With the blog a week ago titled The Whole Wunch of ‘Em, I hoped to have cleared the air about the scale of malaise gripping the country’s morals and proposed some ideas from others how things could be actively improved. But, having picked up what various other commentators are saying, it seems this is more than a hiccup of our financial systems; it is a crisis of faith among the general public as to what society is for in the first place.
The right-leaning-but-thoughtfully-articulate Economist has a piece on the LIBOR scandal in which alarm bells are ringing: “What may still seem to many to be a parochial affair involving Barclays, a 300-year-old British bank, rigging an obscure number, is beginning to assume global significance.” Joyce MacMillan—who seldom agrees with anything the Economist has to say—blames “a global elite who seem to have convinced themselves, long since, that whatever rules are in force simply do not apply to them.”
In fact, Joyce is on a crusade of ideals, shared by many, that UK society has fallen in thrall of what she describes as “Junk Thatcherism”—that everything and everyone has a price, and that all human interactions can finally be reduced to the model of some kind of market transaction, or “investment”.
An alternative perspective came in the Reith Lecture at the Royal Society of Edinburgh, Professor Niall Ferguson points the finger at “welfare as the culprit, corroding our moral fibre, and bankrupting our institutions.” Yet even American stalwart supporters of their beefy brand of capitalism like the Washington Post are crying foul and accusing major banks of cowardly, if not criminal, behaviour: “It takes little effort or intelligence to make a profit when you’re setting a rate and betting on that rate at the same time.”
Whatever your perspective, the whole thing is appalling. But what makes it worse is the crass inequality with which the financial crisis is striking people. Channel 4’s Dispatches will have Jon Snow leading one of their typically mordant reports on July 23rd on the effects of mis-selling on ordinary people that puts a human face on this tragedy. Without revisiting what I blogged about a week ago, it seems this whole thing goes deeper than any other event since the miners’ strike.
No matter who does or doesn’t get prosecuted over LIBOR, people’s faith in bankers—once up there with doctors and ministers—has fallen into the mud. After the amateurish Commons interview of Barclay’s Bob Diamond and the yah-boo-sucks tone of the spat between Balls and Osborne coming on top of exposure of grubby attitudes to expenses at Westminster, the politicians at the helm are seen as little better.
Fundamental questions are being asked, rightly, about what drives the UK. But they are not being asked by leaders in politics, banking or most other business endeavours, where it appears to be business as usual. The sixties and seventies were a car crash for British socialism that cleared the way for Thatcher’s capitalism. Whatever your misgivings about it, that brought growing prosperity to most for the next three decades.
But, like the USA (and unlike most of Europe) Britain never set much by way of limits to problems for which capitalism might be the solution. Most of our problems stem from those limits of capitalism. The railways are cod capitalism that remain state dependent and not efficient. The same applies to most of transport system, those bits of the NHS hived off—and the banks. This last is not because Lloyds and RBS are now state owned but because they were in the “too big to fail” box and not really subject to the market.
People often portray markets as being all about self-interest. But self-interest is as essential part of the human character and it has been argued that markets harness and control self-interest to the benefit of all. So long as customers can shop around, businesses must continually reduce prices and improve quality. It is this dual tension, where self-interest is held in check by the free choices of others, that drove our prosperity.
What torpedoes this virtuous cycle is monopoly control, which is why the state-owned model works poorly. And this is our tragedy, as played out by our banks. They were deregulated and so swallowed up competition until they achieved artificial competition like our rail companies. Nobody said much when the government took over GNER and kept the trains running as East Coast. But what kind of ‘market’ is that?
A market where you don’t need literal corruption for it to infect the banking system. You just need banks big enough so that the jobsworths keeping an eye on them have nightmares about what happens if banks fail. At that point the jobsworths will dedicate themselves to keeping the megabanks afloat at all costs, even it requires methods that aren’t on the up and up.
It’s a heady mixture: untrammeled cowboy operations by so-called ‘investment’ arms of banks, sustained by high street monopolies that drain bank fees, savings and what should be business investment money and cascade it all into the hands of people who get huge bonuses to take risks on derivatives with other people’s money, all underwritten by the state. No wonder they got in trouble; the wonder is it took so long.
But how to unmake the omelette and all these broken eggs? With government and senior bankers behaving as if business as usual were an option, this ludicrously broken system is being preserved. And the once-solid trust of the punter to work hard, pay taxes and retirement rewards will surely come is paper-thin. Tom Meirs offers positive suggestions in today’s Hootsmon but it would take years (and independence?) for them to take effect.
Meantime, why should anyone believe “we’re in this together” when Diamond walks away laughing from his Commons “grilling” en route to plopping a cool £17m severance into his piggy bank? …when the Government front bench is stuffed with millionaires who largely made all that dosh from the system described above? …when the opposition bench were not only tholed but embraced Tory policies (PFI; bus deregulation; arms sales; MoD outsourcing; foreign wars; Trident, etc, etc) throughout their 13-year tenure.
The line from the film Rob Roy about the elite running his country seems apposite: “They are like wolves at lambing” he growled. Once people get angry en masse about not just the recession and how badly it has hit them but that the ones who did it to them are still prospering, still running the show, how long will British sang froid and patience hold? The carnage of riots last summer was visited on a swathe of towns by a few thousand disenfranchised youths.
What happens when Middle England joins in?
STOP PRESS: Paul Waugh reports that, according to Barclays Chairman Agius, Bob Diamond will walk away with ‘only’ £1.35m—half his annual salary. A top Registered Nurse would have to work 38 years to earn that; as a Councillor, it would take me 83 years; a lifeboat crew would never come close because they put their lives on the line as volunteers. Have we totally lost the plot?
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