Global Geo-Politics Net is carrying an important article by David Cronin highlighting the desperate need for a civil society campaign to counter the might of financial lobbying by banks and hedge funds. Besieged by legions of well-funded financial lobbyists (reinforced by columns of financial journalists acting as mouthpieces for the City of London and other offshore financial centres), politicians are fighting an uneven battle to protect public interest from endless lobbying to water-down regulation and protect tax privileges -- and there are virtually no organised campaigns to oppose this relentless pursuit of self-interest.
A cross-party alliance of European parliamentarians has issued a call for the creation of an international civil society campaigning organisation to work on systemic financial market problems in the same way that Amnesty International has worked on human rights issues and Greenpeace on environmental issues. Citing Tax Justice Network's research into how hedge fund activity has been driven by the constant search for innovative ways to avoid taxes, the article explains how the pressure placed on politicians by financial lobbyists threatens to de-rail attempts to regulate against a repeat of the crisis:
"According to the MEPs, the pressure they have been placed under by the financial industry is so intense that it represents a threat to democracy, especially as public interest groups have generally lacked the means or the expertise to mount a robust counter- offensive to the banks’ efforts. "
A major part of the problem lies with the lack of independence of thought within the mainstream political processes. The majority of mainstream political parties, whether in government or opposition, have long since fallen to laissez faire economics. All too often their policy making apparatus - the think-tanks and advisory teams that feed through new ideas - are similarly captured by economic ideas that have failed to protect public interest. In far too many cases these "independent" bodies are funded by vested interests and staffed by secondees from banks and accounting firms: the very people who caused the crisis in the first place. And to make matters even worse, there is a plethora of "independent" academics whose academic chairs are funded by banks and such-like, and who act as hired guns for the vested interests.
An example from BBC's Today programme illustrates the extent of this capture of political processes. In a short news item about a new report on the affordability of public pensions in the UK, BBC journalists cited two "independent" think-tanks as the source of this "independent" report: who were they? The Institute of Economic Affairs and the Institute of Directors. Objective and politically detached? Both are political lobbyists representing City of London interests.
Completely unrepentant about their role in precipitating the worst financial crisis since the 1870s, and determined to preserve the de-regulated model which has successfully transferred huge volumes of wealth upwards from ordinary people to the super-rich class who operate from offshore secrecy jurisdictions, financial lobbyists are working over-time to bamboozle politicians and re-write laws to suit their purposes:
"MEPs had to wade through 1,600 suggested amendments to the law on that occasion. Although only MEPs themselves can sign amendments, it is common practice for industry lobbyists to act as "ghost-writers". More than half of the amendments in this case were written by the financial services industry, according to Parliament insiders.
The hedge fund industry — financial speculators largely based in the City of London — has literally been seeking to write the rules it should play by itself. In April, the Parliament’s main committee for economic affairs voted on its response to the proposed law. MEPs had to wade through 1,600 suggested amendments to the law on that occasion. Although only MEPs themselves can sign amendments, it is common practice for industry lobbyists to act as "ghost-writers". More than half of the amendments in this case were written by the financial services industry, according to Parliament insiders."
The world stands on the edge of a precipice. The impetus for reform that followed in the wake of the financial crisis has been slowed by the relentless pressure from financial lobbyists. The burden of paying for the crisis has been almost entirely shouldered by ordinary people. Public and private debt burdens remain high, but earnings for the majority are stagnant or falling (director's pay being a major exception). The situation will undoubtedly deteriorate as the impact of European austerity packages hits the people in Europe and in other regions that trade with Europe. Unless measures are taken to re-regulate financial services, and especially the crucibles of toxic innovations that caused the crisis in the first place, we are headed for another, even more disastrous crisis in the not-too-distant future. The call from European politicians for civil society action should not go unanswered. TJN, for one, is keen to participate.
Note: cross posted from Tax Justice Network
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“The burden of paying for the crisis has been almost entirely shouldered by ordinary people.”
Yes, that’s unfortunately true. You’ll find that your anger at this chimes with like John Redwood too.
Although it was vital to stop a banking crisis (we came within a few hours of the cash machine network shutting down), we should have drawn the line at protecting deposit holders (i.e. ordinary people with savings or transactions like house purchase in process).
Instead, we rescued bondholders, the people who are loaning risk capital. Yes, the financial pain and the damage to financial markets would have been severe. But now the pain is larger and going to be long and drawn out.
The real lesson from this is not to allow fiscal policy to be manipulated to solve short-term financial problems (like the bursting of the internet bobble). We should have taken our medicine then: the recession then would have been a normal one, but by postponing that we’re now facing a depression.
@John Scrivens
Come on
We had to bail out banks
The issue was failure to regulate banks
Not the bail out
And it still is the failure to regulate
This “failure” was not one of markets, but of Rule of Law. Questionable debt was labelled as AAA when it was not. The law is very clear and basic rules on misrepresentation is enough.
There is no point getting specific, because all you will be doing is guarding against the last problem, not the next.
Banks need supervision, not regulation. This way there is no excuse of hiding behind compliance to chapter and verse.
“The issue was failure to regulate banks”
So all that photocopying passports and driving licences to open an account was because banks like to see photos of their customers?
No, we had a lot of regulation. And it was rubbish: Basel II capital ratio regulations loosened in a bubble, rather than any attempt at counter-cyclic ratios. Sheer stupidity.
Time to go back to the drawing board on regulation, get rid of the useless time-wasting rubbish and start to put something sane in place.
I’m not an economist but I’m trying to learn what I can. All of you who want to make a better world have to get out there, start treading around the Skeptics in The pub meetings, community groups interested in the environmet, charities, anywhere and everywhere, bringing on the young graduates in economics and politics with you as you go. I want to see a loud counter argument to what has been going on, to what has been damaging my future, I want to be educated as a voter, as a citizen. But I’m not getting it on the internet, I’m not getting it on the TV or the radio and I’m not in London. You guys need to get out, across the country and start talking.
The scientists are getting out there, communicating with the public and you all need to do the same.
Please!
@Margaret
I promise I’ll try
Even more I promise to try to empower all those who want to argue as you wish
Richard
“I want to see a loud counter argument to what has been going on, to what has been damaging my future, I want to be educated as a voter, as a citizen.”
Very important is that you don’t merely seek to be educated according to your prior beliefs: that’s is merely confirmation bias. It sounds to me that you’ve reached a conclusion (evil bankers with their bonuses stole my doctors and nurses?). Seeking education from this prior stance is not going to do any good.
I’d take a step back and first of all learn what money is. Sounds trivial, or even bizarre, but it’s not. When you learn what money is, how it works, then you can start to see what went wrong in recent years. Only when you know how something went wrong can you see how something can be fixed, and can tease out where the bogus arguments are.
[…] loved the honesty of this comment on this bog: I’m not an economist but I’m trying to learn what I can. All of you who want to […]
@John Scrivens
Isn’t the passport showing more to do with countering Money Laundering? Are you in favour of deregulating that kind of activity then?
And what effect you think this would have on Investment banking activities like – well, let’s call it what it is, “Gambling” – is hard to see.
[…] loved the honesty of this comment on this bog: I’m not an economist but I’m trying to learn what I can. All of you who want to […]
@BenM:
“Isn’t the passport showing more to do with countering Money Laundering? Are you in favour of deregulating that kind of activity then?”
Oh yes, I am very much in favour of getting rid of those stupid regulations. They do nothing other than make life difficult for ordinary people (try opening an account for an elderly relative and see if you can find a passport or driving licence or wheel them to appear in person at a bank branch). There’s not any evidence that these ridiculous regulations have made the slighest difference to terrorists or the other sock-puppet evil doers.
Thankfully we have some rationality re-asserting after ten years of the neo-McCarthyism post 9/11 – the Section 44 stop and search powers are being terminated. More of that, please.
“And what effect you think this would have on Investment banking activities like – well, let’s call it what it is, “Gambling” – is hard to see.”
I assume from your tone that you regard investment banking as gambling. I take it you’ve never invested money in a company? Or wanted to lock in an exchange rate on a contract which will be invoiced in the future? Or tried to make sure that fuel prices didn’t evaporate your profits in your business plan? I take it that you consider fire and theft insurance on your car as gambling? That you don’t have life insurance?
So can you clarify what you think is “gambling” and what you think is “insurance” and what you think is “investment” before you decide that an entire section of the economy needs to be eradicated by diktat?
Quite frankly it’s none of my business – nor yours – what people do with their own money. If they want to bet on financial outcomes or horses, I don’t care as long as I’m not asked to pay for it.