Wednesday, March 04, 2009

Simmering Away

I've been trying to avoid commenting on matters financial of late. After all, who could not be chilled to the marrow, indeed disgusted to the very core of their being, at recent disclosures on remuneration? What could be more galling than seeing an individual who helped precipitate the collapse of some of our best known financial institutions being able to walk away with a gold-plated pension scheme, tacitly approved by government and bankrolled by the same taxpayers who will be left to sweep up the resulting economic carnage left in his wake?

It's absolutely disgusting, and frankly, no matter what the law says, someone should intervene to stop it. But that's probably enough for now about Gordon Brown's future pension arrangements. There's bigger issues to concern us, after all.

A post about the politics of the financial crisis has been brewing for a while, but every time I've sat down to do it, somehow I've just got so far and stopped. I think that's largely because I've found it hard to adequately express my distaste at the sheer neck demonstrated by senior figures in the Labour Party in pointing the finger of blame at everyone but themselves.

That's not to deny the trans-national nature of the present situation – far from it. However, with the whole 'it started in America' meme, alongside the depiction of Scotland and the so-called 'Arc of Insolvency' - effectively using British weakness and failure as a justification for the constitutional status quo - sometimes, there just isn't enough Brasso in the world to go around.

You can say what you like about Fred Goodwin and let's face it, many have done exactly that over the past week. However, there's something deeply hypocritical about the way Labour has tried to scapegoat bankers in general and Mr Goodwin in particular as a diversion from the bigger picture. After all, capital is amoral - in going on the acquisition trail and in lending freely in the mortgage and unsecured debt markets, bankers only did what they were allowed to get away with by the regulators.

During the resulting growth and profits spree, the Labour Government was happy to hoover up the corporation tax receipts. The consumer debt boom went on buying up imported goods and in fuelling an unsustainable housing bubble. Meanwhile, huge public spending increases seemed to disappear to little discernible effect, with billions squandered on the dripping roast of PFI.

Even before 1997, Labour was keen to get in with the City. In one of his first acts as Chancellor, Brown tore up the old model of discrete regulation by the Bank of England, only to replace it with prescriptive box-ticking and a glossy brochure industry. He crowed about new models of regulation and harangued others for not following suit. Sadly for us, Brown's 'light touch' also meant soft touch. With responsibilities blurred and with few having the understanding or the ability to adequately quantify risk, the dangers grew. Armed with the twin mantras that 'boom and bust' had been abolished and that we were only 'borrowing to invest', Broontania marched fearlessly toward the guns.

Ah, but Brown led the world in responding to the crisis, bleat the apologists. Even Paul Krugman entered the fray, much to the delight of the Brownies. Well sorry, but not even a Nobel Prize in economics offers a guarantee against talking nonsense periodically.

Let's examine the evidence - in response to the banking crisis, Brown had the opportunity to lead when Northern Rock failed. However, instead of allowing a private sector takeover by Lloyds TSB, Brown dithered for 6 months before opting for nationalisation, on the grounds that allowing for a takeover on a weekend was anti-competitive. Compare and contrast this with the swift and decisive manner in which the US Government allowed Bear Stearns to be taken over and through the swift recapitalisation of insurer AIG.

When it came to liquidity, the Bank of England reacted more slowly than the Fed or the ECB. In guaranteeing deposits, Gordon Brown trailed behind the much sneered at Irish. On stimulus, he was also well behind many other major economies, and as Eddie George says, Brown's earlier borrowing ultimately left little room for stimulus, with the eventual package representing 1% of GDP as opposed to the USA's 5%.

Brown's Labour has been behind the curve on every major response to the crisis, yet still the courtiers preen and posture in spite of this. While the Tories have been attacked with the idiotic 'do nothing' line in England, understandably, it's been the SNP which has born the brunt of Labour's ire in Scotland. After breaking their own call for unity late last year, they launched a series of attacks on the Scottish Government for not acting on matters where it has, by Labour’s own design, little powers anyway.

Whether it's spurious attacks on jobs or investment, the Labour line has been simple – just leave the complicated economy stuff to the big boys in London – they know what they're doing and anyway, youse could never afford a national debt like ours. Meanwhile, Labour's Scottish spokespeople exhibit prolier-than-thou cretinism, trying to associate real world experience outside politics with ideological unsoundness and the sort of cosiness with the financial sector which Brown himself was only too keen to cultivate over the previous 2 decades. Whether it's over paintings or political 'pedigree', the game has been, however implausible it appears in reality, to try and somehow pretend to be on the side of the people.

The less said about Iain Davidson's foray into the art world the better. However, with his acceptance speech as Leader of the Labour group in Holyrood, Ian Grey managed to make a life lived well sound less like a principled set of career choices in service of his fellow man, and more like an extended penance to exorcise repressed middle class guilt. It's like being back in the students union – an experience hardly dissipated by a Secretary of State and Holyrood party spinners steeped in the swamp of NUS/Labour Students politicking.

In the much-vaunted 'court of public opinion', the verdict is that Brown's is a government which has lost all direction or semblence of coherence. It is pitifully, woefully, even dangerously out of its depth. It is devoid of ideas, denuded of principle, absent even of endearing personalities. In Scotland, it has long since ceased to be a Labour party and is now simply the anti-SNP party, infected with the canker-ridden sourness of temper tantrums that flow from someone having ‘stolen’ their sweetie.

Somewhere in the 80's or 90's and we can no doubt all point to different dates or events, the Labour Party became solely about the pursuit and retention of power. Entrenched in swathes of Scotland on a minority share of the vote by the first past the post system, there was no competition to drive out the cliquishness, clannishness and petty rent seeking which came to scar it. Swept out of office in 2007 and with municipal power bases weakened by the plurality of PR, it found itself unable to distribute patronage as it once had.

Without economic credibility, Labour in England has lost its reason for being in power. Without power and patronage, Scottish Labour lost its reason for being a long time before.


Leaves on the line said...


Superb. Spot on in so so many ways...


PS - thanks for the nod with the link to my blog...

Stuart Winton said...

Thy pot boil and runneth over!

Interesting the way you manage two spelling mistakes in the Scottish Labour leader's name, but spell them correctly elsewhere. I always have to look it up, so I'm not sure if it's Ian Grey in the main text that's correct or Iain Gray in the labels, or perhaps they're both half correct!!