I don’t know how many of you read Monday’s FTfm (a weekly review of the fund management industry published as a pull-out with the Financial Times).
Today’s version has a peculiarly arresting intro to its leads story, as follows … ‘The asset management industry claims it bears no responsibility for the financial crisis, but it may be on the hook to foot part of the bill.’
That such a story could even be written underlines the power that big money still exacts over our political and media culture.
How come last week, none of the papers reported the spending review as follows … ‘Teachers claim they bear no responsibility for the financial crisis, but 40,000 of them are about to lose their jobs as a result of the coalition government’s response to it.’
‘Poorer children claim they bear no responsibility for the financial crisis, but they are about to lose the educational maintenance allowance that helped them stay on at schools.’
‘Council house tenants claim they bear no responsibility for the financial crisis, but many are about to lose their homes because of housing benefit changes brought in by the coalition to deal with its aftermath.’
‘Local councils claim they bear no responsibility for the financial crisis, but they are being forced to make massive cuts to services to help the coalition deal with the budget deficit that it helped to cause.’
I could go on and on, but will stop there for now, and make the reflection that the coalition has done a superb con job in distancing last week’s decisions from their principal original source. Labour really must reframe this argument, and its history, pretty quickly.
What the hedge funds are worried about is a European wide ‘financial activities tax’. Reasonably, the European Commission makes the argument that the financial sector was a major cause of the crisis and received substantial government support. ‘It should therefore properly contribute to the cost of rebuilding Europe’s economies and bolstering public finances.’
FTfm gives the fund management industry plenty of space to set out how, because unlike the banks they received none of that government support, this is an unfair move.
Yet fair to say they were a lot nearer the scene of the crime than the teachers, doctors, nurses, police officers, social workers, kids, families and pensioners who are being asked the fill the hole the bankers dug for us. After all we are, as George Osborne keeps saying, all in this together. It’s just that the bankers and their friends are not in it quite as deeply as they should be.
One of our basic values is one of fairness. Having four young kids and being a teacher (for the next few months at least) the whinge of “it’s not fair” echos all around my ears. Cameron and Clegg are big on saying the word “fair” but do nothing to implement it. As a teacher I know what happens if you are not seen as fair. The kids revolt. They don’t like or respect you. They stop working for you. I don’t think it is just kids. It is a basic human gut survival mechanism. We can put up with a great deal if it is genuine and fair. But deception will always show through. And this Governement’s deception is on a whooping scale. I just hope we can stamp our feet loud and long enough to show then the door marked “exit to hell.”
Yes, Sarah-dodds, we must stamp our feet, loudly. France has been brought to a stand still at the mention of retirement age being raised two years, as yet only grumbling in England. I think the arguement of fairunfair has been had; none can seriously justify these cuts as anything other than a dangerous ideological implementation of a Tory doctrine. I don’t need the IFS, Clegg or Cameron to tell me about ‘unfairness’ in society, I see it when I leave my frontdoor.
Labour needs to rally now and come out fighting. We need it.We need it now. Most of us on the frontline of cuts (I work in the Arts and will feel this hard) know the causes of the economic crash, and the reasons thereof. Blaming “the last govt’ is not carte blanche to punish children, the poor, the elderly, the dis-abled, the dis-advantaged. This is nothing but obscene. Fairness is a basic value, a value that should be reflected by those on high who govern.
I hope you don’t loose your job, Sarah-dodds
Excellent blog.
Nice idea Alastair, but the CSR, and the savings it sets out to achieve, has not occurred as a result of the banking industry’s problems. Rather they are a direct response to the wasteful and profligate atttitude of the previous government from 2000-07 (in the seven years before the credit crunch) when it systematicaly spent more than it earned. The debt it racked up in those years means our interest bill is heading for £1 billion a week. It would be even higher if Labour had continued to manage the economy as spending (of more borrowed money) would have continued rising and interest charges would have risen further as the international debt markets signalled contempt for those actions. It is heartening that the government’s interest rates have come down in response to the CSR. It is regrettable that the curb in spending is affecting so many lives, but the expectations of many in Labour’s client welfare state have been grossly misled by the actions of the previous government who made them believe that an ever-dwindling number of taxpayers could continue to subsidise those who rely on the state. Life just doesn’t work like that. We need the banks to be profitable to provide employment, pay taxes and help generate growth through funding. Continued misguided attacks on them as being the cause of the current economic situation will only further perpetuate the misguided hopes of those on benefits (and in the shadow front bench) that further taxes on banks and bankers can be a substitute for belt tightening in the public sector. The “fairness” which Labour continues to harp on about works both ways. It is clearly unfair for many of those on benefits to be living a better quality of life on state handouts in guaranteed, subsidised housing than many of those whose taxes are paying for it. Benefits are a critical safety-net in a caring society, not a permanent way of life that can be perpetuated from one generation to the next.
Peter
There is much to pick you in your post, especially as all of it is either inaccurate or based on an ideologically right-wing position, led by prejudice instead of fact.
1). The word ‘handout’ is very interesting. I’d like the term to be applied to the tens of thousands of people working in the private sector, the finance sector especially, where the money received is not in proportion, often not remotely in proportion, to the economic good that job in that company does. I point you in the direction of a graduate daughter of a friend who after 10 months at one of the GB clearing banks in a graduate job of not very high specialism earned a bonus of £49,000. That is a private sector handout.
Taking this further, let’s look at a friend of mine who earns well over £100,000 in buying and selling energy supply in London. Put together with his wife’s large corporate salary, they have a house in France worth a million quid. My friend, last time I spoke to him, was organising, if he hadn’t already done so, the paying of his salary and bonuses into an offshore account so as to evade paying income tax in the UK. Living now for at least 3 months a year out of the country, much of his salary is taken out of the country. My friend is pretty typical. Obviously, he and his like represent only a portion of the private sector, but when you complain about benefits or ‘handouts’ as you put it, remember that a benefit payment is also an investment. A very high proportion of each payment/handout is spent in the local area, keeping small private sector businesses afloat, providing jobs for UK citizens and making tax contributions to the exchequer. It’s interesting and alarming how Conservatives never consider or admit to knowing about the way money flows around and through an economy.
Now, looking at what’s good for the UK, turn your definition of ‘fairness’ and economic contributions to society, ask yourself what is fair about inflated salaries. Also ask yourself whether the £7 billion in bank bonuses is ‘fair’ and also, economically useful to the UK? How much of that money is going to go to the exchequer, I wonder? Less than 20%, I’d guess. How much of that money is going abroad, being taken out of the UK economy?
I could pick apart the rest of your post but I hope you’ll understand that I don’t have time.
RRR
‘Labour really must reframe this argument, and its history, pretty quickly.’
That, and so much else.
Where have Labour gone? Would you not have expected them to be much much more on the front foot by now – especially after a week like last week?
Seriously worrying. Polite, timid opposition in times like these is a dereliction of duty.
Labour cannot do a shadow CSR. And Labour supports 5/8th of the cuts in principle.
Before the crash David Cameron claimed the credit for Conservative decisions in favour of low regulation. In September 2007 Mr Cameron praised financial markets and said that “the world economy is more stable than for a generation”. Messrs Cameron and Osborne promised also to “share the proceeds of growth”.
Labour can attack the coalition´s metanarrative of “we don´t want to do cuts”. David Cameron has stated that it is because of Big Government that we are in this “mess”. And the ideological cuts will not be reversed when the books have been balanced. So eternal austerity awaits Britain under the coalition.
One only had to look at the happy faces of Tory MPs are they were cheering Mr Osborne to know what this is all about. Christmas had come early for them. But the Lib Dems, including Mr Clegg, looked like turkeys who had just realised that they had voted for early Christmas.
It is now time for strategic thinking and ideological renewal inside Labour.
We need a new economic model. State should rebuild and rebalance the economy. Banking sector must be reformed. Industrial policy is needed again.
Power must be decentralised to nations, local government and civil society organisations.
Moral economy must be basis for common prosperity. We need environmentally sustainable wealth creation and equality.
Labour must build a new political coalition for diverse range of indentities, classes and interests. Labour must have a vision for the good society with decent jobs, good homes, proper pensions and fair finance.
New capitalism must be based on fairness.
We are all in this together. But the coalition should understand that “we” means also the US, Japan, France, Germany and even Finland.
Unless the coalition admits the real cause of the global economic crisis, they will find it very difficult to find a remedy.
I’d love to know how many real people you actually know who live “a better quality of life on state handouts.”
It’s not so much that public sector workers are responsible for the crisis – clearly they’re not. Rather the fact there are such large numbers of them is a proximate cause of the scale of the deficit – the bulk of which, let’s not forget, is structural. Whereas fund managers (as opposed to bankers) are actually one of the reasons it’s not as bad as it could be (those big bonuses they get are taxable, you know). And no, I’m neither a fund manager nor a banker, lest you wonder.
In any case, your post is misleading: what job losses there are in the public sector will be spread over a number of years (as will the cuts in general), and while I think it is right to be sceptical of the private sector’s ability to generate job growth on a similar timescale, it certainly won’t help to do so if we continually bash fund managers.
The Welfare State was implemented to assist those in society unable by circumstances beyond their control to help themselves. State assistance with obligation and not to create a ‘culture of dependancy’. British Industry was decimated in the 80’s by a Thatcherite govt that renaged on a promise to replace it with anything else. Go to Bradford, Birmingham, Coventry, Crewe, most of Yorkshire, to name a few and see how exactly ‘the quality of life’ is for the men there. Only recently was the minimum wage implemented in this country (opposed by the Tories) by Labour, a visit to any Job Centre in the country will show you that not all employers are willing to comply with that, and openly state their desire not to do so. Accusing those on benefits of being scroungers, work-dodgers, cheats is sloppy Daily Mail mud slinging.
Adding 500,000 more to the dole queue, as Osborne did at a stroke last Wednesday is not the particularly progressive. Perhaps, Peter, you think they will have a better quality of life as a result?
Excellently put Peter. Yet again Mr Campbell attempts to pin all the blame for the defecit and the rocketing debt on “the Banks”, forgetting that Brown went into this (having changed bank regulation) with a £50bn annual defecit at a time of high tax receipts – or boom if you wish.
It really wasn’t the big boys wot did it and ran away, a majority of the responsibility for this mess lies with the Brown government.
Chris – still here?
Don’t you have a job to go to?
No sign of a university education either in “having changed bank regulation.” Make your evidence clear. I’d suggest you dwell on the fact that Cameron/Osborne criticised Brown’s finance policies for being too strict in terms of regulation. I’d point you also once again to Paul Krugman telling us last week that “Britain…which came into the crisis with relatively low public debt…”
Krugman is a Nobel Prize-winning economist. You are just a ninny who posts like a 12 year old to a website for grown ups.
RRR
Communicator, writer, strategist… really? Sorry, no-one’s listening any more, love.
How the frig would you know, darling?
RoadRiverRail
You wish!
Quite simple really,drivel…I mean,Roadriverrail – you earn a bonus of £49k by making the bank typically £1-2mln in profits,whether directly or being part of a team that makes considerably more than £1-2m profit for the bank.You work long hours under pressure,if you don’t cut it you are out in fairly short order.That profit is then taxed and given to the UK Govt.God knows how much tax the City pays on average every year in that last 30yrs but I’m guessing you will know.I’m also guessing that your so called friend’s daughter goes out spending her bonus most days/nights directly putting it back into the economy and the cycle begins….Tax evasion is so overblown and in no way the norm.
The number of people who blog on here who actually receive a high proportion of their income in welfare benefits or are actually considered to be poor is nil.I would also suggest the vast number of people who blog here are not in vast amounts of debt and certainly not to the extent of the UK govt in % terms.
None of us can claim to know how benefits are really spent or indeed if they are deserving completely 100%.I think we have to assume that the Coalition really have done due diligence and worked out that the welfare system is simply not working for the good,economic good or otherwise.
It was quite simply unacceptable to have employed 1m extra public sector workers with no accountability of value for the taxpayer.
Marcus
you somehow think that criticising fund managers is going to change what they do and how they do it, which will affect job creation?
Get real, for Christ’s sake.
And read Will Hutton and others. For years before the bank crash he was bemoaning the fact that the banking sector was creating financial instruments ONLY so they could earn commission, thereby earning massive amounts of money. He was and is saying that their contribution to the UK economy was absolutely minimal.
All this government stuff about needing to close the deficit and cut the public sector, it’s all lies and propaganda. I’ve just heard Richard Koo, Japanese finance and economics expert on Newsnight, telling us that what we and the rest of the West needs is fiscal stimulus, not retrenchment. And if he’s a centrist, never mind a leftie, then I’m Long John Silver’s wooden leg. I felt almost embarrassed for the BBC, who have been so faint-hearted on the economics of the past 5 months it’s enough to make you cry.
Finally, do I get a sense of you actually believing that there is even the remote possibility that ‘public sector workers are responsible for the crisis’? PUBLIC SECTOR WORKERS RESPONSIBLE? Are you out of your ****ing mind? Who on earth told you this? Is it someone in the newspapers? I’m telling you, this is like saying the jews were responsible for the holocaust.
You’re telling me a teacher, a nurse, a library worker, a policeman, a dustman, an occupational therapist CAUSED this crisis?
I’m sorry to repeat myself but I’m only just grasping the enormity of the gigantic con being perpetrated by the Coalition and the media.
RRR
PS Does anyone have Batman’s phone number?
You think I talk drivel, fine. I think you’ve got no brain at all. Whatever you had to start with disappeared up your rectum a very long time ago on the evidence of the above post.
“I think we have to assume that the Coalition really have done due diligence and worked out that the welfare system is simply not working for the good,economic good or otherwise.”
What they are doing has nothing whatsoever to do with ‘working out’ anything for the good of the country. Let me give you a history lesson, you lame excuse for a citizen of this proud country. The Conservative Party has always existed to preserve the power, prestige and money of the upper classes. It hasn’t changed. Look, for crying out loud, at last week’s CSR and all the lies, propaganda and associated bullshit that’s been pouring out of them for the past 5 months. If you’re one of them, then you won’t hear it because you don’t want to.
When you study history and politics you assume almost nothing. You watch and you listen and you study and you read and you learn. And then you speak (if you want to).
“It was quite simply unacceptable to have employed 1m extra public sector workers with no accountability of value for the taxpayer.”
Tell me where the accountability of value for the taxpayer of the private sector which is supported, aided and abetted by the state. The idea that the private sector is on its own and the public sector is featherbedded and lazy is stupidity beyond belief. Where is the value to the taxpayer of the money that goes to fund the charitable status of the private education sector?
And where do you get this million “extra” public sector workers? What concept is this? Extra to what? You’ve just read the right wing press, heard the Coaliton going on about pampered public sector workers and swallowed it like a dumb fish. Or more likely, you just believe it because it suits your weltanschaung. (which means ‘world view.’).
On the evidence of this post you have no understanding whatsoever of the public sector, or indeed, economics. On which point, your ‘none of us knows how benefits are spent.’ Try studying some economics. Try going out of your home and looking around you.
RRR
Oh, dear, resorting to unpleasant personal comments RRR? Grown up?? I prefer reasoned argument old chap.
A couple of years ago the UK banking system was on the point of total collapse. Is that a fact or am I being misled by the likes of Alastair Darling and Vince Cable? If it is a fact, then what would have happened if there had been a Conservative or LibDem government – or a Coalition of both – at the time? Correct me if I’m wrong but I think that billions of pound of taxpayers’ money would have been used in a banks’ bail-out – though it would have been called something more abstruse and scientific, like ‘quantitative easing’. What did John Major’s government do in response to Black Wednesday in 1992? Wasn’t a lot of taxpayers’ money thrown at the system to keep it afloat? It was a lesser and different crisis, but didn’t it evoke a similar response?
You are out of touch, the younger generation also know exactly who Alastair Campbell is, and they have a lot of respect for him, I know this through my 19 year old son and 15 year old daughter, and their friends, so you are wrong.
No you d*ckhead GB caused it buy falsely telling your perfectly good hearted colleagues in the public sector that the State had a never ending cash pile to hire them and look after them for life – you get real.
As for the expert on the Japanese economy – he clearly is not very good because Japan my friend has been in the shiite for about 16yrs now,spending every penny they have to prop up a pack of cards…move on mate you lost this arguement back in May
Calm down mate you will bust a blood vessel….
As Adair Turner said, they’re socially useless. Time to make them pay though as Vince said they’re guilty of casino capitalism.
I wholeheartedly disagree. Alastair Campbell talks sense and is someone TO listen to
S
None of your points are worthy of being answered.
Your brain is a toilet.
RRR
I’m a bit confused by this response. No, I don’t think that teachers, nurses etc. caused this crisis – that’s why I said right at the get go that “clearly they’re not (responsible)”. Which part of that didn’t you understand?
(The least said about your holocaust analogy the better but for what it’s worth, I think it is despicable also for people to refer to ‘deficit deniers’ or ‘climate change deniers’ for that matter – it’s simply not an appropriate analogy.)
I’ve read Will Hutton, thank you, I just don’t happen to agree with him. One of the reasons, incidentally, that financial instruments became so complex was the hunt for yield (yes, making money, if you like – it’s not a crime!) and this was driven in part (please note IN PART) by loose monetary policy (low interest rates, particularly in the US) and over- (yes, OVER-) regulation, which had the effect of making it difficult or impossible to make a return on ‘conventional’ instruments.
Likewise, I don’t agree with Richard Koo and you’ll find plenty of economists of equal standing who don’t share his analysis.
It seems to me that it is you, rather than I, who is guilty of putting blind faith in what “someone told” me or what I read in “the newspapers”. you know the stuff: it’s the banks that got us into this mess, the Tories are evil, deficits don’t matter, giant con being perpetrated by … Oh, yes, because I’ve actually done you the courtesy of reading your response (a novel concept to you perhaps), I see you that you do know the sort of stuff I mean.
It’s called passion.
I think we are winning the argument….well done Marcus a great response
Sorry – I don’t deal in tautology. Not this time of night anyway.
RRR
PS You smell.
Sigh. The UK did indeed come into the crisis with a low stock of debt. But there’s a difference, which you are seeking to elide, either deliberately or through ignorance, between debt and deficit. Our deficit is one of the highest in the G20. As you borrow year-on-year (deficit), the total stock of debt also builds – so while we may have started low, Brown doubled the national debt and the plans Labour had in place going into the election would have seen it double again over the life of the Parliament. Even if you don’t include off balance sheet items such as PFI liabilities and public sector pensions. The coalition’s plans bring down the deficit but that only slows the rate of growth of the debt.
The point is, that it’s the pace and direction of travel that matters most fiscally. The path Labour had us on was, in my view and plenty of others’, unsustainable. The coalition has done something to address this.
Krugman is a sort of uber-Keynesian academic – and while obviously one has to respect his learning, he’s not necessarily an authority on how markets behave in practice. Not that I’m setting myself up as being such – just that there are other economists – read Greg Mankiw’s blog, for example – who are as ‘learned’ as Krugman but tend to take a different view.
The cold, hard fact is that if you want to borrow money, there needs to be someone who is willing to lend it to you at a reasonable rate. whether bond markets are rational are not is entirely irrelevant – in fact, on Krugman’s logic, it seems to me the argument that markets don’t act rationally supports the case for deficit reduction.
Marcus, almost all knowledge is derived from reading other people’s work, who are more expert than us. Because my politics are leftwards, naturally I’m attracted to the likes of Hutton and Krugman and Koo. But it’s important for me not to believe in duff arguments. When Krugman writes that austerians like Osborne are wrong in their diagnosis of current economic problems, he says that they are not based on observational fact. Krugman is an academic, and he simply cannot get away with making arguments he cannot substantiate. It would completely ruin his professional credibility.
So, I choose Krugman and Hutton, who always reasons very closely, supporting his theses with fact, and you can choose those on the other side of the argument.
To say that I put ‘blind faith’ in people does you much discredit and you should stop saying such things.
One sideways point. The Tories are as close to evil as make very little difference. Their hunger for power causes them to be guilty of vast lies and hypocricies, much worse than anything I heard from the Brown and Blair governments. For example, the past 4 Tory leaders slung the !spin” mud over and over again, and yet they spin much more flagrantly and ruthlessly. They lie and propagandize and don’t give a shit. In a way, I wish my Labour people were more like them, because lying works, Certainly it does if you have a goodly chunk of the press on your side to support the lies and spin with more of the same. And here I’m not trying to wind you up or tease you. I’ve closely observed the Tory party since 1979 and I know what I’m talking about. So the picture you’re trying to present of me believing anything I read is wrong. And sometimes what sounds like mere hyperbole is actually a calm rational believe. The Coalition is trying to perpetrate a great con on the people. It’s obvious and hardly a wild or radical thought.
RRR
PS I note your ‘over-regulation’ point. You cannot be seriously suggestuing that the pre-crash financial markets were over-regulated. Unless you’re on the rapidly free-marker libertarian right. In which case, it’s been fun.
I’m not sure why you think it does me discredit to say that you put blind faith in the Huttons and Krugmans of this world, but apparently is a mark of distinction and irreproachable logic when you accuse me of the same in your initial response to me.
In my own experience, academics frequently make arguments they can’t substantiate – and since you will, as in this case, very often find academics making diametrically opposite arguments, it simply must be the case that one or other of them (or possibly both) is wrong.
And I’m not necessarily arguing that the financial sector was over-regulated in general. I do think, though, that there were aspects of regulation which were overly prescriptive and had a distorting effect on market activity. As so often, regulation which is well-motivated has unintended consequences and in this case it created a space for lots of OTC derivatives trading which effectively pushed out conventional instruments.
So the issue is not so much one of over- or under-regulation in general, but of appropriate, proportionate and perhaps most importantly risk-based regulation.
I don’t think you’d find too many ‘rabidly free-market libertarians’ writing that last sentence, do you? But then, I wonder whether you’re actually capable of conducting an argument in rational terms rather than simply trying to put people into boxes of your own-making? It really doesn’t matter how much you try to claim that your description of the Conservative Party as evil (or ‘as close to evil as makes very little difference’) is based on observation. Any genuinely rational person will conclude that the lens through which you are looking is seriously distorting your vision and, as a result, your thinking. I can assure you that no matter how closely you have ‘observed’ the Conservative Party, you have not done so as closely as I have, and the caricature you paint bears no relation to the vast majority of good and decent people I know personally in the conservative ‘movement’. But I doubt you’ll even acknowledge that such a thing as a ‘good and decent conservative’ exists.
S
There’s a very good primary school near where I live with a couple of spaces in their reception class.
Koo asserted very forcefully that what world markets want now is fiscal stimulus.
You need economic activity, growth, not a slashing of govnt balance sheets. You fear debt; I don’t, I don’t because I trust Krugman, Hutton, et al. Look, what we have here is a philosophical cleavage between us: you’re right wing so you believe any right wing economist going. I’m towards the left so I latch on to centre and leftward economists.
But what you can’t escape is that Osbourne is trying to buck economic theory from the pre-Keynes era that palpably didn’t work. Indeed, was disastrous (see the response of the Coaltion and Tories under Bonar Law to the collapse of 1921). Uber-Keynesian is good. I believe Keynes, presumably you don’t. I think the UK economy is going to suffer from the deficit slashing because it’s going to rip the guts out of consumer confidence and we’re going to get a downward multiplier effect from the job losses, pay freezes and tax rises.This is standard economic theory and I believe that this is how it’ll play out in the next three or four years. We haven’t even gotten onto the human misery this is all going to cause, which is important. There is a moral question that the Tories (nor Clegg) aren’t interested in facing.
There’s also the bank greed, bonuses, etc, acting as a massive disincentive to working hard and honestly and believing in ethics and morals that we don’t have time for. All round, right wing thinking and right wing actions to me is and are destructive, immoral and utterly repellant. I’m fundamentally disgusted by Conservatives and the -ism that goes with them. If I wasn’t basically a moral thinker I’d be happy to have the lot of them put up against the wall and shot. The world would be much happier and wealthier without them.
RRR
You’re just not dealing with the issues. If all you’ve got to offer is emotional anti-Conservative invective, you’re not even bringing much to your own side of the ideological divide, let alone to the potentially constructive debate between the two.