‘We now have a skewed election which favours a discredited political elite’
Bubble — By Jonathan Edwards MP on January 5, 2010 7:00 am
The first Prime Ministerial debate is unlikely to match the drama and argument of the US televised specials it is based on
IF THERE was ever any doubt that the political and economic elite would act for any reason other than their own narrow self interests, the response of the three main London parties to the current devastating recession and the political stitch up of the televised Prime Ministerial TV debates have blown all doubts out of the water.
With the UK economy having lost 6% of its economic output from peak to trough in the longest lasting recession since records began, and the banking bailout having cost tax payers £1.3 trillion in loans, grants and guarantees – estimated at £40,000 per family – you would expect some element of decorum from the city bankers and casino capitalists who brought the global economy to the edge of Armageddon. We are now entering bonus season, and as a taste of what’s to come Barclays is set to pay its investment bankers £225,000 each on top of their annual salaries. With the three UK Banks, HSBC, Barclays and Standard Charter alone expected to announce £15.7bn in profits for 2009 and publicly-owned RBS and Lloyds nearly £16bn between them, so-called investment bankers across the city are expected to rake in £6bn in benefits this year on top of their salary.
These bonuses are obscene, considering the public sector cuts that all main UK parties are now signed up to in response to the bail out, and shows the utter arrogance of the economic elite at a time when the real economy could be in dire straits for years with the devastating human cost of unemployment, debt and poverty that could last a generation. As always it will be those traditional manufacturing and public sector reliant economies such as Wales’s that will be the most at risk as a result of the obsession of the London parties in preserving the wealth and status of the super rich.
When Gordon Brown in his New Year’s message talked of a return to prosperity he was obviously only talking to the select few who have benefited so much from the narrow focus of the London parties. What a damning indictment for a Labour party that has lost all sense of purpose and direction. With a million of the UK’s youth unemployed, 2.3 million children living in poverty, and a quarter of all Welsh households living in fuel poverty, you would expect a Labour Prime Minister to focus on the reality facing working people. Well over a million manufacturing jobs were lost in the UK under Labour during the ‘good years’ as a result of New Labour’s obsession with the City. And those of us who come from traditional manufacturing and heavy industry communities now face the double insult of effectively subsidising the Square Mile for the foreseeable future.
The Labour Government’s one off bonus tax was a welcome change in policy direction from the previous laissez faire approach to the City pursued eagerly by Gordon Brown in his Tory triangulation strategy. Unfortunately, as Vince Cable pointed out, the policy has more holes than a cheese grater. The bankers will not go without, with retrospective and advance payments, increased pension benefits, share options and a whole raft of other ways to avoid this gimmick policy. Far better would have been to tax corporate profit along long term corporate social responsibility lines.
We have never lived in an age where the political and economic establishment is so intertwined. Never in the history of democratic politics has the many been asked to sacrifice so much for the few. This General Election should be a genuine debate about the future direction of UK economic and social policy: how we spread wealth evenly both at a regional and individual level and turn the tide of Tory/New Labour wealth polarisation; how we develop other sectors of the economy and re structure to become less reliant on the so called golden goose of the City (more like golden noose as far as the Welsh economy is concerned); how we ensure social mobility based on ability; how we strengthen the cohesiveness of our communities; how we use taxation and welfare to help achieve these aims; an how to address the global systemic failures of the world of finance.
These should be the real issues of the day. Instead what we will get is a shallow debate at the General Election between the three London parties based on who can be the most efficient saboteurs of public investment. A policy direction whose sole aim is to keep the city creditors happy, no matter the oblivion such a policy direction will send the real economy towards.
The Prime Ministerial TV political debates exemplify this most starkly. Messrs Cameron, Clegg and Brown have really worked this one out in their own interests and the elite that they all represent. They know fully well that the General Election will now be dominated by these three televised events – the lead up and the aftermath of the debates will form the basis of public debate surrounding the election. Parties such as mine who offer an alternative vision for the economy and society will be totally sidelined as the British establishment closes ranks.
Will these debates restore public confidence in politics? At a superficial level perhaps, but until we get a real battle of ideas its merely cosmetic politics. That’s the real tragedy of the Plaid and SNP media blackout. We will now have a skewed election which clearly favours the discredited political elite.
In this context, the online media becomes even more important to offer alternative viewpoints. Wales Home.org thus might provide a forum for debate between progressive reformists who are seeking election and the regressive conservatism of the London parties and their ‘business as usual approach’.
In this spirit, here are some ideas for banking, economic and financial reform:
- Global action to divorce commercial and investment banking so that no longer can the casino bankers and speculators act with impunity – an end to so-called ‘moral hazard’;
- Develop the growth of the mutual financial sector so that companies are motivated by values other than the relentless search for profits;
- A long-term 10% corporate social responsibility levy on banking profits to pay for a redistributive economic development fund for the UK’s poorest areas. The CSR levy which will generate between £2bn and £6bn a year in additional revenue will also be used to fund acute and preventative money advice services provided by trusted third sector organisations such as the CAB, and finance credit unions;
- Corporation tax cuts and business rates cuts in the UK’s most disadvantaged areas in order to stimulate growth of local businesses and attract inward investment;
- A borrowing cap on mortgage payments of three times income in order to avoid yet another unsustainable housing price bubble;
- A change in the calculi for interest rates from the Consumer Price Index to a formula that includes house price inflation;
- A genuine progressive taxation system in its totality so everybody pays what they can afford, and an end to loopholes where the super rich pay less as a proportion of their income than their cleaners and gardeners.
The real choice at General Election facing the people of Wales lies between the London parties and their infatuation with the Square Mile and its economic elite, and a vision for developing more diverse and equitable macro-economic and social policy. It is an insult to democracy that the main media events of the election will not touch on this defining choice.
Tags: 2010 General Election, banking, Economy, inequality, journalism, media, Plaid Cymru, poverty, public debate
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23 Comments
If there is a chink of light through this gloomy sky it is that this election should further underline how the economic and political priorities of England and the rest of the UK continue to diverge. It would be nice if the London-based parties would be big enough to admit that their interest lies primarily in capturing Middle England. As such, they should leave the rest of the UK to get on with finding its own ways forward.
At the very least, if it unfolds in the way suggested here (and it seems entirely likely that it will), this election will probably bring home to people in Wales the need for further powers, and that should add strength to the Yes campaign when the referendum for further powers gets under way as expected later this year.
I’m sure the big three trying to carve up the TV broadcasts will backfire but you can see why they’re doing it. Support for Lab/Tory/Fib Dems is haemorrhaging away and they feel this will re-assert their previous dominance.
Like Duncan, I think the television debate will merely cement the impression of these people being in the bubble and speaking to each other in a language that no-one else comprehends. As such it will do Plaid the world of good to be seen as different and separate to them.
On the wider issue of tackling the global problem, Jonathan Edwards provides a real alternative that deserves wider debate. That’s desperately needed as frontline services face the chop.
The next 5 months will see the three main London parties press harder and harder on hitting the public sector, keeping on the right side of the City and driving home policies of no relation to Wales, Scotland or Northern Ireland, as the issues have been devolved. Wales faces the greatest threat as our media is compararively so weak. A huge proportion of the Welsh electorate will vote on policy issues that cannot and will not be acted on in Wales.
The 3 party TV debate will only make matters worse and again, Wales will suffer more than any other devolved nation as our media plays no part in a huge proportion of our households. I find particularly insulting any suggestion that an all-Wales debate will somehow make up for this. Such programmes will be stuck at the end of the schedules or will receive so little pre-coverage in comparison to the British party versions, resulting in only one man and his dog watching.
As a public sector worker, my biggest concern is the gap building between the London political elite and low paid workers in Local Govt, the NHS and Civil Service. The bankers are now replacing their 3 year old BMWs before the warranty runs out with their recently banked Xmas bonuses. Their lives are back to normal and so is the UK Govt policy of a receding manufacturing base and over reliance on the financial sector. Yet, for the next 5 years, public sector workers will face service cuts, pay cuts and a genuine feeling of a ‘them versus us’ society. The underclass/coping class often talked about is turning into the invisible class that exists in the US, where no-one votes and where poverty is king. The BNP will be rubbing their hands with glea.
Wales has to some extent through devolution, challenged the British approach to politics as have the other devolved nations. In this election, parties like Plaid need to drive home why Wales needs to be different. An economy based on the Financial sector and service industries will crucify Wales, especially with our high reliance on the public sector and the cuts we face. A longer term investment in home grown SME’s and a HE sector financially biased towards these firms requirements is not the short term political solution that wins votes; but is the only viable option for Wales.
I am disappointed that the author makes so many numerical statements without submitting any references. It is the same wiith Plaid’s 14 page document “Recover, Reform, Renew: The Road fronm Recession.”
For instance the “2.3 million children living in poverty” only leads to his previous article where no references are provided. It all depends on what is meant by poverty – a very relative term. Can the author provide evidence of children living without shoes, without enough food and without housing? Of course there is a poverty of aspiration, a poverty of good parental example and a poverty of good education.
Also the author seeks “A borrowing cap on mortgage payments of three times income in order to avoid yet another unsustainable housing price bubble.”
Whilst agreeing with him about the lack of good regulation that led to the present housing bubble, with the latest UK figures for median wage of £25,000 (http://www.statistics.gov.uk/cci/nugget.asp?id=285) and average house prices in the UK of £224,000 and Wales of £158,000 (http://news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/regions/html/region4.stm) , how does he expect holders of avergae negative equity of some £68,000 for Wales (allowing for a 10% deposit by the purchaser) to sustain and fund this loss?
Is it part of Plaid’s policy to fund this or should the householder just sustain the loss and explain it to his mortgage provider?
Please will the author set out, using simple maths, how he expects this mortgage policy to work and how it will be funded giving total costs of this policy for Wales and total tax implications if the funding is to be tax based..
Duncan do you really think that voters in the majority of Welsh constituencies will vote in a different way to their counterparts in the rest of the UK. There can only be two possible winners next year. The Prime Minister after June will either still be Gordon Brown ( despite the speculation I can’t see a change of Labour Leader at this stage) or David Cameron. The odds at the moment if you are betting person seem to be in favour of either a hung Parliament or a small Tory outright majority with in both cases Cameron as Prime Minister. I know there are some in Plaid who believe that a Tory government will push Wales further along the road to independence. Whilst it is probably true that without Mrs Thatcher there would not have been a ‘yes’vote in 1997. History despite Marx’s famous quote,however, often doesn’t repeat itself. If the Tories do win it will also be because in Wales thousands more voters are attracted to the Tory message than to the message of Plaid. An increase in the Plaid vote in seats such as Bridgend and Cardiff West could even let in the Tory candidate.
The hatred of the Labour Party on some blogs from Plaid activists and the positive glee at the thought of a huge Labour defeat I find baffling. We know that whoever wins next year will introduce cuts in the public sector from 2011 onwards. The timing and where those cuts will fall will have a major impact on the Assembly. There is a real danger that if the wrong decisions are taken we could be heading for a double dip recession and the problems that have beset the Japanese economy in the past 20 years. The losers of course will not be the political elite or probably blog contributors. They will tend to be those who for the past 13 years despite the huge increase in public expenditure have just about being hanging on. When I read articles like the one above I often wonder where the writer believes the extra amount of money given to the Welsh budget has come from in the past 13 years. Without the spending decisions of the UK government none of the promises in the One Wales document could be implemented. The Assembly itself doesn’t raise a pfennig. Whoever runs WAG in the next few years will have to make the tough decsions to bring public spending back into line. Of course for some irresponsible Nationalists there will always be the get out clause that its all the fault of those nasty unionists in the Labour and Tory parties who are stopping Wales enjoy the prosperity guaranteed by independence. Rather than continually criticising the party of their coalition partners perhaps it might be more constructive if senior Plaid figures began a debate on the strategic approach WAG should take over the next two Assembly terms given the financial situation that it will face.
Hi Jeff,
Sorry if my comment was misleading. I’m sure you’re right – that whoever gets to Number 10 (or doesn’t have to call in the removal men) will receive considerable Welsh support in doing so. My point was based on a suspicion (and it can only be a suspicion, we are much too early into this election) that much of the campaigning will appear to be aimed at the English electorate.
Now, there’s no doubt that the economic policies proposed by the likes of Vince Cable will benefit Wales as well as the North East, or the Midlands, or Devon. But there is sure to be a perception that these parties are speaking only to those English regions. And while we’re on the matter of perceptions, both Labour and the Tories are considered to be too close to the City. Of the three, only the Lib Dems have proposed giving the Square Mile the severe slapping that most people think it needs (regardless of whether their motives are concern for the future of the UK economy, or just good old-fashioned vengeance). This closeness matters less in London’s hinterlands, which benefit from City wealth. Wales, however, does not – or at least on a level where people are prepared to forgive bankers their greed.
My point was that if Labour, the Tories and, to a lesser extent, the Lib Dems decide to run their election campaigns in the way I suspect they might, people here will increasingly wonder why Wales is involved. As such, they are more likely to consider more seriously the proposals that we all expect to see in the forthcoming referendum on further powers.
We are where we are and our economy is tied into the wider UK economy. Sadly we do not seem to have what Jeff Jones calls for, an open and honest debate between not just senior figures in Labour and Plaid , but between respected experts in civil society as well. Our path to prosperity is tied into global and UK national recovery.
We have to concentrated on weath creation and the creation of sustainable jobs and impact that that can have. ( I am not talking green jobs here, but jobs that last )
I am fed up of hearing how poorly paid public sector workers are, as if the private sector workforce was well paid. There are many in the private sector on minimum wage ,without some of the benefits the public sector has.
Its time we looked at how we can improve prospects for everyone ,possibly if there were more private sector jobs available our public sector would shrink to a more acceptable size . Less short term iniatives going nowhere except for short term contracts.
If pundits and politicos spent as much time looking into where we can earn our own money in Wales as they do chasing grants may be we could move forward a hell of a lot quicker
Ian
I note that your ‘concern is the gap building between the London political elite and low paid workers in Local Govt, the NHS and Civil Service.’
Please look nearer to home to see unfairness. We already have a two tier society in Wales: people in our bloated Welsh public sector who have been protected from this recession so far, and private sector workers in wealth-creating industries who have been losing their jobs – for which they are paid considerably less on average (http://tinyurl.com/yz7juon). They fund generous public sector pensions when they often have none of their own.
The Welsh economy is in a dismal state. Shamefully, we have settled into a dependency culture. I shall vote for the party in Wales with the most imaginative and radical plan to create real wealth creating jobs – not yet more in the public sector that pitch us further along a downward spiral of uncompetitiveness and economic failure.
I disagree with Jeff Jones’ contention that hatred is espoused towards Labour on Plaid blogs. From reading the Plaid leaning blogs like Guerrilla Welsh Fare and Welsh Ramblings, their political thinking is in fact extremely close to what most people associate with ‘Labour’ style politics and it’s to do with opposing Conservatism which those blogs often characterise (rightly or wrongly) as an ‘English’ political theory. Perhaps those blogs are heavily critical at the abandonment of Labour values by the Labour party at Westminster, in which case the criticism is richly deserved.
British party politics is now designed to facilitate an unshakable consensus based on basically a continuation of Thatcherism. David Cameron last week said something like ‘all three of us (the party leaders) agree on the same things, it’s just how we should do them where we disagree’. I find something about that convergence sterile and bland, and no wonder election turnouts are so low.
Each of the three ‘main’/London-base parties can tinker around the edges (with the Lib Dems committed to do the most tinkering but obviously not able to win under the current electoral system), but it’s along the lines James Connolly once said where the main parties are merely committees designed to manage and defend the system- one which has been both economically and constitutionally discredited and shamed during the past 18 months. PR and devolution seem to be the only contemporary factors that could change this, but no glossy TV debate will tell us that. The TV debates thing just puts us further down the road of US-style Presidential politics based on personalities and spin rather then issues.
Angela, Will,
Totally agree with the thrust of your posts.
The question that has to be answered is: “Why should any international business wish to set up in Wales?” What advantages does Wales give over other countries?
The Welsh infrastructure is outdated – I have just tested my internet speed (West Wales) and it is 6MB download and 0.38MB upload and that is the best available here without putting in a private line. This not even adequate for a small international business that has to transmit large volumes of data.
Whilst at a meeting of multinational businessmen just before the New Year, I posed to them the question of setting up in Wales – their unanimous answer was negative as they did not want to be involved with any future regulation that may be imposed by the Welsh Language Board. Even if what they believed is not true, they had been put off by rumours of enforced bilingualism.
Mr Edwards’ article is most welcome- there isn’t enough passion around in politics so to have someone with passion, ideas and, to use the Welsh, hwyl, is doubly welcome. I note with interest the debate already stimulated. Id like to add my own thoughts if I may.
This idea that the so-called “London parties”- and by this I assume he means those that are actually fielding candidates across the whole of the UK for the forthcoming general election, (unlike his own), is somehow only interested in a mythical Middle England/London elite, living in a green and pleasant land with pots of money is so far wide of the mark is not just insulting but laughable.
Over the past twelve months I have seen friends and political opponents alike- all of whom are supporters and/or members of these so called “London parties” working hard on issues that matter to them and their own communities. I have seen MPs secure investment in Merseyside and ministers open improved capacity for Nissan in Teeside.
Similarly, I have seen local politicans from all of the “London parties” campaigning across the UK, in towns and villages, in the valleys and the metropolitan cities on health care, social care, immigration. I have seen friends from all parts of the “London parties” joining forces to combat racism and the threat of the BNP and work colleagues who would be proud to call themselves Tory campaigning against homophobia and social injustice. Perhaps its just me, but this doesn’t strike me as the politics of pandering to bankers.
Although Will’s remarks on this site were spot on in terms of how very protected the public sector has been from the ravages of the present recession thats no quite the point. Let’s be clear: unemployment has a devastating effect on people’s lives, irrespective of whether the job has been lost from the private or public sector. The last time I looked being unemployed in Newcastle or Plymouth or Falkirk was just as devastating as losing ones job in Wales. Government’s role much surely be to create the right conditions for growth and job creation, across the whole of the UK.
Im not sure I have understood the Plaid argument over the “exclusion” from the forthcoming election debates. I thought that these were debates over the parties that were most likely to form the next government of the UK and who will be the next PM. Much as I may have sympathy that Plaid have some ideas that are worth sharing- and I think they do-they wont be forming the next UK government and Mr Llwyd wont be the next Prime Minister. If, as Edwards says, they dont think the debates will influence opinion that much anyway then why dont they simply get on with selling their ideas at a grassroots level using alternative campaigning such as the internet?
Mr Edwards had a few to share:
“Global action to divorce commercial and investment banking so that no longer can the casino bankers and speculators act with impunity – an end to so-called ‘moral hazard’;”
So how will splitting investment and commercial banking achieve this? Mr Edwards doesnt articulate because either a) he doesnt know or b) he doesnt understand how investment banking works. There is a very good argument to be made for global regulation of capital markets, wherein the flow of capital across markets is regulated systematically and to a consistent set of standards. This is an argument that banks have been making for years- and which Barclays president Bob Diamond did again not two months ago. It has been governments’ (here, US and Europe) refusal to agree on a global set of standards that has prevented the introduction of such a regime and enabled those looking to exploit market vulnerabilities to their own ends to do just that.
“Develop the growth of the mutual financial sector so that companies are motivated by values other than the relentless search for profits;”
Sorry, what? Does Mr Edwards mean the mutual fund market? If he does, then he doesnt understand how this works either. If he doesnt mean this, and he may not, then Im clueless as to what he thinks the mutual financial sector is.
“A long-term 10% corporate social responsibility levy on banking profits to pay for a redistributive economic development fund for the UK’s poorest areas. The CSR levy which will generate between £2bn and £6bn a year in additional revenue will also be used to fund acute and preventative money advice services provided by trusted third sector organisations such as the CAB, and finance credit unions; ”
This is unworkable and uncosted- so exactly where does this £2bn and £6bn come from? This is the worst type of politics- not making a promise you cant keep but even worse than that, making up a promise you cant keep.
Right, thats got things off my chest. Thanks for reading. Doubtless someone will pick holes in my arguments too. Happy days. May the debate rage.
Jonathan Edwards is absolutely right to point out the gross unfairness in the way the leaders of the ’3 main parties’ have stitched up the TV debates. What’s the definition of a ‘main party’ anyway? From what I can see it seems to be “A party that intends to put candidates up in all the constituencies of England, Scotland and Wales, has at least 60 MPs, and has been existence for at least 100 years”. Or put another way “Us lot that have been here for ever, feeling quite cosy, and petrified at the thought of others spoiling the party as a result of the expenses scandal”. Democracy? I don’t think so.
If this looks suspect from a London standpoint (considering the support for UKIP and the Greens in the Euro elections), then it is far more so from a Welsh and Scottish perspective. It is fundamentally undemocratic for voters in Wales and Scotland to be shown a TV debate featuring leaders of only three of the four ‘main parties’ that contest all constituencies in their respective countries (and there can be no doubt that they are ‘main parties’ as both Plaid Cymru and the SNP are in government in Cardiff and Edinburgh). Those who maintain that their debates should be confined to matters relating to their respective institutions are reminded that Wales and Scotland are not yet independent, and therefore much of the decision making about their governance is retained in London.
In order to make the TV debates more democratic, I propose a number of different solutions:
1. Have a debate between the ‘London’ parties, but only show it to viewers in England.
2. As above, while at the same time showing debates in Wales & Scotland & NI featuring leaders of their ‘main parties’
3. Have a UK-wide debate of the leaders of all the ‘main’ parties of the UK, Wales, Scotland, NI, England.
4. Have no TV debate
All this just makes it glaringly obvious that the UK constitutional setup is at present fundamentally flawed and is in dire need of fixing………
The term “London parties” refers to the three mainstream political parties headquartered in London. Plaid Cymru is headquartered in Wales.
I’m not sure I follow Mat’s point on MPs from the London parties actually doing their jobs. Isn’t that what they are paid to do? It shouldn’t be such a great thing that they are doing it, it should be expected.
Mr. Edwards’ argument is that those three parties have a “narrow focus” on gearing politics and economics to suit the interests of a small section of society.
“The term “London parties” refers to the three mainstream political parties headquartered in London. Plaid Cymru is headquartered in Wales.”
Does that mean we can call Plaid a “Cardiff Party”? Of course not. “London Parties” is and always has been acceptable pejorative code for “English parties”.
Adam, it would be perfectly legitimate to label Plaid a Cardiff-based party, although I can’t see what context that phrase would be used. A more likely reference would be to label Plaid a Wales-based party or a Welsh political party, rather than a British one. I think its not only a signifier of identity but of political priorities. The London-based parties aren’t English parties at all, that’s the (apparent) problem! They are British parties with branch factory operations in Wales. The Lib Dems have a more solid claim as they are a federal party, but again they are based in London.
Of course the British parties aren’t English parties. They’re British parties. But the use of the term “London parties” is intended to denote them as English parties without actually saying it.
ap Neb has crystalised this one for me – Option 4 all the way.
No TV debate for anyone, I say. It will skew the General Election in many ways, not just against the non-Big 3 but also by creating a journalistic focus on the personality cult of leadership rather than broader party platforms. Or, should I say, further enhance such a focus.
Despite my love of politics am tempted to boycott any such TV debates. And not just because I want to hear from Alex Salmond or the leader of the Alliance Party of Northern Ireland.
Jonathan Edwards writes:
“Develop the growth of the mutual financial sector so that companies are motivated by values other than the relentless search for profits… ”
Values? Economics is about the efficient allocation of scarce resources, which have alternative uses. This means that some must lose their ability to use those resources in order that others can gain the ability to use them. Profits plus the threat of losses are thus crucial to the functioning of the economy. They force us to produce at the lowest cost and sell what the customers are willing to pay for it.
“A borrowing cap on mortgage payments of three times income in order to avoid yet another unsustainable housing price bubble”
Limits upon the mortgage markets are simply unnecessary. No one is going to invest in subprime debt, as they’re not going to invest in telecoms companies with “creative” accounting techniques. Losses tell the manufacturer / creditor what to stop producing / lending. If you want someone to blame, then blame the PM, who, in 1997 transferred the responsibility for bank regulation from the Bank of England to the feeble FSA. He also curbed the central bank’s ability to keep asset inflation in check by removing housing costs from the price index.
“A long-term 10% corporate social responsibility levy on banking profits to pay for a redistributive economic development fund for the UK’s poorest areas.”
If you reduce the profits to be made then bankers will invest *less* money. They’ll have less money to rebuild their capital bases, so that they can get lending again. If you want credit to get cheaper then you don’t tax the people that provide it. There is also the point that by reducing the profits of those already in the industry you deter new entrants.
“…the banking bailout having cost tax payers £1.3 trillion in loans, grants and guarantees – estimated at £40,000 per family.”
If you reduce the profits to be made then bankers will have a much weaker capital base to repay the taxpayer support. No?
“…you would expect some element of decorum from the city bankers and casino capitalists who brought the global economy to the edge of Armageddon.”
The global financial system is actually characterised by risk aversion – i.e. the stock market, investors who diversify risk, derivatives which are a form of risk management, new types of insurance, etc. Yes, there’s Citibank, Bear Sterns and Northern Rock. But UBS, Soc Gen, Barclays, IKB and WestLB? “Casino capitalism” is a misnomer.
“Global action to divorce commercial and investment banking so that no longer can the casino bankers and speculators act with impunity – an end to so-called ‘moral hazard’;
Securitisation predated the repeal of Glass-Steagall (a law which kept commercial banks separate from investment banks). In many ways securitisation was in fact a reaction to Glass-Steagall, a way in which the system tried to find a way around it.
Many thanks to all the replies to the original article, I am deeply humbled that some of the ideas I have floated are worthy of such detailed comment. I’m even more honoured that the economics professor and leading Welsh Tory, Dylan Jones Evans, has written his own blog in response.
I will endeavour to answer the points raised to the best of my ability.
At the onset it should be made that the policy points are some of the ideas that interest me and not party policy. Carmarthenshire has a fine tradition of producing independent minded politicians like the co architect of the welfare state Jim Griffiths, and of course the man I hope to replace, Adam Price. If elected I will aim to continue that tradition of challenging norms and orthodoxies – for the life of me I can’t understand why anyone would want to be elected in order to protect the status quo, surely there are better things to be doing in life. Plaid has yet to publish its General Election manifesto and therefore the policy points referred to in the article it could be argued are equally aimed at those in my party drawing up our key election pledges.
London parties – the whole premise of the article is that I argue that the three main British parties have sold out to the economic elite in the city. There are differences of course. In very simplified term the Tories are a party that fully believe in the city golden goose and care little for regional and individual wealth distribution. New Labour believed that they could have it both ways – allowing the wealth creators of the city to run riot and then achieve their social justice aims via a means tested benefits and tax credit system. Unfortunately the so called third way has failed. A recent JRF study indicted that the poorest in society are no better off than they were than under Thatcher in terms of disposable income. We also know that wealth at both regional and individual level has polarise further under Labour. If that’s not a damning indictment of Labour’s failures, then I don’t know what is.
I have a lot of time for Vince Cable having spoken to him about these challenges. However, the Lib Dems believe there should be a ‘discussion’ about the economic and social imbalances within the UK. I believe the time for debate is over – the old system has failed and we need action to make sure that future wealth generation is delivered on a more equitable basis rather than in the interest of the select few and one small part of the state. I’m more than happy for both Labour and Tory representatives to dispute my opinion, but let them be honest with our communities in whose interests they are really fighting this election.
Jeff Jones is a political opponent to admire and fear. We will never agree as fundamentally he is a British unionist and I am a Welsh nationalist. He asks why people like myself attack Labour and accuses us of endangering a Tory victory. As far as I am concerned – and this is coming from the son of a Trade Union shop steward – it makes no difference at all to me who wins. The Tories and New Labour are as bad as each other standing on an almost identical policy platform. He talks of the devastating public sector cuts we are now facing in Wales – I put it to him that we are only facing these cuts due to the obsession of his party with letting the city run riot.
Mortgage eligibility – I think this is a very interesting debate which incidentally is one that I and my closest Plaid colleagues over the years have had diverging opinions. My basic starting point is that Government should discourage unsustainable bubbles of any sort. Financer clearly makes my case for me when he clearly indicates that average house prices are clearly out of all proportion with average earnings. It seems slightly worrying to me that one of the main responses of the UK Government to the recession is to try and re-inflate the housing bubble. In other words address an unsustainable situation by creating an even more unsustainable situation. I admit I am a lay economist at best, so perhaps there is something I’m missing. Having worked with the CAB movement, I’m all too familiar with the debt epidemic we are facing within the UK. With UK consumers owing £1.4 trillion, I find it hard to see why any responsible government would want to push people further into debt. Clearly a x3 mortgage limit will lead to a correction in house prices and that will mean pain for those who have mortgages based on an over inflated asset. Clearly if any Government was to follow the proposal it would need to find a way of managing that correction. The key diverging point is that I believe that we need a sustainable housing market – other believe in a fantasy world where house prices are artificially propped up in order to stimulate consumer spending – the path to further booms and busts.
CSR levy on banking profits – I find criticism of this policy idea somewhat difficult to understand from politicians who say that their primary interest is the good of our country. Any economist will tell you of the North – South UK economic divide and we are on the wrong side of the stick. Creating a dedicated economic development fund for the UKs poorest areas out of banking profits will help transfer wealth from the UKs richest parts to its poorest. There is a valid argument that a CSR levy as I propose will mean that global financial organisations will essentially cook the books in order to avoid paying tax to the UK Exchequer. If that’s the case then fair enough, but lets stop basing core macro economic policy merely to feather the nest of the city and lets use the fiscal and monetary tools at our disposal to stimulate growth in other economic sectors – otherwise the city will forever hold a gun to the heads of our policy makers and this wont be the last bail out. Michael is correct to point out that eventually/hopefully the £1.3 trillion handed to the banks will be repaid – but not before the next UK Government gleefully attacks the public sector and the devastating impact that will have on economies such as ours here in Wales.
Mutual finance – Here I’m talking about reversing Thatcher’s demutualisation policies of building societies. I would argue we want a greater market share for financial organisations that provide products based on the interests of their members rather than shareholders.
Business rates – I don’t quite get Dylan Jones Evans’ bizarre outburst – but then I’m not an economics professor. As a Westminster candidate, I didn’t understand that I was exempt from talking about devolved matters. His attack on my party leader Ieuan Wyn Jones is also somewhat OTT considering that decisions on business rates within the Government of Wales are made by the social justice and local government minister.
Moral hazard – As a socialist I find it difficult to understand why ardent capitalists believe that speculative activity should be bankrolled by the state. Unless we end moral hazard, the casino bankers will be able to act with impunity. Mervyn King shares my view of divorcing commercial and investment banking as does Paul Volker, the former legendary chair of the FED.
When I first received this excellent article I was in two minds whether to edit it back a little. On the one hand, I could see it was a persuasive piece which pulled no punches and would attract comment and debate. Jonathan is that sort of guy and in my prediction I have been proved right.
On the other hand though, I felt that maybe the article was possible throwing in too many issues, particularly Jonathan’s proposals for economic solutions which are flown up the flagpole rather than being fully fleshed out.
On balance I decided to keep the editing very light in the hope that commentators would find plenty in this column to engage with, not least the solutions being offered. After all, many politicians or would-be politicians are quick enough to attack the policies of others without properly suggesting alternatives. Jonathan quite appropriately cites the radical tradition of Carmarthenshire politics (though quite why Gwynfor doesn’t get a mention bewilders me a little, Jonathan
) and places himself squarely in this tradition.
It is therefore especially pleasing that commentators have engaged not just around the existing financial system and the suggested iniquity of election coverage arrangements, but also have challenged the author over his policy ideas. And he has responded robustly.
As Mat Davies said earlier, “there isn’t enough passion around in politics so to have someone with passion, ideas and, to use the Welsh, hwyl, is doubly welcome.”
If only every politics column we ran provoked a response like this! Still, it’s a good start for this column in 2010 – and I’d be surprised if more of you didn’t come on the substance of Jonathan’s latest comments.
Can I thank Jonathan for responding so thoroughly to some of the criticisms and observations made to his article, including some of my own. It is refreshing to get someone who is at least prepared to engage in debate. I dont agree with a lot of what he wrote but I will, as the saying goes, defend his right to write.
On the demutualisation issue, I have sympathy with his desire to have wider interests taken into account, over and above the profit motive. Hes right that members interests need to be accounted for: it was a sad indictment of the times that that was EXACTLY what Thatcher was doing- Im sure he remembers the appalling sight of carpetbaggers moving their savings from institution to institution to get the next £500 payout. I’d like his thoughts on my suggestion of globally regulated capital markets when he gets a minute
M’learned friend Mr Hill did the right thing with editing the piece as he did- its this kind of debate that make WalesHome a preferred destination. Could we have similar pieces from other view points- am sure that David Melding could be persuaded to draft something provocative, Daran.
More power to your collective elbow. Keep up the great work guys.
Mat – keep the comments coming. Jonathan likes nothing more than a debate, and it’s something we like on the site too.
Yep, cross party – and no party – columns will continue to be a feature for our coverage. True Wales had a very provocative piece last year, and there’ll be a follow up soon.
I’m an even bigger Melding fan than you, Mat. David Melding as a regular columnist is lined up for a Sixth Columnist piece in the near future and I’m sure some of his Conservative colleagues will weigh in over coming weeks too. And Lib Dems remain a big part of our contributing team – we’ve run a fair few provocative pieces from that quarter, and more will follow.
Perhaps a few from different parties might be tempted to respond to tomorrow’s column. We’re launching Public as a new column and the first writer will be Carl Sargeant AM, the new Minister for Social Justice and Local Government. His column is the first one written by a Welsh Assembly Government Minister in such a capacity and it’s a cracker. He manages to talk about the big challenges facing local government in Wales without once mentioning the snow.
I would hardly call my response ‘bizarre’, given that the issue of business rates was one of Plaid’s seven key election pledges during the 2007 Assembly campaign and a pledge that Plaid Cymru has failed to keep as part of the One Wales agreement.
The point is that I agree with Jonathan that there should be business rate cuts for Welsh firms.
Unfortunately, none of his Assembly colleagues are of the same opinion and have argued vehemently during the last few months that they are unaffordable etc….
Anyway, rather than repeating the long and convoluted debate I have had with one of your party members over the matter, it may be better for you to read the discussion itself
http://dylanje.blogspot.com/2010/01/mixed-messages-from-plaid-cymru.html
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