First Jose Manuel Barroso, and now Mervyn King: in a few weeks of time, two high-profile politicians have turned to banks: Mr. Barroso joins Goldman Sachs, while Mr. King is heads to Citigroup. Many have criticized the 'revolving doors' and vilified the two former civil servants. But revolving doors are not as evil as is thought.

There are a few points that need to be addressed:

  • Should civil servants and politicians make vows and serve the public during their whole life?
  • How can we have skilled and knowledgeable politicians, able to understand complex or technical issues?
  • Are banks the problem? If so, how can we change them?

Politician, a lifetime job?

First of all, let's consider the position of a politician who reached the top of the ladder. Manuel Barroso was Prime Minister of Portugal and then headed the European Commission. Mervyn King was Governor of the Bank of England. Though I've always been far from the top, I can only imagine how difficult it must be to stay in an organization which you headed, but in a secondary position. Heads of governments usually don't stick around that much. Some go and sit in special councils, but it is typically not their primary occupation.

The same goes for CEO: if they stay in the corporation, it is usually as an outsider, in the Board of Directors, rather than on the management side, which is a way of leaving them with some influence without bringing them down the hierarchy. But such things don't really exists in many institutions. Sometimes, there is a way for a president to stay around: in France, Presidents typically sit at the Conseil Constitutionnel. In the US, Obama kind of tries to emulate that with the Supreme Court.

But beside the lack of opportunities to stay in an institution after being its head, there is a much bigger issue with long-term politicians. They are a strong hurdle for democracy. The longer a politicians stay in the government and law-making sphere, the higher the chances that he gets corrupt. They are high-profile targets for lobbyist who know them well. The longer they stay in the job, the longer they want to stay, and the more difficult for them to find another job outside politics (without the help of lobbyist that is). Switzerland imposes on its members of parliament to have another job beside being a politician, and that is a sign of a healthy democracy.

To make the point clear: we should encourage politicians to have shorter careers in politics. We should show them that our society is happy with them moving on after their service. We should not vilify them for going into banking after serving the public.

Skill, knowledge, and conflict of interest

Another good reason not to disprove revolving doors is that we actually need politicians to be top profiles who have strong knowledge and understanding abilities on complex and technical issues. France has a particular way to address this challenge: the top civil servants are recruited after a special administration school, the ENA (Ecole Nationale d'Administration), which guarantees that our technocrats are skilled. But it doesn't free them from external pressures or lobbyism. They constitute a form of cast, and keep links within their classmates for life.

In most countries around the world, a good way to appoint skilled civil servants is to recruit them from the private sector. It is difficult to do otherwise. Those people have a strong knowledge of the problems that cripple their sector of activity. They know where the abuses are. They often have some idea of which solutions would be effective or not. They have ideas about what should be done to improve things.

The problem that we face today in Europe is that people are defiant of the private sector. Because an individual has worked for finance, he is identified as an agent of the devil. But we cannot let ourselves to such judgments. A good counterexample is Nicholas Nassim Taleb, who worked as a trader in his early career, and is a strong critic of the sector. He still works with the sector and tries to raise awareness on technical problems crippling measurement of risk.

In short, we should not be afraid of recruiting civil servants in the private sector. Their expertise is valuable and useful.

Banks, sins of the past and ethics

Banks do not have a good image in Europe. And the same goes in the US and pretty much all around the world. Banks are seen as responsible of the 2008 crisis. We could argue that Central banks bear a larger part of the fault, but let's focus on commercial banks. Did commercial bank do something wrong? Yes, they failed at measuring risk, they failed at understanding their own products, and they misrepresented and mis-sold them to investors. Did they pay for their mistake? No, they didn't. More bankers should have been prosecuted, and more banks should have been allowed to fail. But revenge is pointless. We are now 8 years later, and we need to correct a problem, we need to improve a system.

What ways do we have to change banks? We could regulate them harder. How do you find people knowledgeable about banks and their business outside of the banking system? I hold no grudge against anyone, but nobody is quite as fit for the task as former bankers. Economists and academics have an broad vision full of concepts, which, as accurate as they might be, are hard to translate into effective regulations without loopholes. Accountants and other technicians lack the concepts: a quick glance at IASB, the organization responsible for the IFRS accounting standards, is quite convincing. Going through IFRS 13 on fair value is painfully awkward for financiers.

Another approach leads us to the same conclusion about revolving doors: we could try to improve the ethics of bankers. And for that, what best than allowing former civil servants with a strong sense of ethics and duty to work for banks? Mervyn King has long been a critic of the banks, and of the excess of the financial system as a whole. His latest book "The End of Alchemy" (which I haven't finished yet) is a clear example of that. Mervyn King isn't going to swallow his pride and tarnish his image by giving up his ideas. But why did Citibank want him then?

Chances are, when a bank brings in a strong critic or hardline regulator of banks within, they will be a very strong and precious counsel. The bank will be able to better understand the limits, and will know for sure that when their counsel tells them not to do something, they should listen.

Don't blame politicians who move on

To wrap it all up, politicians should be encouraged to move on, and go to the private sector. We should not be afraid to recruit our politicians in the private sector. We need their expertise. Having that said, we should always be very vigilant, and carefully observe our politicians. They must be controlled by the people to make sure that they don't serve other interests. We would gain a lot by putting the emphasis on personal values and on the sense of ethics of politicians rather than on their career path.