I'd completely forgotten Tony Blair's speech to the ippr back in 2005 entitled Risk and the State where he argued that the FSA was "seen as hugely inhibiting of efficient business". This was classic 3rd term Blair moving way beyond the centre-right approach of his first term, and even the mainstream Toryism of his second, into flat-out deregulationist libertarian maniac territory. At the time Blair was seriously suggesting that if the FSA's funding and role had been reduced, UK capitalism would have been healthier.
Pretty much no-one would say that now (although maybe Blair is out there somewhere still believing in free markets and neo-liberalism; thankfully his contributions to the debate in the current crisis have been non-existent. We've had to rely on senile dodderers like Denis Healey to talk bollocks instead.) But Mason is absolutely right that
the whole current episode has the air of that famous moment in Nineteen Eighty Four where the enemy suddenly switches from Eastasia to Eurasia, without anybody daring to comment.
The FSA's new head Adair Turner (probably one of the best economic thinkers in the broad centre of the political spectrum) puts it admirably clearly in a recent lecture on systemic risk. Almost no-one was able to realise that the huge explosion of credit and the asset bubble, the exponential growth in complex financial instruments were all pointing towards a crash.
To be fair, a few people were saying it. Larry Elliot and Dan Atkinson in Fantasy Island made the case that the boom was unsustainable very articulately, but were widely derided as Jeremiahs. UCLA economic historian Robert Brenner predicted systemic collapse in The Economics of Global Turbulence, but again was dismissed as a maverick Marxist.
But nope... most commentators across the political spectrum were in the boat with Tony Blair, rowing towards disaster.
And Gordon Brown was definitely in that boat. Which, I think, helps explain why Labour's poll bounce is evaporating, and he's facing a big defeat in the 2010 election unless he can undergo a convincing ideological reconstruction from first principles - back to something much closer to 'old Labour' than new Labour in many ways - and on top of that, inspire confidence in the electorate that his policies can beat the recession - or at least make it a lot shallower. So far, people are confused, afraid and angry. There's no other real explanation for why the Tories are doing well in the polls - they sure as hell haven't come up with any particularly good ideas. But things are getting so bad out there that people are saying "why not give the other guy a try".
But as Paul Mason says, given that Brown said the UK banking industry was entering a "golden age" in his 2007 Mansion House speech, just weeks before Northern Rock's collapse, one can't blame the electorate for giving up on him unless he makes much clearer noises to the effect that everything he has been saying since 1994 is complete and utter bollocks. Bye bye New Labour, hello kicking some serious ass. The election can still be won - I'm sure of that. But I wonder if the current Labour leadership has the guts to really go for it. At the moment they seem to be simultaneously holding to the old New Labour shibboleths (free markets work best, Britain is an economic success story, etc.) and also kicking all the institutions they were praising during the boom years (the banks, hedge funds, etc.) It's a schizophrenic approach and it looks bloody stupid. More coherence, please - or the voters will kick your ass.
1 comment:
Good post - The only problem you face is sketching out even the vaguest outlines of a more interventionist strategy risks a rerun of the 1970s. However, given the absolute failure of the 'Fundamentally Supine authority' (as so-called in 'private Eye') to do anything to avert Northern Rock or any of the other crises that have rocked the banking sector in the past 15 months, a more hard-handed approach seems to be inevitable, and really is what the banks deserve!
I think you're a bit harsh on Lord Healey - unless you're advocating a return to a taxation rate of 98p in the pound? Also, I beg to differ in recognising broad agreement that this crisis wasn't coming. As soon as house prices started reaching 15X average earnings across most of the country, most sensible commentators thought the writing was on the wall. What remains of our manufacturing sector and distribution industry is likely to close in the next decade anyway, as the ridiculous 'Climate Change Bill' becomes law, effectively outlawing motorised transport in the UK - so the road to recovery is likely to be a long one. Check out Richard Lambert (CBI Director General) in the Telegraph and my response to him - sums things up nicely!
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