The post below is a guest contribution by Andrew Sheng*.

The banana kingdom was in deep trouble. After the failure and rescue of Banana Bank, the government poured lots of funds into the bank and enjoyed a temporary revival. But the economy fell back into recession and unemployment grew.

The king was very worried, because his ministers gave him lots of conflicting advice. The public blamed the bank managers for incompetence and insisted on more regulation.

The bankers complained that more regulation was killing the golden goose that gave the kingdom so much prosperity before. No one was happy.

In desperation, the king summoned the wisest of the monkeys – an old sage well-known and respected for his frugality and his integrity.

“Please help me get out this problem, Master. Teach me how to deal with our difficulties,” the king pleaded.

“Remember the golden rule,” said the sage. “He who has the gold rules. But who has the gold now?”

“You are right, wise sage”, admitted the king. “We spent so much money rescuing Banana Bank that the kingdom is deep in debt. In fact, the bankers are now richer than before and are major lenders to the kingdom.”

“So are you the ruler or the bankers? You must know the monkey rules, before you can rule them,” said the sage.

The first rule is “never let monkeys look after bananas.”

“Yes, I learnt this to my cost,” said the king, “but the monkey was so convincing because he was able, brilliant and well dressed.”

“He went to the best business schools and was so polite and able to explain things so beautifully that I felt it was in my best interest to trust him.”

“Exactly,” smiled the sage. Did the monkey banker not say to you, “you pay peanuts and you get monkeys?”

“Yes and because of that I paid him a lot of money and bonuses.”

“Rule number two is, an expensive monkey is still a monkey.”

“So, the crisis must be due to the derivative banana products which are very bad and dangerous? We should ban them,” said the king.

“The derivative game looks very complicated, but it is very simple. You should not look at all the banana leaves, but look at the banana trees. Where is the fruit? Who has eaten the bananas? The banana derivative products are only tools, which can be both good and bad. Guns do not kill people, only people kill people. So you should not blame the derivatives.”

“You are right. But where did I go wrong in the bank rescue?” asked the king.

“There is a time for a tree to live and a time for a tree to die. A tree dies when it has taken all the goodness from the soil. When it dies, it returns the goodness to the soil so that new trees to grow. Life is cruel, but for every death there is new life. Instead of allowing a bad and sick tree to die, you rescued the dying tree. Now the sick tree is sucking more goodness from the soil, so that new trees cannot compete for the sun and soil.”

“But I did it for the good of everyone”, protested the king.

The sage nodded. “You have a good heart, but good intentions do not always have good outcomes. The monkey understands well that the secret of making money is to buy low and sell high. When you rescue him, you are buying high and selling low. If you always buy high and sell low, how can you win?”

Rule number three is therefore: “When you rescue a monkey, it’s no longer the monkey’s problem, but your problem.”

“I now understand that it’s all the monkey’s fault,” said the king.

“No,” said the sage firmly. “Monkeys are not born bad. Neither are monkeys born good. It is not wrong for them to love bananas. You put a monkey in charge of monkeys,” quipped the sage, “because you thought you wanted an expert who understood how monkeys behave. But management that is part of the problem cannot be part of the solution. They will want to protect their interests.

“If you are not careful, the monkeys will become the owners of the banana kingdom, not you, my lord.”

Rule number four is that there are no permanently good monkeys or permanently bad monkeys. There are only permanent interests.”

“You are right”, admitted the king. “I now see that tools and monkeys cannot be my master. But I still blame the monkey for making a mess of the situation.”

The sage shook his head sadly and sighed deep and long.

“Your highness, it was you who allowed the monkey to look after the bananas. You who appointed a monkey to look after the monkeys. So now that the bananas are gone, are you the monkey or are they the monkeys?”

Rule five is that you are ultimately responsible for your own mess.

The king at last saw the light. “You are wise, my master, but what should I do?”

“You are kind and your ministers push only those policies that are popular. But what is popular today is not what is wise tomorrow. If the monkeys eat all the bananas, there will be no seeds for the trees to grow. If there are no trees, there are no bananas and everyone will starve. So even monkeys understand that short-term excess consumption means starvation tomorrow.

Rule six is you have to be cruel to be kind. Do what is necessary for your people, even if it means sacrificing yourself.”

The king saw the light. He gave up his kingship for his son and asked that he and his children swear to learn the Monkey Rules. The first thing the new king did was to banish the monkey banker, clean up the system and ordered that the banana plantations be rejuvenated.

Then the old king followed the monkey sage up the mountain to become a monk.

* Datuk Seri Panglima Andrew Sheng is adjunct professor at Universiti Malaya and Tsinghua University, Beijing. He has served in key positions at Bank Negara, the Hong Kong Monetary Authority and the Hong Kong Securities and Futures Commission, and is currently a member of Malaysia’s National Economic Advisory Council. He is the author of the book, From Asian to Global Financial Crisis.

Source: Andrew Sheng, The Star online, March 22, 2010.

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