arthur
Andersen that had expanded from audit activity to embrace
management consulting and even legal advice. Critics have
noted the 'expectations gap', rediscovered every decade.
Investors appear to believe the accountants
are supposed to stop fraud. Accountants refuse to accept
that responsibility, arguing that their task is not to
suspect that management is lying but simply to make sure
that the data — whose accuracy is the responsibility
of boards and managers responsibility — is presented
in a manner consistent with accounting convention.
In the US the 'big five' - PricewaterhouseCoopers (US$2.2
billion turnover in 2000), KMPG (US$1.3bn), Deloitte Touche
Tohmatsu (US$1.2bn), Ernst&Young (US$1bn) and Arthur
Andersen (US$0.9bn) - were belatedly found wanting by
the SEC and other agencies. As noted on the preceding
page, Andersen appears to have made more money from providing
management advice to Enron than underpinning corporate
compliance through rigorous independent audit services.
Insights are provided by Inside Arthur Andersen: Shifting
Values, Unexpected Consequences (New York: Prentice
Hall 2003) by Susan Squires, Cynthia Smith, William Yeack
& Lorna McDougall, Paul Barry's Rich Kids (Sydney:
Bantam 2002), Maggie Mahar's Bull! A History of the
Boom, 1982-1999 (New York: HarperBusiness 2004),
Jean Gadrey's New Economy, New Myth (London:
Routledge 2003), Pump And Dump: The Rancid Rules of
the New Economy (New Brunswick: Rutgers Uni Press
2005) by Robert Tillman & Michael Indergaard and Icarus
in the Boardroom: The Fundamental Flaws in Corporate America
and Where They Came From (New York: Oxford Uni Press
2005) by David Skeel.
other government agencies
Government regulatory action was sometimes contested by
other government agencies. One of the products of notions
of 'internet exceptionalism' and 'policy by media release'
was the establishment of 'new economy' agencies such as
Australia's National Office for the Information Economy.
The effectiveness of such agencies in facilitating uptake
of the net by business and the wider community or driving
the development of coherent whole-of-government policies
is uncertain. Most appear to have succumbed to hubris,
serving as cheerleaders and distinguished by publishing
of glossy reports rather than much of substance, offering
legitimacy to media noise about the unendable boom.
Comparison of the 'digital' cheerleaders with other government
new technology facilitators (such as those in the biotechnology
sector concerned with policy-making and funding) is instructive.
We'll be exploring the performance of the digital agencies
and biotech agencies in a forthcoming paper.
Other parts of government, such as agencies responsible
for auction of radiofrequency spectrum to mobile phone
companies, were also fundamental actors in the bubbles.