Its Time for a Royal Commission on Banking Practice

Does Mervyn King Have a Clue?

The world around us is facing economic upheaval and uncertainty. Major European economies are being tossed around on the choppy waters of the financial markets as if they are nothing more than fishing boats caught in an extended winter storm. Despite all the effort to prove otherwise, austerity is providing no safe harbour for these battered economies, despite the many claims. The lack of growth across Europe has always been the real problem, but the fiscal conservatives are in perpetual denial. They are locked into a form of handbag economics that pays lip-service to household moralism but which misses the bigger picture and the greater dangers.

[The Governor of the Bank of England is today reported saying he doesn’t know when the recovery will take place. According to the Daily Mail King is reported saying “I don’t think we’re halfway through it”. If King doesn’t know perhaps it is time for him to move aside and make way for someone who isn’t so out of touch and has a better sense of what is going on?]

Times are getting harder for most people. Our cities are rapidly hollowing out. Our high streets are becoming ghostly, deathly even. There is little evidence that any recovery will start soon, and even if it did there is little chance that it will have an impact soon. Money is being stuffed into the banks, but the real economy is withering and atrophying. The jobs market is getting tighter, with more people dependent on part-time work. There is little evidence that companies are investing in people. The rate of company failure is constant and seemingly inexorable, while the rate of new business ventures is sluggish and anemic. It is a sensible question to ask, but would you invest in the British economy at this time given such an uncertain outlook? The ‘animal spirits’ of business entrepreneurialism are well and truly quelled and tamed. It’s batton-down-the-hatches time.

Almost in the same instant the government seems hell-bent on alienating young people. First came the cuts in Educational Maintenance Allowance, then the hike in fees for Higher Education, now comes the proposal from the Prime Minister to take away the Housing Benefits of anyone under twenty-five. Just when support from the state is most needed, all the talk is about withdrawing help and punishing people who need it most. The one lifeline that many people have when they are trying to get established is that they can move to a new part of the country and find work, safe in the knowledge that they have a cushion in housing benefit. It’s not the fault of young people entering the housing market that rents are extortionate and that affordable social housing is restricted. The locked-up housing market is impossible to enter unless parents make significant financial investments in their offspring. Further locking-in privilege and reducing the ability of ordinary working people to stand on their own.

Lets not fool ourselves into thinking that British social benefits are generous. They are restrictive, slow and inflexible. The great bulk of spending on social benefits goes to supporting pensioners, but it is the young who are getting it in the neck and are taking the blame. Before they have even started out they are having their hands tied behind their backs. The Tories often argue that it is unreasonable to leave our children with debt. What they don’t comprehend is that there is an even worse burden. Leaving our children in poverty now for the sake of not taking on any debt. Starving people of investment now is not virtuous, it is cruel and immoral.

At the same time the British banking system trundles on as if nothing has changed. There is little indication that the banking practices of the past have been revised or moderated. The big banks are still refusing to lend to small businesses and families as they try to manage exorbitant fees and restrictive credit ratings. The banks are unchallenged and unaccountable. The City of London remains the political force that sucks the life out of the British political class. Money and privilege are concentrated in super-conglomerates that cross international boundaries and don’t answer to anyone but themselves. Much of the practices of banking are corrupt and immoral, but we have internalised the promise of extended wealth and riches and turned-off our moral compass because we wanted to make a fast-buck. As Charles Ferguson argues “the new elite has obtained much of its extreme wealth not through superior productivity, but mainly via forced transfers from the rest of the world’s population”.

It’s time for two things to happen. Firstly, the Governor of the Bank of England, Mervyn King should be sacked and removed from his job. His complicity with the Conservative Party, now and in the run-up to the election in 2010, has been breathtaking. This is not a banker with an independent, evidence-based view, but a banker with an ideological axe to grind. It’s time that he went. The second thing that needs to happen is the establishment of a Royal Commission into Banking Practices. It is a scandal that no-one has gone to prison for crimes committed in the run-up to the financial crash of 2008. Evidence gathered through the commission should lead to criminal prosecution of those shady people, hanging in the background and never answerable to the public, parliament and the courts, but who have taken this country to its knees. The stated aim of the Royal Commission should include wiping out restrictive and class-based practices that keep the banking system in the hands of small cliques and oligarchs. How we establish a new democratic structure for finance and investment in this country will determine the kind of nation that we need to be.

Competing against China, India and the emerging economies will require an ethical standard that goes beyond our immediate short-term interest. We have to be fully integrated with a modern, ethical, equitable and fair Europe. Protectionism and isolation wont save us, but ethical sustainability will. And we have to practice what we preach. Universal welfare services for all, providing support and investment for the poor rather than blame and abuse from millionaires. A fair taxation system with everyone making a contribution according to their ability to pay. We laugh at Greece with it’s embedded patronage systems, but British society is more riddled with patronage and class-based division than at any other time in our history. It’s time we started to polarise this debate and make some clear choices, before something worse comes along that we will all regret for generations.

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