It’s an abiding mystery that the very rich don’t feel the pinches that the ordinary rich do. Sunseeker, the yachtmaker, said the other day that their multi-million speedboats were keeping the business afloat even as the bottom end of their market was feeling the pinch. There will always be plenty of multi-millionaires to buy Hirst, even in the depth of a recession.

In Hirts’s case, we have all the conundrums that art always presents. After all, we have no idea whether his pieces will grow more valuable as works of art, or be stripped down for whatever their raw materials are worth. In short, his works may be thought risible quite soon. Or not.

Then there’s the intriguing business of what Hirst will do with his loot. He might just become an ordinarily rich person. But it is just as likely that his wealth will be folded back to us all as his audience. Perhaps he’ll start a gallery or a foundation. Whatever.

Roughly speaking, the problem is this. Capitalism is prone to bubbles, but they really do differ in degree and kind.

Here’s a morphology.

(1) Stock Bubbles
At their most pure (The South Sea Bubble, the 1717 Mississippi Company), these are stock schemes in which there is no actual economic activity. But these readily get confused with, say, the 1990s Internet Bubble – in which there probably was a real business. Greed and irrationality underlies bubbles, but at least in the Internet case, people were aware that something big and real was happening. Tulipmania sits somewhere between the two, as does the art market. Will Damien Hirst’s productions get melted down for their gold?

(2) New instruments
John Law, who was behind the Mississippi Company, also came a cropper when he tried to engineer a new currency for France. But he wasn’t operating as a crook when he did the latter: he was inventing new approaches to currency and was – hardly surprisingly – out of his depth. 

This is a little like the muddle modern banking has got into as it recently sliced and diced sub-prime debt.

Indeed, many of these dramas turn out to be schemes which are crucial to capitalism’s future – it’s just that the pioneers don’t post large enough warnings as to the riskiness of innovation.

(3) Straight frauds
Some bubbles and some new instruments are introduced as straight frauds, or as screens behind which straight frauds can be perpetrated. Thus, Enron’s crime was very like the fraud perpetrated by Jabez Balfour in the late 19th Century. Enron was playing with energy futures and other devices which few people understood, just as Jabez was playing with new schemes for insurance and housing.

Enron and Jabez were developing schemes which in non-criminal hands would turn out to be valuable.

In conclusion…..
Many capitalist pioneers turn out to be crooks. Or, many crooks turn out to be pioneers. It’s spotting the difference which makes for entertainment.

Anyway, there are no signs of crookedness in the present crisis. Regulators encouraged bankers to get careless as they invented new wheezes. The bankers overdid it. The bubble burst.

The books excerpted in the R4 series
The Science of Getting Rich by Wallace D Wattles
The Moneymaker by Janet Gleeson
Little Dorritt by Charles Dickens
Liar’s Poker by Michael Lewis
When Genius Failed by Roger Lowenstein
Metamorphoses XI by Ovid 
Tulipmania by Anne Goldgar
The Bonfire of the Vanities by Tom Wolfe
The Reformation of Manners by Daniel Defoe
The Great Crash 1929 by John Kenneth Galbraith
The South Sea Bubble by John Carswell
Tulipmania by Anne Goldgar
The South Sea Bubble by John Carswell
Extraordinary Popular Delusions by Charles Mackay
The Age of Turbulence by Alan Greenspan
A Short History of Financial Euphoria by John Kenneth Galbraith

I would add:

Millionaire: The philandere, gambler and duelist who invented modern finance, by janet Gleeson
Jabez by David McKie

When the bodies of her crew were found floating off the island, it was never seemed likely that The Ouzo just sank of her own accord. It turned out that the regular run of a P&O ferry, the Pride of Bilbao, took it to the very near vicinity at the probable time of the accident, whatever it was.There is much speculation as to whether it was involved. In the ensuing inquiries and court cases, the bridge officers of the ferry were accused of being less than thorough and thoughtful in their response to what they admit was a close encounter with a yacht (which they claimed to believe had probably passed safely by). One officer was tried for manslaughter and aquitted.

Oddly perhaps, I find my sympathies going to the crew of the ferry. Of course the families of the yacht’s crew have suffered a terrible loss. And the ferry’s officers may not have behaved brilliantly. I am emboldenedin my view partly because I have often been on the Pride of Bilbao and anyway feel a quite undeserved connection with people who make their living on the sea.

By default, not liking to criticise the Ouzo’s crew leaves the blame to drift inexorably to the larger ship. This seems a little unfair.

I am also drawn to the wide range of technological solutions available to yachtsmen as they take their cockleshells out into commercial waters. Here are some of the devices and tricks which would have diminished the chances of such an accident happening being fatal (in no particular order):

(a) Stay out of shipping lanes at night;
(b) When a ship is near, shine a beam alternately at the sails and the ship’s bridge;
(c) Have an AIS ship-ID and course-plotting radio (£500);
(d) Have a watertight radio receiver and transmitter to hand;
(e) Have a watertight mobile phone to hand (£16 sachet);
(f) Wear a crotch-strap on one’s life jacket;
(g) Have a strong watertight cockpit door and shut it;
(h) Have an emergency position transmitter on one’s lifejacket;
(i) Fit an active radar signal enhancer (£500). 

So far as I can see, a small selection of these items (culled from sailing blogs) would have been very helpful.

I shall now go and do some of my very timid Mediterranean sailing, and probably cock it up.