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The Austerity Trap
After a decade and a half of flirting with the financial sector, Gordon Brown now has the bankers where he wants them.
Last night, the Prime Minister told a City audience that the rescue package was "unprecedented but essential."
The government will be taking a £20 billion share of the Royal Bank of Scotland and a £17bn share of Lloyds TSB once its share with HBOS is completed.
There are strings attached, as both the PM and Chancellor of the Exchequer Alastair Darling have made abundantly clear.
Bankers might be forgiven for thinking that most of those strings are being tied around their necks, or worse.
Brown and Darling are riding a populist wave of reaction against the bankers, who are largely blamed in the media for provoking this crisis by dodging "regulations."
This despite the fact that Britain's banking sector is one of the most closely regulated industries anywhere.
Brown and Darling say they won't be sitting on bank boards. Of course not - they will rule over and above anything the board decides. Bonuses and dividends can be safely forgotten for the time being: This doubtless explains the fact that shares in banks continued to tank today, despite a surge in other FTSE-100 companies. Banks in the other European exchanges saw share prices fall too - a vote of no confidence by investors in the Brown plan which is currently being implemented by other governments.
Bankers will find themselves even more tightly regulated; their salaries and bonuses trimmed; their decisions over-ruled by government. The best will leave for Asian finance capitals; others, with little incentive to take risks or perform, will slump into mediocrity or early retirement.
A combination of "red flag" waving by the Guardian and curtain-twitching parsimony by the Daily Mail means that no-one is prepared to give finance sector employees a fair hearing. This suits the government, which has been looking for a suitable scapegoat for the collapse of the markets. It suits the public, too. The mob frenzy of British financial reporting and the suddenness of the crash left citizens dazed and confused - ideal conditions for a cynical government and press to direct the blame onto an already unpopular third party.
Classic bullying tactics. One can't fully blame the people. Brown had cheered them along for 11 years with the cry "No return to boom and bust", which he has since revised to "No return to Tory boom and bust."
Furthermore, only a month ago, the British were returning from their holidays, vowing never to camp in Cornwall again after a miserably wet summer.
Within weeks, they were being told that they might find themselves permanently under canvas in an economic refugee camp, that the basic building blocks of western society were crumbling, and that a new Dark Ages was only weeks away. The old Home Office warning "Britons are only four square meals away from revolution" was wheeled out by hacks eager to make their impact on the front pages. Colour seemed to drain from British life as quickly as the markets were being bled dry by the crash.
Suddenly, a new terror - like AIDS, Bird Flu and Global Warming before it - was upon us.
And the bankers were to blame.
The Guardian's crack squad of anti-capitalist columnists wrote raving columns on how greed had destroyed society and how "once the dust settled" a new regime was needed. The Daily Mail obligingly pictured "fat cat bankers" sinking Champagne at a summit in Tuscany; city bonuses were listed with a fury almost as if each thousand pounds represented a child the banker had strangled with his own hands. Both papers gloated about swanky City restaurants lying empty, rows of unsold Porches in City dealerships, the sudden vulgarity of anyone who had made themselves a bit of cash and wanted to enjoy it.
It was, as Spiked Brendan O'Neill warned, the dawning of a new Age of Austerity.
Believe it or not, some welcomed enforced austerity. Environmentalists believe it is the only way to wean us off our destructively consumerist habits, while Daily Mail columnists, who claim to represent penny-pinching folk in imaginary Middle England, write of it as a come-uppance to those who flashed new money around, particularly if they had the nerve to come from working-class backgrounds.
"If there is one thing we should be angry about in relation to the financial crisis – one thing far more infuriating than the apparently ‘evil’ bankers who are treated like voodoo dolls by the shallow anti-capitalists of the British press – it is this discussion of enforced austerity. Anyone who values choice, political imagination, individual liberty and independence should reject it", writes O'Neill, "History tells us that austerity is not only an assault on our desire to live comfortable lives free from need or guilt; it is also a tool of political repression, which both springs from and reinforces the lack of a political alternative on how society should be organised. The Age of Austerity would not only prevent us from ‘buying new three-piece suites’ or ‘wasting hundreds on jokey Christmas presents from those idiotic mail-order catalogues’, as one commentator sneeringly puts it. It would also further increase state power over individuals and stifle political vision and debate."
Wise words. When the Guardian and the Daily Mail agree on something, it can be read as a touching moment of national unity. Dissenting minds, however, would see it as a worrying moment of populist scaremongering, which is never good for the country.
