In yesterday’s Guardian, Simon Jenkins complained that none of the major UK parties are attacking the Chancellor Alistair Darling’s decision to bail out the banks in 2008. After watching Tuesday’s Chancellors debate, Jenkins was left wishing for some “good old Labour blood and guts”, someone who could say to the would-be Chancellors:
“You blew it! When those petrified, knock-kneed smoothies from the City came pleading for help, you caved in and gave them the people’s money. You panicked, you bunch of creeps.”
Now I’m all for a bit of bank-hating, and I agree it’s important to stand up to any ”petrified, knock-kneed smoothies” that come your way (has there ever been a better description of bankers in the credit crunch?) and I definitely agree with Jenkins when he says that the better option would have been to nationalise the banks, not bail them out, but the idea that a better option would also have been to let the banks fail isn’t left wing, it’s just wrong. And it’s particularly wrong to say this:
Of course we shall never know what the world would be like today had Darling reacted differently in 2008. It could hardly have been worse. Some scenarios, such as just letting the banks fail, are undeniably hairy, though the global market in finance is astonishingly resilient and would, by now, probably be picking up the pieces and getting back to normal. America still eats and breathes, despite the failure of Lehman Brothers.
Wow. Saying that America still eats and breathes despite the failure of Lehman Brothers is like saying that Dick Cheney still lives and breathes after his heart attack. Technically true, but avoiding the minor detail of the triple-heart bypass in between. The crash of investment bank Lehman Brothers started the credit crunch proper and almost brought the world’s financial markets to their knees. Its collapse sent waves of panic through the markets, causing investors to try and dump all their dodgy financial products, which simply made the crisis worse. The mistake of the US government was to assume that the financial markets could cope with the failure of Lehman Brothers, and it learnt its lesson by bailing out all the other massive banks that needed help, and in doing so (narrowly) averted the complete collapse of America’s banking system
If Darling had let banks like RBS fail instead of bailing them out, then Britain might have had its own mini Lehman Brothers crisis. Jenkins says “it could have hardly have been worse”, but it really could have. At least we still have a functioning banking system. Obviously this doesn’t mean we shouldn’t still be angry about the respective parties’ current approach to the banks - no-one seems to be willing to make the banks pay for the mess they created, and no-one is taking the steps necessary to stop it happening again - but venting this anger by wishing that we’d just told the bankers to, uh, go collapse themselves instead of bailing them out is not admirably Old Labour, it’s just silly.
David Davis, ex Conservative MP, was on the Andrew Marr Show this morning and had this to say about the Tories’ chances at the upcoming general election:
“If we’re coming up to the election and we don’t show a clear lead, the financial markets are going to respond. The pound will fall, people will talk about our credit rating… The biggest financial wake up call to the electorate you’re ever likely to see.
The markets hate indecision. And it is said… I’m not in a position to judge… but it is said that they’ve already allowed for a tory victory in our credit rating. We wouldn’t have our credit rating if the markets didn’t think there was going to be a tory victory.”
Now, just like David Davis, I’m not in a position to judge the calculations of the bond markets, though I will say that this idea that the people investing in our debt are a group of all-knowing political sages ready to punish us if we commit to anything other than Tory-style severe cuts is getting a little wearisome.
But it seems to me pretty obvious that this kind of thing is pretty offensive and not the kind of theory that you’d want to parade around too much. I mean, think about it. What Davis is essentially saying is that the public should base their vote not on the unemployment rate or the state of the economy or the respective parties’ manifestos but on the beliefs of a group of people effectively holding a gun to the UK’s head. And let’s not forget that these are the same people (hedge funds etc) who until recently were busy helping to flush the global economy down the toilet.
When you’re being held hostage, it’s probably best not to gloat about it.
It’s now been a whole week since the G20 met (an event which, if it was a Friends episode, would surely be called The One Where The Canadian Prime Minister Missed The Group Photo Because He Was In the Toilet) and yet commentators are still very much divided on the deceptively simple question: Was the summit a success? This isn’t really surprising, since the answer depends on how you define success. For example, if you were looking for a demonstration that in the midst of global recession the world’s leaders are able to get together, put aside their differences and promise to sort stuff out then the summit was very successful indeed. Alternatively, if you were looking for a solid commitment to prevent a global crisis like this from ever happening again, then you must have come away very happy with the result. And if what you were after was a bunch of vague commitments that will probably/maybe be ratified in the future but more importantly look very good in the present, then you’re probably still doing triple backflips of joy.
But if you were hoping for a substantive commitment to lifting the global economy out of recession – and doing it now, rather than later – then it’s hard not to see the G20 summit as a bit of a let-down, albeit a very glamorous and show-stopping one. It’s true that restoring growth and getting people back to work was never the sole aim of the summit- in the final communique it’s merely listed as an equal pledge amongst eight others - but lifting the world out of recession is nevertheless the first thing you’d expect someone to say if you asked them what the summit’s main goal was. And with good reason – the current numbers coming out of America alone suggest that we might have to soon start switching out terminology from talk of global recession to the use of the dreaded “d” word (“depression” that is, though doom and devastation work quite well too).
To prove my point, let’s examine what have been touted as the main substantive achievements of the summit – the clampdown on tax havens, the new regulatory framework and the headline-grabbing sum of $1.1 trillion.
Last month Britain was swept up in a maelstrom of rage after it was revealed that Fred Goodwin, the chief executive of the Royal Bank of Scotland, was due to receive a generous pension to the tune of a staggering £703,000 a year. The problem? The Royal Bank of Scotland is now 70% owned by the British taxpayer. Cue outrage from all sides: while the tabloids and broadsheets alike foamed at the mouth, government ministers went a bit mental and promised to suspend the rule of law. The controversy over Goodwin’s pension wasn’t just a matter of one man’s greed, however; it was a focal point for the public feeling of helplessness, disbelief and disgust brought on by the realisation that the mighty, all-knowing financial powers we entrusted with our money are actually just a load of out-of-their-depth greedy idiots who’ve gone and squandered the lot.
Well, now the United States is having their “Goodwin” moment – and who knows where the chips will fall?
On Tuesday night I was watching Channel 4 news when they aired an interview with Wall Street “legend” Jim Rogers, who the reporter described as “one of the world’s leading financiers” . The build-up to the interview was interesting: Rogers, it was ominously announced, thinks the economic rescue plans being put forward by Gordon Brown and Barack Obama are “ludicrous and insane” and that “the politicians could be leading us into another Great Depression”.
Well you can imagine my surprise at hearing this, given that I was under the impression that the deficit-spending, government-stimulus strategy being adopted by leaders like Obama was meant to stop another Great Depression, not start one. If I’d been drinking coffee, you can be sure that I’d still be wiping it off the TV instead of writing this. But I thought I’d see what Rogers had to say before coming to judgement on the man. Big mistake!
