Outrage at the banks is everywhere, so why aren't there riots on the streets?
Anger about bankers from left and right is muddled by the City's mantra that banking is too complex for people like us
- The Guardian, Monday 30 May 2011
- Article history
The award-winning documentary film Inside Job does for banking what An Inconvenient Truth did for climate change. It's an hour and 20 minutes that quietly and clearly documents the appalling corruption that brought the global economy to the brink of collapse. Made by American Charles Ferguson, it is about to be released as a DVD in the UK. It needs to go viral, and kickstart public pressure on the faltering Vickers commission on banking reform. As the film points out, each banking crisis in the last 25 years of deregulation has been progressively bigger and costlier, culminating in the massive bailout of 2008. Yet effective reform has stalled, all the key players and institutions are still in place: business as usual.
This is the most disturbing aspect of the film – a political system in paralysis. Not one financial institution or individual has been prosecuted for the biggest bank theft ever; the executives who resigned from their collapsing banks in 2008 walked away with their vast fortunes intact. There has been no effective calling to account on either side of the Atlantic; both the UK and the US have repeatedly brought in bankers to run inquiries or act as advisers to sort out the bankers' mess, with predictable results – caution and status quo. Despite the biggest economic crisis for decades, the idea of a royal commission has got lost in long grass. It has been left to film and books to tell us what happened and why, and how to stop it ever happening again.
The paralysis doesn't mean there aren't plenty of angry people. Anger is everywhere – on the street, and among experts, regulators and economists, and even in political institutions; Ferguson's film showed incensed members of Congress asking the key questions of embarrassed bankers. In the UK the outspoken criticism of the banks has spread into the most powerful of positions, from the governor of the Bank of England, Mervyn King, to Adair Turner, chair of the Financial Services Authority.
Outrage against the banks is no longer a leftwing hobby; across the media there is an increasingly frantic desperation from commentators, even in such unlikely hotbeds of revolution as the Evening Standard, where the admirably infuriated Anthony Hilton declared recently: "Our problems were wholly caused by the greed and irresponsibility of some in the financial community. But the culture has not changed ... What more will it take?" He may well ask.
What indeed? Where are the riots? The mass protests? On Saturday, UK Uncut organised emergency events around the country in which activists took over their local banks and turned them into hospitals. It was a clever attempt to link NHS cuts with the banks, and it serves to underline how much easier it has been to engage the public in the equally technical issue of NHS reform, but it failed to catch the attention needed. Anger with the banks is widespread but diffuse, confused as to what to ask for. It doesn't have the political vehicle to get traction with the public.
Yet evidence emerges on a weekly basis of the banks' outrageous behaviour. Last week it was announced that they were failing to meet their own agreed levels of lending under Project Merlin, the one quid-pro-quo for their huge taxpayer-funded support. They are strangling the economy (as Polly Toynbee wrote on these pages at the weekend), while ripping off customers with insurance scams and poor service, and creaming off the profits. Just over 200 "core" staff at Barclays took home £554m last year, while thousands of shareholders, who had lent £51bn of equity capital, were left with £653m in dividends. This is an ongoing institutionalised bank raid.
The scale of the injustice is so blatant, the risks ahead of failing to reform now clearly defined by so many, that it beggars belief that our political system cannot generate the pressure to defy the banks and their implausible threats to relocate. (Frankly, what country would want the risk of taking them on, given how they have near-bankrupted their current hosts?) No one would ever have predicted this strange inertia, and I'm not sure many can fully explain it now.
There are some obvious important explanations. Firstly, finance has intertwined itself intimately into the political process in both the US and the UK. Lobbying has ensured some crucial reform initiatives hit the buffers. Between 1998 and 2008 the finance industry in the US spent $5bn on lobbying. Spinwatch monitors the close links between finance and politics, but repeated Freedom of Information requests on the dinners and meetings with senior politicians such as Boris Johnson reveal nothing of the content of discussions.
Secondly, there's been failure across the political establishment: while the coalition has diverted popular anger on to Labour and blamed bloated public spending for our financial woes, Labour has lamentably failed to put its head above the parapet.
The collective failure smells of fear: that the City could lose competitiveness if regulation steps out of line with the US; fear that Britain has few other competitive advantages and for all the talk of rebalancing the economy away from finance, no one is sure how you do it and everyone is worried that the short-term would be bumpy. Without political leadership, the public has got repeatedly distracted by comparatively trivial political issues – discussing duck ponds and moats while a tsunami threatens.
But the biggest puzzle is the public. The enormous advertising campaigns of the banks must play a role; some say the total spend last year was around £30m. The cutesy animation and friendly "real" bank staff must work at some level to delude the public, to calm and reassure that all is as normal. It's trading on some folk memory of banks as sober and reliable. Add to that the massive patronage – of the arts, sport and good works – in the last few decades designed to inspire shock and awe.
This public deference is also evident in how effectively the banks have used complexity and expertise to dodge accountability. "You wouldn't understand" was the mantra provided to regulators, politicians and the public, just as priests in a cult might tell devotees. The complexity required a superior intelligence and skill, insisted the "masters of the universe", as they recruited the sharpest minds. This is a version of the meritocracy against which Michael Young warned so presciently in 1958, using a phrase that has been stubbornly misunderstood ever since. He recognised that meritocracy was a form of elitism; it could be as ruthlessly exploitative as aristocracy and, in both, deference and patronage play integral roles. It's worth remembering that Young predicted revolution by the disfranchised against the meritocracy – but not until 2033.
Last week the New Economics Foundation and Compass brought together a diverse and passionate coalition to formulate an agenda for banking reform. Its determination and energy had something of the flavour of the early meetings of the debt relief campaign for the developing world in the 90s. That comparison is not exact but it is instructive: it's going to need a huge public education programme to convince people that the reality of banking is far crazier than anyone can imagine – which is where Inside Job can help – and furthermore, that leaving reform to the experts is a recipe for inaction. Of course what may pre-empt all of that is another crisis, another bailout, this time accompanied by the blind rage that emerges when the idea of reform no longer seems credible.
Monday, 30 May 2011
Outrage at the banks is everywhere, so why aren't there riots on the streets? | Madeleine Bunting | Comment is free | The Guardian
via guardian.co.uk
