Martin Kelly writes:
The cockamamie, Heath Robinson nature of the banking bailouts, which seemed to enable the bankers to remain as arrogant as they always were while swathed in the comfort blanket of taxpayer funds, makes one wonder why they weren't all just nationalised outright.
If governments were to be asked about this, they might state their fear of 'capital flight', the principal cause of the Asian banking crisis of 1997; if foreign investors see a country's banks being nationalised, the domino effect produced by the hitting of 'Send' keys in glass towers will collapse your economy in seconds - such are the vagaries of modern economic theory, it might even collapse before you've made the decision to nationalise. These economists are all really sharp cookies; an expression which, like so much in economics, should properly be considered a contradiction in terms.
Capital flight is one of the most interesting phenomena of modern times. It seems strange to believe that digital money can cross the globe unimpeded at lightspeed at the same point in history at which it costs £14.50 for a weekly bus pass to take you from one side of Glasgow to the other, and when the UK now has a particular train fare that costs a grand a pop for a ticket, but there you go. As far as the UK's concerned, of course, capital flight was never on the cards for a moment. While the banks might talk up Burundi's potential as a developing economy, and bellow like mountain gorillas about how they'll move your money away from you if you don't do what they want, London has a number of amenities - such as Harrods, Harvey Nichols, The Royal Opera House, The British Museum, Latvian whores, the Theatre Royal, Drury Lane, and the number of a reliable coke dealer on your speed-dial - which Bujumbura might lack; and let's face it, nobody really wants to foul their own nest. Bankers might view postings to exotic locations as being good for their careers; but I'm also sure many hope that such postings will be for as brief a period as is humanly possible.
As an aside, if the UK were to suffer from capital flight, it would expose the extent to which government no longer controls the economy; and we can't be having that. One wonders how long it will be before the post of 'Chancellor of the Exchequer' is declared obsolete; if the banking crisis has shown nothing else, it's that the guys with the money are always in charge, and that the bankers always seem to have the money even when they're bust. There are those who believe this lack of control to be a good thing; given that all views on this matter are likely to be wrong, I am neutral one way or the other.
However, what those who tout deregulation, are for 'cutting red tape', and the unending procession of old, fat, hardfaced men who bray (and I mean really bray, like donkeys - somebody pin a tail on them, please) that what's 'good for business is good for Britain', aren't ever now challenged upon is why one section of national life should to all intents and purposes be exempt from the oversight of the law. At bottom, that's what deregulation means; the private human being is to be governed by law but the business sector isn't. They seem to believe that laws are good for you but not for them, so shut up and do as you're told. This legalophobia invests limited liability companies, entities which cannot be said to exist in the real world other than through the operation of legal fictions, with more rights than you and me; for legal vacuums do nothing but invest those who live in them with absolute rights.
The way in which the culture of deregulation expanded at the same time as the contraction of civil liberties makes one wonder whether liberal capitalism needs illiberal laws to operate most efficiently.
But that's all by the by. The flightless bird which is the capital produced by fractional reserve banking was never going to take off. The reason why we now own banks but don't seem to have any say in how they're run might be more mundane.
If the banks were nationalised, everything in them, from the dealing records of the young, lean, hardfaced men whose actions were always cheered on in the good times by the aforementioned old, fat, hardfaced men, to the negotiations which went into the accumulation of the old, fat, hardfaced men's' pension pots, could have been subject to the terms of the Freedom of Information Act. You could have been able to see how Fred Goodwin came to be awarded a pension of £600,000 a year (if memory serves, also index-linked - none of that inflation rubbish for the bankers); and you could also have been able to see how the 'sanctity of contract' which meant he couldn't be stripped of the lot also meant that he was probably entitled to only about two-thirds of the original total. The negotiations regarding the reduction in Goodwin's pension would certainly have been interesting to read.
The banking bailouts were not really about saving the banking system in the end; they were about saving bankers. There was no reason why the banks couldn't have been nationalised. A good dose of humility is what these people needed; they would not learn it of their own accord, and it is a pity that the peoples' representatives did not see fit to impose it upon them. This was bad for bankers' mental health, as it gave them the impression that, no matter what they do, the taxpayer will always act as the lender of last resort, a state of affairs guaranteed not to produce the inhibition which the current fiasco has definitively proven to be necessary in bankers' characters.
But it was also bad for democracy; one set of individuals has been protected, while everyone else gets thrown to the wolves. All political parties are mere gangs; yet it does not matter a jot which gang had held office at the time the crisis broke, so to speak. Mainstream British politics is now so monoideological that they would all have adopted the same solution; and don't listen to any of their shills who say anything different. In 2008, it was not merely 'the banking system', that entity which it is often forgotten is nothing more or less than the bankers who work within it, that failed; government failed as well. By failing to be even-handed, it made us a two-tier nation; it is to be hoped that this point, the point at which the maintenance of some commercial activities became more important to the state than its discharge of its duties to the people, and commercial secrets assumed a higher importance than state secrets, is not an event which future historians might one day ponder as being one of the milestones we passed on the road we travelled towards the loss of our democracy.
And to you, Martin. And to you.