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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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