As the Guardian has reported this morning:
The cost to UK banks of providing redress for mis-selling mounted on Tuesday, when Barclays set aside another £1bn to compensate its customers.
I am of course pleased, in a sense, that those who Barclays has abused will receive recompense: so they should. In that sense this is good news. But it takes an optimistic interpretation to see it as such. The reality is that we should see what is going on here as a simple example of the massive exploitation of the banking sector over the last thirty years that is now beginning to unwind.
As Duncan Weldon has shown on the TUC blog, the finance sector's operating surplus was negligible throughout the 1940s, the 1950s, the 1960s and the 1970s. It began to rise in the 1980s and reached almost 5% of GDP on the eve of the crisis. Over this period a rising profits in the financial sector explain the entire increase in the UK profit share.
There now has to be real doubt about whether much of the supposed profit in the finance sector ever actually existed. We have to ask instead whether it was all simply a con-trick. And if it was then it was much more serious than a simple financial con-trick. It subverted the talent of a generation or more from productive activity into the wastefulness of a career in mis-selling and exploitation. It destroyed the UK's industry. It undermined our ethics and the fabric of society. On the basis of a con trick inequality was greatly increased. And our politics was corrupted by a belief that greed was good and markets were the answer to all questions.
And the reality was none of this was true.
It was all just a con-trick.
I can be angry about the waste of £1 billion now that could have had so much better a use in the past and at present. But I am much more angry about the corruption of an economy and our society on the basis of the fraudulent misrepresentation of bankers.
And I'm as angry that they still get away with it.
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It’s not just bankers though is it.
I did an economics MSc back in 1981 where card carrying members of the Labour Party would break off from bullying the SDP supporting lecturer to teach us enthusiastically about rational expectations, the natural rate of unemployment and all the other building blocks of the neocon economics embraced not just by Thatcher but also by Blair, Brown and Ed Balls. Labour came to power 16 years later saturated with this “new” economic dogma, intoducing PFI and the like.
Do you hear Labour raising any fundamental objection to this reversion to pre-Adam Smith economics – even now, after everything that’s happened? I don’t remember the Unions complaining much between 1997 and 2010 either.
Don’t you remember the prawn cocktail offensive that preceeded the 1997 victory? Do you remember Labour making the Bank of England “independent” while taking away many of its powers, setting up the tick-box FSA and setting in place a tripartite arrangement between HMT, the Bank and the FSA that was almost designed not to work? Or HMT inserting its own ex-officials as deputy Governor to keep an eye on things? It was HMT’s John Gieve who – along with Mervyn King – presided over the lead up to the 2007 crash.
Everywhere you go in the civil service, local authorities, NHS and elsewhere in the public sector and now privatised utilities you find our taxpayers money being drained away into private sector pockets. That didn’t start in 2010. There are people all around the country with horror stories about their experiences at the hands of these charlatans between 1997 and 2010.
So it’s not just the banks that caused the collapse in civic values in this country is it.
Politics reflects reality and does not create it
Finance created the neoliberal myth
I’m not sure that’s correct, Richard. It’s always seemed to me that the myth was created by a lose coalition of right wing think-tanks, economists, authors, media, and so on, who created and promoted a set of unproven ideas and assumptions that subsequently took on the form and power of a myth. The key role of banking and finance was that it was used to ‘prove’ the accuracy of the myth. In other words, that the myth was not a myth at all, but was, as the zealots had argued, reality.
Now some of us have known – or at the very least suspected – that was not the case. Or, even if it was, the world it created – of rank inequality and exploitation and of corrupted forms of politics and democracy wasn’t worth the (so called) benefits.
But I’m afraid tigger is right, there weren’t many in the Labour Party at the time who fell into that camp, and there are plenty who don’t now (e.g. Johnson, as you noted yesterday). Consequently there’s no great wish that I can see to admit what you so powerfully illustrate in this blog – that the banking and finance ‘miracle’ of economic success and growth was and remains a myth. And thus it’s no proof at all that neo-liberalism actually delivers anything of value – except to the 1% and their lakeys, of course.
I have to ask Tigger…although I wasn’t quite a teenager in 1981, I do remember the tone of the times and I don’t recall many (or any) Labour people advocating the kind of economics you talk about. Well before 1981, I think I’m right in saying, Keith Joseph went on a student tour to argue the case for a new approach to society and economics. Any students influenced by him would have found a natural home in the Conservative Party. I don’t understand why in the mid- to late-1970s students taking a first degree in economics would have been both influenced by the new liberalism and yet decide to join a Labour Party full of some very left-wing people.
What you say is actually really interesting and pre-dates by quite a few years what most people understand as the embrace by sections of the Labour Party of a neo-liberal approach. Surely there must have been quite a degree of cognitive dissonance between old Labour types who may have been on your course when faced with this new group. It sounds quite suspicious to me. Maybe you’re onto something. Did any of your peers go on to make a name for themselves in the Labour Party?
Why don’t you write up your experience…you must have engaged these people intellectually I suppose…and offer it to the Guardian…it might help a lot of people to see where things started to go wrong and help those fighting the “Progress” Labour dinosaurs to orientate themselves and see who they are fighting much more clearly.
You’re right, there were loads of others who went along, and still do, with the neoliberal paradigm. Right wing thinktanks, politicians, consultancies, (much of) the accounting profession, and quite a few journalists.
However, the bankers certainly played a leading role, and their ludicrous levels of remuneration show how much they benefited; what a pity so many other people are going to suffer to pay for their greed, fecklessness, incompetence, and corruption.