Over the last few days, President Obama has surprised the world’s press, the political movers and shakers, and indeed the press department of the Liberal Democrats by stealing a key Lib Dem policy, when he announced two major new strategies in the global efforts to ensure that there is no repeat of the financial crisis that has swept world markets, and deprived so many of their jobs.
Firstly, he announced that it was the intention of his administration to levy upon the banking organisations a tax on their financial transactions. Secondly, and much more boldly, he declared war on the culture of the mega bank, assuring the American public that never again will banks become too big to fail. This is all very laudable in terms of being seen to take action against the institutions that were the harbinger of the global financial meltdown, but it also gives light to other, more intriguing ramifications, both in terms of the effect on international banks, and indeed the effect that these actions will have on influencing British government policy.
I have to say that both of these policies do not leave the British government looking particular competent, or indeed effective in tackling the root cause of the recession.
Labour’s response to the ambivalence of the banking sector to the hue and cry over bonuses was to grasp at the headlines by applying a one off windfall tax on bonuses over £25,000. Of course, the blood hungry media lapped this up, and at least for a few moments, danced around the fires which they hoped would roast the burning carcasses of the banking fat cats.
This policy however is deeply flawed, and is indicative of the government’s desperate desire for any kind of positive media coverage. It is flawed in that it fails to tackle the underlying problems that still exist at the heart of our banking system.
The fact that the government are prepared to cream off £25,000 from a banker’s bonus will not lead to an end to the bonus system, and the way in which it disfigures the judgements of the bankers who chase it. More importantly though, it will not lead to the type of cultural change that is needed in order to move away from the backdrop of avarice, before which our banking system rots our economy to its very core by way of the ‘casino with impunity’ mentality.
If I were a banker receiving a bonus worth hundreds of thousands, or indeed millions of pounds, a windfall tax of this kind would not even make me bat an eyelid. Policy lurches of this type only serve to underline the fact that the government are when it comes to fiscal policy, akin to a ship with a jammed rudder; going haplessly round in circles with no relief, redirection, or dry land in sight.
The second of the Obama proposals on banking reform concentrates, as I have mentioned above, on the intention to ensure that the banks are ‘sectorised’ in order to ensure that they do not in future have the ability to so adversely affect the world’s finance markets. This is in my opinion, one of the first instances of truly far sighted and innovative measures being taken by any government in response to this crisis.
For far too long, the multi-national institutions within which we place our money, have taken that hard earned cash and gambled with it on the international markets, seeking short term fortunes in bonds, derivatives, hedging and the like. Meanwhile, these same institutions have hit the ordinary hard working men, women and businesses of this, and other countries with penalty charge after penalty charge for going a few pounds, or even a few pence overdrawn, all while they have been losing millions.
As an aside to all of this, we have recently seen the conservatives sounding the alarm bells over the post Lisbon treaty appointments within the EU. The conservatives maintain that Britain has been out manoeuvred by our European neighbours in these negotiations in that, they allowed the selection of Baroness Ashton for the post of EU High Representative for Foreign Affairs in order to facilitate the filling of the financial services commissioner by a Frenchman who has since gone on to make noises within the French and European press about how he will seek to tame the City of London. I for one believe that this new French commissioner for financial affairs is only making what noises he believes will keep the domestic audience happy. (And what British politician could ever be accused of that?????)
In any case, this is an interesting, yet irrelevant side show, at least in the short term, and I find it breathtaking that the conservatives have so badly misread the situation that presents itself.
The simple fact of the matter is that the biggest influence in terms of change in the City of London will not be coming from across the English Channel. It will come from across the Atlantic.
On the TV shows, and at political talking shops, the tories are bleating on about how it is that the French will end up having the controlling hand over the actions of the square mile. Yet they fail to realise that the actions of a building full of outdated and disgruntled republicans over in Washington DC will have far more control over what goes on in terms of fiscal policy, and this will happen for the following reasons;
• The current Labour government are, as I have intimated, desperate to be seen by the general public, and indeed the media as doing something to try and put right what has gone so horribly wrong within the nation’s finances. The simple truth of the matter is that they are quite simply bereft of ideas, therefore they will, in the fullness of time jump on the ideas that have been vaunted by Obama regarding financial regulation. We have seen a cautious reaction from the government to what President Obama has said on this subject, and I would wager that this is simply the government playing for time whilst they observe the reaction of the British electorate to the actions of the American president. If the public react positively to these measures (and I for one cannot see anybody outside of the banking sector reacting in any way other than positively) then they will set their army of spin doctors to work on a plan that can be presented to the media and the public as the government not riding on the coat tails of the US, yet you can bet your over priced house on the fact that whatever plan is presented will read very similarly in terms of content to that which President Obama has in mind for Wall Street.
• The US political landscape is not one of happiness and light right now. The Democrats have lost their majority in the Senate, and Washington is only a few steps short of all out war between the two parties, such is the residual bitterness of the Republicans at the loss of the presidency, and indeed the political impetus. The Republican party has gone on record as stating that it has no intention of voting to pass any measure that Obama puts before them, and you can bet that his proposals to reform the US banking sector will be no different. US Politics is one of self interest, lobbying, and money doing the talking, all to extents that Westminster could only dream about (and I’m sure that some there do frequently) The Banking sector is similar to the oil industries, in that it has much of the Republican movement eating out of its hand, and I can imagine that the highly paid, highly trained and zealous lobbyist movement is descending upon capitol hill as you read this, desperate to avoid any law being passed that will actually make the bankers responsible for the damage that they do!!!
It doesn’t take a political psychic to determine that any proposed legislation is going to be stuck in the cycles of Senate and House of Representatives for a long time to come, with the Republicans blocking the democratic proposals, and the Democrats becoming increasingly outraged, and engaging in the same tactics, blocking legislation concerning other issues.
Back in Westminster however, things are not that much better;
The Labour government looks on cluelessly, their noses turned windward in order to catch the prevailing breeze, and legislate in accordance with all that it brings.
The Conservative party maintain their positions; occupying the optimum seats for throwing disdainful looks across at the Labour ministers as they sniff the wind, the tories casting their collective gazes across the channel to the European parliament, banging their saucepans and pointing at the European Commissioners that they believe will bring the downfall of the City of London, and plunge the UK into a future of brown Lada’s and socialism.
The most intriguing thing that occurs to me whilst looking at all of this, is the striking fact that the leader of the richest and most powerful nation on earth is a liberal Democrat!!
For quite a long time now, Vince Cable MP has been pushing for the breakup of the banks, and for measures to ensure that the City of London is never again able to sabotage our whole economy (even the Governor of the Bank of England, Mervyn King agrees that this must happen in the interests of economic stability in the future)
Time and again, the other two parties have rubbished the Liberal Democrat proposals, each claiming that they are the only ones who have the one definitive strategy that will prevent this whole sorry affair from being repeated.
Now it looks as though these very measures are going to be what President Obama attempts to implement in order to bring the banks in line, and quite right too.
What we need here in the UK is somebody in Number 11 Downing Street who has the bottle, the foresight, and the economic competence to do what is needed and instigate real and radical reform of our banking industries.
Labour have shown, time and again that they have nobody. Alistair Darling does not have the vision, Ed Balls cannot see past the next poll of his leadership chances, and David Milliband would not know where to start, largely due to the fact that he is a serial bottler. (If you don’t believe me, look at the last failed attempt at a Leadership coup. If Milliband can’t even take on a lame duck Prime Minister, how on earth will he face down the self interest and abject greed of the big banks?)
If Vince Cable were Chancellor, these tough decisions and radical measures would be put into practice.
What we need is a clear system of regulation whereby the Bank of England has the power to intervene in problem institutions, and has the teeth to police the banking sector properly.
We need a clear separation of the investment and retail banking operations of the multi-national organisations. It is no longer acceptable that your life savings should finance the purchase of a hedge fund in some far flung tax haven.
We need a Chancellor, and a government with courage, strategy, vision, and the best interest of Britain and its people at heart.
All of this aside though, the events and actions that are centred around these developments have laid bare the true natures of the main political parties, and highlights the true choice at the next election;
The Labour Party will, as they have seemed to do for a while now, continue to scamper around the political landscape like an excited puppy, lurching and jumping at whatever idea or proposal that looks like having even a modicum of popularity, snapping and barking insults at the other political parties as the situation becomes ever more desperate.
The Conservatives will continue to growl and holler at mainland Europe, their preoccupation with the inception of a French financial commissioner, whilst the domestic quarrelling over in America between democrats and republicans continued unnoticed demonstrating the fact that they are far too obsessed with playing to the gallery of red top papers, rather than judging the political landscape correctly and formulating a policy that will actually provide the British electorate with a true choice.
I still passionately believe that the Liberal Democrats are the only party that is offering any sort of tangible policy that can truly have the effects that we all desperately wish to see; a tighter rein on the City of London, fairer and more progressive taxation that prevents the richest few from paying less tax than those who clean their mansions, and a clear strategy aimed at getting the country back on its feet again, both financially and industrially, both through the sustenance and development of existing industry and commerce, as well as the burgeoning green industries that the UK so desperately needs to succeed if we are to build ourselves a more stable financial future that will enable the kind of political and social changes that we all wish to see, and wish to benefit from.
I take comfort from the fact that the Conservative party are still clunking around, banging the table about the same old subjects, filled to the brim with outdated ideas, perceptions, and graduates from the old boy’s networks. They have shown nothing to the electorate other than poor judgement, the same elitist preconceptions of those who they seek to represent, and a preoccupation with Europe. The really great thing is that they miss the point time and time again. Long may it continue!!
So if you really want to know where the real influence will come from in terms of regulation of the City of London, don’t look across the English Channel to the European Parliament. Undoubtedly, the EU will play a role in the medium to long term.
But the real influence will come from the domestic wranglings between Democrats, and embittered Republicans that will be taking place in the coming months within the Senate, and the House of Representatives.
If you really want to know where you can find fair and progressive policies that will make your life better, and make Britain great again, don’t look across to Labour..or the Tories..have a look at the Liberal Democrats..
I can also take comfort from the fact that, if Obama were a British voter, I’m pretty sure that he’d be with the Liberal Democrats on this one!!