Banks have better things to do with their money...

... than to invest in the growth plans of medium organisations. Jyoti Banerjee asks if the investment preferences shown by banks are really the results of market imperfections that need to be dealt with by policy-makers.

A few months ago, I took part in a meeting at HM Treasury organised by M Institute where a few leaders of medium organisations were invited to present their stories: how their companies became medium-sized, and the challenges they had to overcome and still have to deal with. A recurring theme for these business leaders was the way in which problems relating to access to capital impair their growth performance.

Should government be doing something about it? Clearly, the Treasury officials we spoke to did not think so as there is no evidence in their eyes of market failure. Without evidence-based market failure, how can the government generate its favoured route of evidence-based policies? (One wag recently commented that it is not evidence-based policy-making at work here – simply, policy-based evidence-making).