Labour must make up for its failure on banking

Johnnydub

There's no point Labour leaders such as Milland espousing bank control soundbite ideas, where they have comprehensively proven that they can't manage the economy without running out of the people's money.

Simon Stephenson.

"So the question for tomorrow will be: is Labour serious or is its rediscovery of basic principles just a stunt to gather a few positive headlines?"

No. The question is whether or not Labour is serious about rebuilding the structure of successful capitalism that recognises both the genius and the malignancy of human behaviour? In government, were Labour fooled by the promises of high finance, or did they deliberately and purposefully sow the seeds of capitalism's destruction by relaxing the regulation and oversight that kept humanity's more harmful elements in check?

This is what the public should ask of Labour. Did you govern like wide-eyed novices? Or were you secretly acting to undermine an economic system you found too difficult to challenge openly? And in either case why should you consider your present views to be taken at face value?

Steffan John

There's a problem with Miliband case though Nick. Underlying it is the argument that the global crash was caused by ethical impropriety by a few bankers, rather than a structural flaw of excessive and excessively complex lending practices. I.e. that it was (and remains) essentially a moral problem, not a political one.

If the Left is to re-emerge with a distinctive economic philosophy, it is precisely this intellectual cul-de-sac that it needs to avoid.

Sui Juris

"Bankers forced the taxpayer to bail them out with public money"

They certainly wanted lots of public money; I wouldn't have refused it, either. But the bailouts required the consent of politicans, and politicians, not bankers, are responsible for them.

"...that free market liberals denounced as a sin...in the 1980s"

And I, and all the other free-market liberals I know, and plenty of other right-wing types who wouldn't describe themselves in those terms, also denounced the bailouts. There has never been much evidence of public support for the bailouts, you know. Most of the public can tell when good money is going after bad. But don't try to tar us with the same brush as our parliamentary and journalistic "leaders", who feel it would have been "irresponsible" to let banks sink or swim on their own.

It's laughable, then, to claim that there has been any sort of failure of conservative ideas, when no-one tried my ideas. Soi-disant conservative leaders swallowed whole the idea that they were "forced" to emulate the socialist idea of mutualised losses. Don't let them get away with it - they weren't forced, they chose to do it this way. Though, of course, they were only following the lead of the Labour government.

Leading former members of that government, now in charge of the party, continue to believe that writing blank cheques to people who say they need money is a good idea. Let's not go down that route. And, yes, let's have some contrition from the Conservative party, too, because they had not the courage to stick to their principles and just say "No."

Boo

Why did Labour not reforms the banks, for the same reason a parasite doesn't kill it's host.

As long as Labour was to be the party of public spending, they were dependant on the city. Is it any wonder that they decided not to rock the boat.
Sadly Labour are still the party of public spending, defining how much they care in pound signs. Until this changes they will always be troubled by who pays the bill

arnoldo87

Simon Stephenson

You make it sound as though Labour alone caused the 2008 crisis.

It is obvious, in retrospect, that control of banks was inadequate, but the Tories wanted even less regulation, and the USA was hardly a model of good regulatory practice.

So yes - Labour has lessons to learn on banking regulation. But they are not alone.

And your rather ludicrous suggestion that Labour may have been deliberately working to destroy Capitalism breaks down, like all conspiracy theories, on one crucial fact:-

They hadn't got the ability to carry out something so complex.

Simon Stephenson.

arnoldo87

Faulty reasoning, leading to faulty attitudes, leading to faulty behaviour - this was what caused the 2008 crisis. Labour were complicit in this because they were in government at the time. They were a part of what went wrong - a substantial part - but not, obviously, the whole of it.

It was obvious to some - at the time, not in retrospect - that a significant part of what is in the self-interest of managers is not in the best interest of society as a whole; that managers will continually be trying to circumvent regulation put in place to discourage non-social, self-interested behaviour; and that unless gatekeeping is pursued with the same sharp intellect and vigour as the managers put in to evading it, the gatekeepers will lose, and society in general will be the worse off for this.

However, what became mainstream opinion was that human ingenuity was far more powerful as a force for good than managerial self-interest was a force for bad, and, more crucially, that they were inseparable from each other. This became the groupthink of the age, and it is this wishful-thinking - this lack of sophistication of thought - that has been our undoing.

To have bought into the groupthink requires one to have a second-rate mind. I'm giving Labour's hierarchy the credit of possibly not having second-rate minds by suggesting that their "embracing" of managerial excess was more the outcome of a Machiavellian manoeuvre than a mental deficiency. There's enough historical evidence of such political manoeuvring that I should have thought it's only ludicrous to those who are mentally unprepared to accept that it could be true.

arnoldo87

Simon,

So let me get this right.

Labour, with their first-rate minds, knew all along that lack of bank-regulation would lead to the 2008 banking crisis, but this was just what they wanted as the first step towards the fall of Capitalism.

So far so good then, because Capitalism has indeed been in trouble for the last three years.

And there is the arch-planner, Gordon Brown, cunningly losing office and taking public humiliation on the chin for his comrades on the team. Ed Balls is playing his part by suffering a five year stint in opposition.

Yes, Simon, it's all taking shape.

Those of us with second rate minds are keen to be apprised of the next stage of the plan.

Please advise.

Baron

Nick Cohen has the answer: “banks that are too big to fail and too big to bail out should be split up into separate retail and investment companies”.

Nick, do you know what you’re talking about?

What will the split achieve then? Will it deliver safety for depositors? Will it ensure a meltdown such as the one we touched on in 2008 will never happen again? Will it deliver in terms of credit what the street needs?

The near crash happened not because the banking sector wasn’t regulated enough, it happened because regulation offered the bankers a free win-win ride, they knew that whatever they did, the regulators approved, they couldn’t lose, the government, any government or rather the taxpayer will come to their rescue.

The only regulation that can ever be effective in keeping the banks in check, is the market, and only the market, it has ever been so, it’s a folly to think a man made regulatory structure charged with keeping the banks on the straight and narrow will do the job, it won’t, if only because those employed in banking have always outsmarted the regulators, will do so again.

Baron

Nick, and another thing, easy to comprehend but deadly crucial:

how come Brown, Balls, the clever people at the Treasury, King, the even cleverer people at the BoE, the regulator had allowed Northern Rock to offer 125% self certified mortgages that were predicated on a continuous rise in house prices?

explain it to the poorly educated Slav, if you will.

Simon Stephenson.

arnoldo87 : 10.11am

"And there is the arch-planner, Gordon Brown, cunningly losing office and taking public humiliation on the chin for his comrades on the team. Ed Balls is playing his part by suffering a five year stint in opposition."

Why should they care about being out of office? They've poisoned the well to such an extent that a 5-year parliament can't possible decontaminate it. They've done what they intended to do - create such chaos with the old structure that it's impossible to reconstruct it.

A few small boys with a box of matches can both create all sorts of havoc for hundreds of firefighters, and make it impossible in the aftermath of the fire to resume as before.

"Yes, Simon, it's all taking shape."

What's this supposed to mean?

"Those of us with second rate minds are keen to be apprised of the next stage of the plan.

Please advise."

Yes. It is to continue the bad faith with which Labour has conducted politics since Kinnock became leader in 1983, in order to deny the central intention of their policies, to blame the creation of the economic chaos on anyone but themselves, and to place obstacle after obstacle in the way of anyone seeking to restore sanity to the situation. To make the most effective use of calumny, concoction, deceit, deception, dishonesty, disinformation, dissimulation, distortion, equivocation, evasion, fabrication, fakery, falsification, fraudulence, inaccuracy, invention, legerdemain, mendacity, misrepresentation, perversion, prevarication and subterfuge to achieve these ends.

Were it not for this they'd be honourable people.

arnoldo87

Simon,

It's great when you can read an unbiased, well-argued and rational argument in a post.

But never mind.

Love your thesaurus, though.

Simon Stephenson.

arnoldo87 : 1.02pm

So, what, you accept that this theory is a possibility, even if you don't personally believe it to be true?

Well that's a start, I guess.

I'm not going to put my neck on the line and say, yes, this is definitely what's happened, but as a theory it does explain a whole lot of recent events far better than do the official explanations. I mean, come on - how can we have ended up in the economic position we're in unless the judgment of our political leadership was either massively incompetent or secretly malignant? What other choice is there? That they operated at the height of human competence, but were overtaken by events over which they had no control? If so, doesn't this need to be established? Don't we need to be sure that this is neither the Freudian denial of an over-confident leadership, nor the continuation of a long-running Machiavellian deception? Don't you want to know this? Or is the possibility of either of these being true something that you, yourself, need to deny as a defence of your own psyche?

arnoldo87

Simon,

What a tease you are.

First of all you convince me of this diabolical plot with your polemic.

Then you appear to have doubts.

What is a second-rate mind to make of it all?.

Simon Stephenson.

arnoldo87 : 5.31pm

Of course I have doubts. I can't prove that I'm right, so I have to leave room for the possibility that I'm not. I seriously believe that the sun will rise tomorrow morning, but I can't prove that it will, so I'm never going to act as though I can.

Life's about guaging probabilities, not seeking certainties. And if all you have is a probability, then you must also have an element of doubt. To me, it is probable that Brown, in particular, is a scheming b*stard who would think all his Christmases had come at once if he were able to engineer a collapse of the personal-wealth system by which society is run. What better way to subordinate the individual to the State than to destroy the system under which personal autonomy is exercised. And I think that the major reason why he chose to ignore so much professional advice is that his objectives, well camouflaged though they were, weren't the same as those of the people giving him advice.

But if instead you want to base your outlook on a faith, or a certainty, that Labour would only operate in good faith, then of course you're entirely at liberty to do so. Just don't try to make out that because you're willing to ignore observation in favour of following a faith, that this is what everyone else should do, as well.