Nick Clegg sets out his answers over on Comment is Free.
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3 Comments
It’s an OK article, but the language is a bit stale. For example, the opening sentence (‘These are dark days for the economy’) is doom-laden, but doesn’t tell us anything that isn’t implied by the second sentence.
I remember when Francois Mitterand nationalised the French banks in the 1980s. The policy was a disaster and the conclusion was obvious; socialism doesn’t work. I for one believed that argument and I have not felt the need to change my views a great deal since, whilst many socialists and ex-socialists have.
What I find curious today is how the argument is turned on it’s head. The social impact of a large high street bank going out of business is simply too much to contemplate. So our policy is to nationalise Northern Rock. And now I notice Nick Clegg believes that politicians should have more of a say in how banks conduct their affairs.
I agree with him, given what he is suggesting.
But what we now have is a set of private institutions operating in the private sector but without the insecurity normally demanded from market forces that they could go out of business if they are not competitive.
It seems that policy makers are dammed either way; we do not want to nationalise them, but we do not want them to go out of business either.
In addition there is another point we need to address; the short-termism that seems to be one of the fundamental weaknesses, not only of banking but of markets in general.
Banks invested in the sub-prime markets, not because it made economic sense, but because that was where the short term profits were, and if you do not do what the others are doing, you are losing to the competition. And you are missing out on your bonusses as well.
It was a blow that the government had to nationalise Northern Rock, but imagine the impact if several banks had to be nationalised, the costs would have spiralled out of control.
We need a new economic model for banks. It is easy to say what it shouldn’t be; state control or pure private sector. But what should it be? Can the Lib Dems come up with something?
As the first commenter on CiF says, it is not the responsibility of government to mop up after people who have borrowed irresponsibly, surely, just as it is not our responsibility to mop up after banks who have borrowed irresponsibly.