In it together: Faces of the credit crunch from 2008: Clockwise, Tom McKillop former chairman of RBS; Alastair Darling, Chancellor of the Exchequer; Gordon Brown, Prime Minister; Sir Fred Goodwin, former chief executive of RBS.
ANDY FLEMING turns his sceptical eye on a largely unregulated and archaic economic system still based on greed. It's a system where financial institutions responsible for the present crisis are once again back at the trough.
I have very little time for UK politicians of any hue. When push comes to shove and when money or self-advancement beckons they generally renege on their promises and throw out their principles. Tories magically become socialists, socialists show how some pigs are more equal than other and Liberal Democrats... well they just opportunistically jump on whichever bandwagon of the former parties looks most attractive.
But it was particularly galling to hear the Chancellor of the Exchequer, George Osborne last year announcing his half-hearted levy on bankers' bonuses, stating that the age of retribution when it comes to Joe Public versus greedy Mammon is now over. Far from it mate... nurses, teachers, librarians, and hundreds of thousands of workers from both the public and private sectors in the UK are losing their jobs in droves. Minds are crystalising with thoughts on how can it possibly be that the people who caused the financial crisis are troughing it again.
So let's get this right. For the best part of twenty five years, ever since a huge slice of UK Manufacturing plc was closed down by Margaret Thatcher, the British have financed their over-lavish lifestyles on cheap credit, obtained from an unhealthily large financial sector... with money borrowed by the banks from the Far East and China (wealth created incidentally by people on poverty wages, many living in police states).
This perverse type of economy, overly dependent on financial services has been augmented with income from tourism, services and retail parks. In brief, we don't actually make anything anymore. Politicians didn't just allow this situation to occur; they actively encouraged it by removing regulation. The excuse was that if regulations weren't relaxed the bankers and their money would go elsewhere, and argument that is still used today when it comes to taxing bonuses. And so, this financially apocalyptic but symbiotic relationship continued... politicians were literally in the bankers' pockets... a huge slice of tax revenue was dependent on it.
With politicians and bankers both in the trough of easy borrowing, the carrot of cheap credit was dangled in front of a largely gullible public brought up on a media espousing the benefits of conspicuous consumption. Second hand Sierra and Cortina man became brand new 'on tick' Mondeo man. As the millennium turned and the supply of cheap credit increased the Mondeos were replaced with BMWs, Audis and Mercedes.
Today, even in the poverty stricken north east, they're ubiquitous along with all the other trappings of modern consumerism, the five bedroomed detached executive home, flat screen televisions, two annual weeks in Florida and season tickets for haute cuisine restaurants and to see gold plated soccer prima donnas. Everyone was happy, or so it seemed... bankers were getting obscene bonuses, politicians had bought popularity with cheap credit, and Joe Public enjoyed the delusion of having more material goods than ever before. Much more worrying was the fact that governments around the world had joined their electorates in a public spending credit spree that was generating unsustainable budget deficits, often using bad value private finance initiatives. In the UK, for example, for every four pounds spent in the public sector, one pound had to be borrowed.
Today, even in the poverty stricken north east, they're ubiquitous along with all the other trappings of modern consumerism, the five bedroomed detached executive home, flat screen televisions, two annual weeks in Florida and season tickets for haute cuisine restaurants and to see gold plated soccer prima donnas. Everyone was happy, or so it seemed... bankers were getting obscene bonuses, politicians had bought popularity with cheap credit, and Joe Public enjoyed the delusion of having more material goods than ever before. Much more worrying was the fact that governments around the world had joined their electorates in a public spending credit spree that was generating unsustainable budget deficits, often using bad value private finance initiatives. In the UK, for example, for every four pounds spent in the public sector, one pound had to be borrowed.
Some more sceptical working people, myself included, had worked out where the money was coming from, and knew it couldn't last. And sure enough, the financial house of cards collapsed in a way far more spectacular than anything Hurricane Katrina produced. The banking and credit greed fest had over extended itself, even by its own low standards. People were defaulting on loans like never before as oil and commodity prices went through the roof... banks and their shareholders became nervous, very nervous and all of a sudden the scale of sub-prime toxic lending suddenly became known. In the UK the run on the banks required £175 billion of taxpayers' money just to stop the banking system going into meltdown. Banks such as Northern Rock and Royal Bank of Scotland were effectively nationalised. In the US the bankruptcy of Lehman Brothers sent a seismic financial earthquake around the globe.
The stabilisation of the financial system has not as yet improved lending to either individuals or businesses and a double dip recession still ruminates on and on. But more concerning is that as Charlie Rose, a former US radio host commented on the BBC recently, no lessons have been learnt either from the economic crunch of the thirties or the noughties -- the people running this corrupt financial cartel have just too much money on it. Another financial meltdown will threaten once again in the future... it’s not a question of ’if’’, it's just a question of 'when'. That's why these self-same individuals and their political sheep don't want more financial regulations. To elongate their snouts they actually want less! And it was a lack of accountability and regulation that has caused the crisis in the first place... a lack that goes right back to Margaret Thatcher, Ronald Regan and their obsession with economists such as Friedman and Hayek and their sentiments that regulation is a 'Road to Serfdom'.
It will once again be taxpayers throughout the world who will again be required to bail out the banks, the bankers and their obscene bonuses. It's inevitable in a financial and economic system that depends on greed to function without proper regulation... without it, the whole edifice of our crude economic system would truly collapse. Surely there must be an alternative to this crude, archaic, demented and socially divisive system otherwise known as free market capitalism. Although Charles Darwin balked at the idea, we live in a system whose polite veneer masks its true awful identity. It's social darwinism masquerading as social democracy, and it doesn't bode well for the future of the UK or global economy or come to think about it, mankind. The bottom line of all conflict is economic and greed. Unless we raise our more pleasant attributes up on to the pedestal, we are in effect apes with nuclear rockets... a horrifying future.
It will once again be taxpayers throughout the world who will again be required to bail out the banks, the bankers and their obscene bonuses. It's inevitable in a financial and economic system that depends on greed to function without proper regulation... without it, the whole edifice of our crude economic system would truly collapse. Surely there must be an alternative to this crude, archaic, demented and socially divisive system otherwise known as free market capitalism. Although Charles Darwin balked at the idea, we live in a system whose polite veneer masks its true awful identity. It's social darwinism masquerading as social democracy, and it doesn't bode well for the future of the UK or global economy or come to think about it, mankind. The bottom line of all conflict is economic and greed. Unless we raise our more pleasant attributes up on to the pedestal, we are in effect apes with nuclear rockets... a horrifying future.
Humans have walked on the Moon, a cure for cancer is around the corner and it won't be too long before quantum computers make an everyday appearance. The strides forward in science and computing have literally been astronomical, even in just the last decade. Chemists, physicists and biologists should be well proud.
Is it not possible for the human intellect, capable of so many fabulous achievements to extend such advancements to the field of economics. Isn't it time economists pulled their socks up and devised new national and international economic and political institutions that will end extreme greed, extreme poverty and cyclical economic crises? Possibly not: the current system seems to meet the needs of the wealthy, greedy and powerful very well indeed. Why would they wish to change it?
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