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4 Law & Fin. Mkt. Rev. 1 (2010)

handle is hein.journals/lawfinancmr4 and id is 1 raw text is: Editorial The markets rally A year ago, capitalism careered over a cliff. With vast effort, states have put it back on the road. The petrolheads at LFMR have been trying to revive our annual motor rally to the Middle East for some time. We were going to call it the Race to Dubai but apparently that is a golf tournament and the combination of golf and Dubai doesn't quite hit the right note at the moment. So, given the current City fashion for all things Swiss, we are going to run the rally to Geneva instead. Some of the fans are said to be booking one-way tickets. The event is already being dubbed the race to the bottom but we think that's a bit unfair. Geneva has many fine traditions. You get a feel for the place as you arrive at the airport and study the billboards. All those expensive watches and private banks! Time is money, right? However, we have been running into one or two safety issues with the rally in recent times. After years of a close-to-perfect safety record, the drivers have suddenly started crashing the cars all over the place. Some of the acci- dents have been horrendous. Typically, the cars have been almost, but not quite, written off. (Most of them are huge four-wheel drives - Anglo-Saxon as well as European models - that never seem to be completely destroyed. Even when their brakes fail, they just seem to plough into, and through, everything in their path. Too big to fail altogether. In some of the more serious cases, bits and pieces of wrecked cars have been salvaged and put into new vehicles.) Many spectators have been killed or maimed and a large number of properties bordering the rally routes have been virtually razed to the ground. The collateral damage has been really, really bad. Strangely, however, the drivers (who wear the latest safety gear) always escape any serious injury, even in head-on collisions. They just clamber out of the wreckage and walk away unscathed - almost as if nothing had happened. Although we don't wish the drivers physical harm, it does seem bizarre that they almost never suffer direct consequences of their own foolhardiness. The Swiss don't seem to be too concerned about any of this but the sport's governing body - the Organisation Internationale des Automobiles a Grande Vitesse-is deter- mined to take action. So determined, in fact, that it has been meeting every six months in various parts of the world to consider the matter and keeps issuing statements about how seriously it takes it all. The rally team owners have been busy as well. All kinds of new safety features are being proposed for the cars. The sat-navs now have a built-in mechanism that has a strident, slightly robotic female voice (known as Harriet) telling drivers when it determines that they are driving in an excessively risky manner. New crush zones are being fitted all round the cars to help buffer the impact of collisions (although the drivers complain that they reduce the speed of the cars). But the most controversial proposal has been the idea that drivers' prize money should be reduced. It is argued that this will perhaps result in drivers being less motivated to take the foolish risks that have caused so many of these accidents. However, some see it as simply a punishment. There is a serious confusion of objec- tives - which is not helped by all the political hot air that the idea has generated. We don't even have a very clear idea of what the appropriate amount of the reduction should be. The drivers' riposte is that if they are not paid what they think they are worth they will quit the competition alto- gether and either take up another sport or switch to another sponsored rally somewhere else. They say we shouldn't interfere with their pay negotiations. Since we very much want to keep the competition alive, this poses something of a dilemma for us as organisers. We get quite a healthy revenue from the tickets that we sell for the rally (in fact, we've become quite dependent on it) but the cost of insuring the event is getting prohibitive and the rally team owners' ability to keep their teams financially afloat without that insurance is, at best, somewhat questionable. Frankly, without our support behind the scenes, they would have all gone bust long ago. But if we had let them go to the wall (metaphorically as opposed to literally) that would have meant the end of the rally and could have resulted in a loss of confidence in our ability to organise anything much at all. We're between a rock and a hard place on this. The insur- ance is costing us too much, limiting our investment plans in other areas, but we don't have any realistic way of offloading the cost on any one else. So we have been thinking about some more radical solu- tions. We are hoping that a few windfall taxes here and there might have the effect of curbing drivers' pay. They have generally made themselves very unpopular so we hope they won't make too much of a fuss once the initial huffing and puffing dies down. And, anyway, it's not as if they are irre- placeable. (However, this is hard to take for those drivers who have a good safety record and are known for their responsible attitude on the road. We do have a slight guilt complex about this. If we hadn't been so keen to make the rally more exciting in order to sell the television rights the accident problems might have remained containable. Now that the thing has got out of control, it seems convenient to focus all the blame on the drivers, regardless of their indi- vidual behaviour.) We are also going to reduce the number of four-wheel drives that can take part. Their sheer size seems to encourage some of the drivers to take risks that they would not take if they were in smaller, more compact vehicles (which, of course, should still have all the safety features). So there will be no more smoke-glass windscreened, super-powered get-out-of-my-way Chelsea tractors hogging all the road in our rally. We want more, smaller cars and - as a result - we Law and Financial Markets Review January 2010

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