George Bush's past makes him the ideal person to clean up corporate America

Somehow, George Bush has to remoralise American business. At the moment it is profoundly demoralised – in both possible senses of the word. Both its morale and its morals are shot. The rapid rebuilding is essential not just to America, but to the rest of us, too. If the US cannot sustain a strong and sustained economic recovery, the world economic recovery will falter. It is profoundly in our self-interest to try to understand rather than jeer. (Members of our present Government should certainly not jeer, particularly those who were close to Robert Maxwell.)

Yesterday the President made his first serious effort to push through a new corporate code, with tougher penalties for chief executives who break the law. But of course the tainted nature of his own dealings in the energy business in Texas at the beginning of the 1990s has diverted attention from the wider problem and made it harder for him to catch the right tone.

In a sense, this is principally an American party political issue, giving the Democrats their first effective weapon against the President since 11 September. In theory, this should not really be a party issue. The business dealings of the previous incumbent and his wife were less than edifying and most of the excesses of corporate America took place before George W took office. But the reality of the situation is that the person who has to put things back together is damaged by his own past – and by the past of some senior members of his team. This is not ideal.

Looking ahead, three things need to happen. If they do, all will be more or less well. If they don't, we should worry.

The first is for the flow of bad news about US corporate accounting standards to cease. Misstatements of company profits, in the eyes of financial markets the most serious of the scandals now unfolding, cut into the very bedrock of market capitalism. Investors can make their own judgements about the competence of company managers, the quality of their products and services, the opportunities in their line of business and so on. What they cannot cope with is accounts that lie. That is what auditors are for – and why, incidentally, in the UK the appointment of auditors has each year to be approved directly by shareholders, not by the management. Now, as more and more US companies reveal that their previously published profits were wrong, the raw material with which investors work is suspect. And until you know the size of the pile of rubbish you tend to assume it is bigger than it is. Only a tiny proportion of US companies is in the dock, but the whole system is contaminated.

By its very nature, getting the rubbish into the open will take some more months. The faster companies can assure their shareholders – by, for example, getting separate teams from their auditors to check the results – the faster their shares will recover. So it is profoundly in the self-interest of corporate America to demonstrate that its hands are clean.

The second thing that has to happen is an orderly examination of the regulatory, accounting and legal framework for companies. Shooting a few miscreants and making heroes of the whistle-blowers is fine. Nothing like seeing your peers punished to sharpen up discipline. But the much harder task is to figure out whether there has been a failure in the system or merely failure by a number of individuals. Actually it is both. But tackling white-collar crime effectively is like tackling other forms of crime: there is little point in changing the law if the problem is not the law but the enforcement thereof.

Fortunately, the US will now carry through a root-and-branch examination not just of company law, but also of financial market practice. America has to figure out why hitherto respected financial institutions allowed themselves to become the cheerleaders for companies that were being run into the ground. Here, I don't think we are dealing with a handful of dishonest individuals. Rather a very large number of fundamentally honest and extremely bright people allowed the huge personal rewards they were receiving to, well, slightly corrupt them. Niggling doubts about the shares they were puffing were suppressed – far easier to go with the herd than be the lone warning voice. Besides, if you warned too loudly, you would probably be sacked, as, let's remember, was the UK analyst who memorably headed a paper on Robert Maxwell's empire with the words "Can't Recommend A Purchase". (Don't worry about him – he has been extremely successful since.)

But even when the rubbish is out in the open and the necessary changes in US legal and accounting practice are in place, there will have to be a culture change if the US is really to rebuild its faith in itself.

If you look back in history, there have been a string of financial disasters, some the result of incompetence, some fraud. We have all had them. If you want a proxy for Robert Maxwell, read Anthony Trollope's The Way We Live Now. Look at the way the French press, controlled by the financial services industry, puffed tsarist bonds in the run-up to the First World War and the Russian Revolution. Look at the excesses in the Twenties in the States that led to the creation of the Securities and Exchange Commission (SEC).

But each wave of scandals has also led to a change of attitude towards what behaviour is acceptable and what is not. Increasing the penalties for some fraud from, say, five years to 10 years is much less effective than kicking someone out of the golf club. The really interesting thing to look for in America will be the way in which social attitudes to wealth change. Victorians in Britain sought to distinguish between the deserving poor and the undeserving poor. I suspect Americans will increasingly distinguish between the deserving rich (those who do a good job and get rewarded for it) and the undeserving rich (those who manipulate the system to enrich themselves while ripping other people off).

This has to happen. It has to happen partly because Middle America is deeply angry at the antics of the financial elite but also because, without a change in morality, the capitalist system cannot rebuild the trust of investors. Without trust, markets and, indeed, the economy will languish, and in the first instance it will be the financial service industry that will be hardest hit. So change has to come from the top; it is in the self-interest of the fat cats to leave more of the cream for the rest of society.

But is George W the best person to capture this mood for change and articulate the need for financial morality? Of course not; but he will have to do. Remember that sometimes poachers make good gamekeepers. Joe Kennedy, Jack's father and the notorious US ambassador to Britain, made his fortune by pretty dubious financial dealing in the 1920s. He was then made the founder head of the SEC and oversaw the outlawing of many of the practices he had used to enrich himself. The SEC was crucial in rebuilding trust in US capitalism in the second half of the 1930s. Sometimes it takes one to catch one.