Why should we tolerate our "greedy bankers" any more?

Vince Cable has a strange relationship with Banks on one level he castigates  them for "ripping us off" with excessive charges, but on another shares the Tory reluctance to actually bring them to book for their recent excesses. Steadfastly some banks, despite in effect being nationalised by the billions of £'s they had to borrow from the public purse, refuse to loan to the public or small business!!!There is no doubt the image of Banks has  suffered from both the credit crunch and banking collapses. As we settle down to massive cuts in public services, cuts in benefits and increased prices and indirect taxes for a decade.........will we ever trust banks again. That conservative institution, that was once  perceived as being  very solid, reliable and cautious was stripped, away to disclose whole sale gambling on the global money markets in effect like  a gambling addict let loose in a  Vegas casino!!!!

Worse it turned out there were few other institutions that had not  acquired this gambling madness depositing public monies in Icelandic Banks despite it being a very risky investment.

Such speculative bubbles have been seen in the history of the capitalist economy since the invention of the company by the Dutch. All speculative bubbles will eventually burst. The Dutch speculated on Tulip bulbs, the English on the South Sea Bubble whilst modern speculative bubbles have been seen investing in China and the pacific Rim or in Land and Housing. But in the global downturn of trade arising out of the liquidity problems that stemmed from the collapse of the housing market in the US and the UK that caused many banks to go bust having to be rescued by massive government intervention, it was unusual to see some really Conservative icons taken down by investment madness.

Once upon a time in the late  60,s were you  to be reading  text books on "Banking" you would be  immediately reassured by the chapters describing  how both the Government and the Bank of England, regulated bank lending rates and the ratios of deposits to bank lending, to ensure that the integrity of the Banking System was maintained. This was a tried an trusted system that had seen the UK through past traumatic contractions in world trade  and made the British banking system allegedly the envy of the world

Back in those days, events like a "bank run", which  we saw with both Northern Rock or Bradford and Bingley, had been unknown for over a 100 years. We never ever believed that our savings could be  at risk from anything other than inflation.

In the 30,s US banks had  collapsed . But British Banks with their cautious approach to lending had not.!!!

Young sixth form economists  in the 60,s were probably bored absolutely witless by the complex  bureacracy of banking that seemed wholly unintresting to teenagers.

But in the US a major economic revolution was under way. In the West the Left argued for increasing government intervention and banking was seen as a commanding height of the economy that should be taken into public ownership. Whilst accepting the need for a mixed market economy..the Left argued for high levels of government control and regulation to  plan economic growth that served all of us. Nationalisation was the cure all for public ill,s and we wrote essays juxtaposing free entrprise and public ownership.

In the background however  big US conglomerates and multi nationals were manovering, whilst many traditional British industries were ailing have seen little investment since world war 2. The UK economy was in poor shape. A large public enterprise economy was seen as the s train that would lead the nation to what Wilson once described as the "White Hot Technological Revolution".

But the Chicago School was in the process of  formulating the principles of monetarism in which government would be criticised and chasticed for  regulating money supply poorly. The problems the Uk were sufferring were entirely due to government intervention and  over regulation of the economy.

Young Revolutionaries like Milton Friedman was mounting a classical revival and taking on the left and questioning  their principles of  government intervention in the economy. Keynes was under seriously heavy fire.

The US even  sent the CIA to destabilise most South American economies and imposed under dodgy right wing governments, that privatised and deregulated public services. Death squads and terrorists over ran the continent  whilst US multinational and global corporations, under the cloak of the munro doctrine, siezed all business they could get their hands on. Whether bannaas, oil, water, minerals all were fair game to be expropriated. Why?  A patterm emerged. Any Governments that promised workers or farmers reforms or responded to organised trade unions were overturned by US financed freedom fighters and then farms,  factories and processing plants were taken over by US companies.  The first thing these companies did was externalise costs. Poverty, pollution, social injustice and waste of natural resources were ways that profitr margins were massaged. It was the model for globalisation and the global sourcing of profits.

In the UK banks had upsized through amalgamations and mergers to produce  a small group of high street brands. In the US there were literally hundreds of suppliers. In the UK there were other lenders known as mutualised building societies. Mutualised companies were accountable totally to their depositers.

Despite mounting evidence that monetarism was a complete disaster in South America politically, economically and socially paving the ways for the complete utter economic colonialisation of the continent by the US...two political icons for the free market were about to enter the stage. Monetarism and Friedman were the prophets of this new age.

Thatcher and Reagan both committed themselves to small government and privatising public services. Monetarism was the new religion although Thatcher and the Tories never really understood the more radical policies of negative income tax in the place of welfare benefits.

In the US and UK by the late 70,s the rise of an "underclass" was blamed as being a sheet anchor on the economy, welfarism bred dependance on the state loossened fanmily bonds, breeding one parent families and producing sink estates full on non working white trash totally dependent on the state.

A decade earlier most economic projections predicted that declining traditional industries, mechanisation and computerisation would mean that there would be too few jobs to meet the needs of the population. Welfarism just abandoned folk, some work was better than none and negative income tax should bring wages from any work up to a better level than welfare benefits. 2 decades later new labour used this economic principle to drive economic growth!!!

Thatcher attacked nationalised services and industries privatising them, stimulated owner occupation by selling council houses, attacked and diminished the power of trades unions. One of her targets was banking. A banking cartel on the high street, Tories argued,  did not match the diversity of providers in the US. Deregulation was the name of the day, the emergance of wholesale money supplies and the arrival of credit in banking were things she wished to encourage. She opened the doors for banks to speculate and for mutualised lenders to convert to PLC banks!!!! A long spending boom that seduced Britons to turn from saving to borrowing and spending money had begun. To paraphrase Trevor Storeys book a "Live now pay later" culture had emerged. In the 60,s hire purchase had exploded in the UK but it was the late 70,s and early eighties with the assault of bank loans and credit cards that was creating a debt ridden culture.


Post Thatcher the launching of these new banks, Halifax, Northern Rock or Bradford and Bingley was accompanied by High Street banks closing high street sites and relying on telephones as a customer interface!! Significantly a time bomb was ticking even as speculative investments were collapsing in the pacific rim. Lending had been decoupled from savings and investments. Worse lending began to seem to only be loosely linked to collateral.

Casino banking was born. Both in the US and UK banking was greedily investing in the seemingly never ending housing equity boom. Sub prime lending in the US, mainly to poor black marginal borrowers, was seen as being safe because it was anchored in property even if estimates  of the borrowers abilities to pay and the value of the assets did not match the worth of the loan.

Everything that goes up will.................will also come down. In the UK lending was increasing families debts were escalating and the economic mantra of the day was if you want borrow more money to satisfy the want.
When the collapse began in the US it became immediately apparant that no economy in the western world  did not have these worthless "toxic assets". Billions were wiped off balance sheets by worthless assets.

In the 1929 crash did Bankers warn the public? No they removed their own investments but continued to take the publics money. In the UK and US bankers continued to lend on bad equity to people who were bad investments...even after government had begun to launch lifeboats.

Faced with a political situation within which an angry labour government, forced to make massive investment into banking, and left with little to give back to  the public at a general election, it was unsurprising that bankers would flock to the Tories in search of better terms.The Tories of course were sympathetic and warned that nationalisation and too harder deal for the banks would export business out of london!!!

 Yes Cameron did a deal for which we will all pay the bill. They will also seek to divest the government investment asap and have advisewrs from Merril Lynch to help.

In this shambolic mess that we all are paying for there are  major worries

1. If the world trade crises was caused by banks when will we see the tighter regulation that needs to happen to protect the public from further over exuberance in investment?
2. Where will divested investment go to reduce VAT? and other government cuts?
3. Why are those who were accountable for the disaster never brought to account in the courts?
4. How come the banks are still awarding bonuses to bankers?
5. The heaviest banking failures had occurred in demutualised building societies over dependent on wholesale  borrowing instead of savings deposits.

The banking shambles poses some very fundemental questions about our free market system? Should banking remain in the private sector at all? Every political party seems to say it should....as some ideological chant.

Before he died last year Milton Friedman who had framed the economic principles that the Tories had used to deregulate banking argued there was a strong case for, transport, utilities such as electric, gas and water and banking to be in the public sector!!!! The Tories and Liberals for all their promise to bring reforming zeal do not seem to be up to date with such debates.. Of course the free market system endures but even Adam Smith argues the "invisble hand" of the market needed help. Regulating and controlling greedy bankers would top my "wish list"

The Budget

At the birth of the US the biggest argument between the founders of the new state was about the economy. One camp believed the market should be left unfettered whilst another argument was that the state should act as the regulator of markets to protect sellers and buyers. Laissez Faire versus Regulation a central argument within economics that students grapple with.

In the early days of pre industrial agricultural markets economists studied how prices varied with supplies and demand from buyers, Adam Smith was amazed as the "invisible hand" he saw smoothed out gluts and shortages by adjusting price up and down. The magic of markets had been known since ancient times the Romans used financial enterprise as a unifying factor for empire indeed it became the most desirable factor that attracted tribes to the Roman franchise.

In Norman times the local lord would, given a royal charter, provide markets so his serfs could trade their personal surpluses.

Everywhere markets had been the key through which economic development occurred. But were they un fettered....well no. There has always been a need for special courts, local laws and local law enforcers to ensure buyers and Sellers were not cheated. For this they levied local taxes. And reaction could be extremely punitive indeed.

Mmodern economics was based on observations of how these simple markets operated....and Osborne, Clegg and Cameron perhaps should have got back to basics before they launched into their emergency budget.

For those who are confused the condemns came to power based on a commitment to small government, reducing the deficit and reducing government spending to stimulate the market!!

But it was greedy monopoly forces in banking searching for ever more marginal investments and consequential higher returns that led to massive losses in wall street, toxic losses in the sub prime market tracked across the globe resulting in the biggest run on banks in banking history. Banks fell and had be bailed out by national governments. This was the origin of the Global Collapse in trade!!

Deregulation of financial services was soon identified as the fly in the soup.......Thatcher & Reagan being the villains of this piece. All markets will move to monopolisation and concentration of economic power...that is why we need cycles in the trade cycle where regulation is increased to ensure positive corporate practices.

Perhaps Labour should have done more and perhaps they should have seen this disaster occurring but as a government they were not responsible for it!!!!

In Cameron & Clegg World, the last of the summer amateur economists, it is government that is the baddy and not the greedy bankers!!!! Government spending was the issue they say and then impose more inflationary forces on the economy than there were in the first place by increasing VAT, reducing working families negative income tax, reducing government spending. The Young, Poor and Middle in come groups will pay all the costs whilst we could see stagflation and unemployment rapidly increasing in the economy.

Does any of this make sense well not really...except we must rebuild the Labour party and again offer a real alternative to Tory Economics from Noddy and Big Ears!!!

60 years on different dance but the same music

This year I will be 60 years old. My love affair with politics began in the early 1960,s. As the wind of change divested the UK of an empire, leaving us to looking vacantly at world maps in school covered in the pink where once the British Empire had stood, we all were aware that a wind of change was reshaping far more than our former colonies. 

After 13 years of Tory post war rule , the 60,s was a Britain with full employment, the beginnings of the consumer culture and a large industrial base that was aging and badly managed. The working class was on the move re shaping both  arts and popular music and sexual liberation was beginning .

The great social revolution of the reforming Labour Government of 1945 until 1950 had been overlayed by 13 years of conservatism out of its depth with social change, industry, foreign affairs, and media. Broke from world war 2  the government ran foul of the US in 1956 with its colonial Suez affair...........Telling everyone that we had never had it so good in 1959 Super mac slid into the teeth of sex, and official secrets scandals..the Profumo affair whereby a government minister, beautiful call girls and soviet spies were linked together seemed to spell the end of conservatism as we know it.

Wilson was dynamic, bright and very populist. To young people concerned with the nuclear bomb and the deteriorating situation in Vietnam..he was an attractive political alternative. The economy seemed good but its underlying problems were showing up in an underlying overseas balance of payments problems.

Wilson's formula would be to harness the heat of the white hot technological revolution . Opening up universities, developing new industries would regenerate the UK. New industries would be grown and welfare measures introduced to provide better services to the less well off were the measure of the day.

The bottom line was the UK was nearly bust, its old industries were fairly clapped out and needed structural change.....but for the moment it was an exhilarating period it seemed as if Britain had been cleaned out over night with a fresh brush. Wilson through the 60,s struggled to make progress with changing Britain. I was one of the generation that in the late 60,s went up to university to study sociology, economics and the really new study of international economics leaving in 1972 to join the spearhead of new social workers attempting to reshape and re engineer the UK.

Like all dreams there was a downside. The economic situation deteriorated as old industries became moribund. It was clear that nationalised industries were looking too old fashioned. Coal, Steel, Railways, Post, Telephones, Cars were all state owned. The Unions were flexing muscles to protect, jobs, wages & conditions. Through the brief  period of a social contract  a new toryism was to arrive thatcher ism.

Already Charles Murray had come up with a new moral panic to explain the decline of Western civilisation..the underclass...Unmarried mothers with children being the public enemy no1 in the new structure.

Politics is very much a Love affair the positives being that we do make positive changes to our world. The downside being that often not as many as we might have liked and we path the way for new ideas to come from another direction.

Last year Milton Friedman died. A Chicago School economist who more than any other individual since adam smith had shaken up economics. Governments he argued were the cause of all our problems. Governments should control only the supply of money and apart from providing negative income tax to those we really either want to work part time  or those we need not to work at all!!! Friedman became a revolutionary for the right. Through the 70's the CIA imposed Friedman through South America. Privatisation of govt and public utilities followed in nation after nation where the US installed right wing near fascist regimes. Did it work...well not very well and god knows how many people were killed in the great experiment.

Friedman became the icon for the right as thatcher ism and reganism led a right wing revolution hell bent on restoring market forces to all services selling off any bit of government that was not screwed down. A boom followed that collapsed in the late 90,s as all speculative booms do!! This set the seen for Labour to return to office showing that the party could actually be more conservative than the conservatives........sustaining consumer spending through tax credits, continuing privatisation of govt services but also properly funding education and health services.

At the same time as the bottom fell out of world trade as  a result of the collapse of the us sub prime market..Milton Friedman recanted............perhaps air travel, railways, public utilities like water, gas, power, railways and even banking might be better in public ownership!!!!!!!!!!!!!!!!!l

45 years later the political dilemma is still between the view that economies should be market led and thinking that believes all markets need regulation in a wider public context. Never before has the concept of free markets been so lamentable.The multinational corporation of the 60,s have given way to the global corporations of today and given the scale of government  spending where would the free market actually be? Governments "play with devil by the pale moonlight" ..they have to finesse business into supporting their goals to deliver their manifesto commitments but in doing so become illiberal. It will in time become clear that new labours most fatal mistake was to say no to Murdoch...........which resulted him in immediately offering his support to the Tories!!! This shows how Faustian the deal is that government makes with business.

The Tories talk of "broken" Britain, but divided might be a more apposite description. We are divided as to whether we are in organisations or not. There are those who control, serve and work within organisations clutching the safety blankets that organisations provide from day to day living. 

Then there are the rest of us outside the organisations, the young, the old, the sick, disabled, the artistic and eccentric trying to make a living often living on the crumbs from the tables of organisations. The Elite and the non Elite. The problem is the Tories do not recognise the problem at all. They use old world logic of reincentivising work, reducing welfarism without understanding the origins of inequality in the modern state!!!

The challenge to the Labour Party is to understand once and for all that the carnival ride we have been on has been a journey from deregulated market economies to regulated economies to deregulated economies back to regulated economies with larger global companies and galloping inequality as a byproduct. We now need to take serious stock of how we can address this.. and what we aim to achieve and for whom????.

A major calamity or a major opportunity for the left?

It had to happen eventually. We all knew that the blairite/brownite driving force behind new labour would begin to slow stop and that then the   whole "new labour" edifice would crash to the ground as redundant as the Berlin Wall.

Blair and Brown way back in the 90,s had cleverly stolen the centre ground of British politics to a British sort of neo liberalism. They weakened the link with Trade Unions, cosied up to industry and business, centralised control of the party control and re branded labour as "new labour", business friendly conserving the best of our market driven society but offering change to newly aspirant middle class  and upper working class families.

The repackaging worked all too well, and left the Tories chewing on the bones of successive leaders who failed to take the "golden boys" on. They were more Thatcher than Thatcher working families credit fuelled consumer spending, consumer spending drove economic growth, services continued to be privatised and business was even invited into the education systems. The party seemed endless as the rich got even richer and inequality accelerated in New Labour. The neo liberal model seemed solid and even the Iraq war did not knock it off course.

Britain enjoyed its longest period of economic growth. It did not join the Euro and with its special relationship with the US retained a position as the worlds fourth largest economy. Great strides were made addressing poverty, proper funding to the NHS and Education. Could the party last for ever, Brown announced that we had conquered boom and slump economics. But time was running out the banks in pursuit of profit and new markets were dabbling as they always do in riskier and riskier markets. The Thatcherite/Reagan  goal of the property owning democracy was leading them in the US and UK to lending at the margins to those whose lives were turbulent. As big industry looked to globally source and manufacture employment for those at the margins became rocky and they defaulted on mortgage payments. The collapse of the US sub prime market triggered the burst of a speculative bubble that rocketed around the world. Debts racked up in all home lending institutions. A global recession followed and the after shocks can now be seen ripping into Euro land as Spain, Portugal and Greece struggle to keep afloat.

What went wrong. Way back in the late 1960,s two economic approaches faced off  amongst economists. Monetarists led by Milton Friedman believing the sate should restrict its activities to regulating money supply providing the poor with negative income tax, privatising public services and allowing market forces to iron out inequalities and distortions in the market system.

The opponents were Keynesian economists believing governments must plan economic growth and that regulation and state intervention was necessary to ensure the evils of unemployment and political extremism were kept out of nations.

The young "monetarists" were the rebels and they were politically seductive to neo conservatives in the US and UK. The US though the CIA undermined government after government through South America, supported right wing fascist regimes and imposed "monetarism"!!!! Privatising public services, reducing welfare payments and allowing US companies full rein....The results were a depressing failure. South America did not grow it became poorer with deeper problems than before.

Free Market economy facing off those who would plan economic development and regulate business. Who would win? Well actually niether because there are other variables in the model. That is globalisation and monopolies. There is a tendency within the free market towards ever increasing monopolies that distorts the free market........even government spending distorts the market. The result is that the market is not quite as free as we think it is!

Global companies can manipulate government. There is an established pattern that it the upswing of economic growth government deregulates and stimulates corporate growth and profit, then at the apogee there is over speculation, bubbles burst and as business and trade declines government re regulates to encourage better corporate behaviour.

The behaviour of the banks was therefore synonymous with previous collapses of the trade cycle and an earlier intervention by government in the UK and US could have helped limit the serious damage. But government had danced way to close corporate power and totally missed the danger signs.

Everyone knows that profits can also be made by removing costs. If you can externalise costs you increase profits.  The conglomerates and global companies can do this in many ways, pollution, supporting injustice, right wing regimes...in all thgese ways they externalise cots of a product as a cost we all have to pay at later date......................ie climate change

The costs of bailing out banks and financial institutions will be less new housing, less schools, less NHS and a variety of other services plus less spending power in our pockets.

The collapse of the neo classical economic model was completed when even Milton Friedman  its arch architect suggestsed that public utilities such as Banks, Transport, Health, Education, Housing and Transport may not be best served by being in the private sector. There was a case to run them in the interests of the community as whole.

"New Labour" crudely welded together  populist monetarist themes, achieved a great deal and ultimately like Thatcher paid a Sharp price for getting it wrong. What of the future?  Well no one would suggest that we abandon the concept of a mixed economy or suggest a moribund centralised command model for the economy.that failed across eastern Europe. But the concept of an economy in which the government operates to ensure fairness to all by regulating the big corporations and providing good public services is a lot more palatable than the laissez faire models that we have all see,

What will happen in Europe Next?

The UK  is a strange place inwards looking towards  Europe and outwards looking towards the USA at one of the same kind. Never completely approving of either set of allies. This conflicted trading position ,when added to the fact that we stayed well out of Euro, has given the UK good economic growth and better global markets than it's trading neighbors. Being Americanised first we have been saved from most of the grief that European partners had to go through downsizing domestic expectations of what the state could offer in welfare care!


The upside of this Americanisation of the UK has been steady economic growth, higher employment rates , access to global markets and unleashing the power of the individual. The downside has been globalisation, accelerated inequalities and sharper booms and slumps.

With climate change, economic development of underdeveloped nations  and globalisation being high up the international agenda politicians have a US ally in Obama who will be far more pro active than Bush.
Europe now is imploding as Greece,s illness has begins to look terminal. £600 billions of aid to Greece may or may not work and as the German's fall out with the rest of Europe there is a widening terror that domino like Greece's problems may infect both Spain and Portugal. Bitterly the Germans are looking towards the IMF............whose usual medicine spending freezes and privatisation of all public services could drive a coach and eight straight through the principles of the EU!!!


It could well be as some observers hypothesise that some EU leaders will want to accelerate political union to match the already achieved currency and trading union that the EU has already achieved! But of course the UK is less than enthusiastic about  European union.  Back at the dawn of the EU Winston Churchill was enthusiastic  about political union as the solution  for the rest of Europe. not us...Later DeGaulle was determined that political union never included the UK.

Europe has by and largely been excluded from the British General Election with the Conservatives euro scepticism offsetting the  Liberals bounding enthusiasm for Europe. The problem is that whilst the British Public voted slightly more enthusiastically than labour and rejecting entirely the Europe enthusiastic Liberals for the conservatives taking  firm action on the domestic economy, Cameron if leading a weak coalition could be yanked by his hair right into the middle of  the deepening  European crisis. But they have no policy. This could be an interesting time. The deepening crisis may well outstrip the EU,s abilities and resources and there is no saying where this yellow brick road might actually end. "Airstrip 1"?

The Three Leaders

The three maestro's stood on their podiums and proceeded to answer questions in turn a bit like automatons. In the game that followed where each waited for the other to make some dreadful mistake, the public were treated to 90 minutes of unimaginative boredom.

Fighting to occupy the centre of british politics as a strategic and tactical manovere Clegg, Cameron and Brown were all performing. .

Clegg played the Romeo and Juliet game...a "plague on both your houses" ..the public can only trust the liberals.

Cameron kept up the pressure of being the "agent of change", whilst keeping his hand concealled...............the real cost of his proposed program of cuts, privatisation and decimating public services.

Ceasar GB tried to appear imperious and in control...the man that gets things done (which indeed he does)

Not one of the 3 approached Tony Blairs abilities to communicate. But in all of this "politics" is the victim reducing issues to media bites and truncating political debate ultimately  debases the political system and ensures really contentious and serious issues like Iran and Housing remain unplumbed. perhaps the attempt to turn the Elections into cheap reality TV should be abandoned. This is not Big Brother where we vote who should leave the house but a decison that has fundemental consequences for us all over the next 5 years.

MGM's problems cancel Bond

The news that the 23rd Movie in the Bond franchise is cancelled indefinitely is really bad news for the british film industry. MGM,s future is in great doubt because it owes billions and has no immediate buyer. The business investors that speculated on MGM burnt their fingers in the recession and asset stripped MGM is a shell of what it was.

The Bond franchise is one that has sustained the British film business for 50 years ensuring continuing business to studios and a plethora of british companies. The downstream employment is massive with big productions like this. And there will be concerns about the knock on effect for british productions.

Bond is inextricably part of the british way of life ..so I for one hope the MGM problems can be quickly resolved