How the British left should seize this moment to strip finance of its political clout
In 1977, Nicholas Ridley, a Tory MP in Margaret Thatcher's government, wrote The Ridley Plan, a kind of shock doctrine manual that the Thatcher government followed in its program of mass-privatisations, attacks on trade unions, and the "stealth" privatisation of the NHS.
The Ridley Plan counselled a staged and escalating set of attacks that would start with soft targets and work its way up to the deployment of "a large, mobile squad of police" to put down strikes that the escalations would eventually provoke.
Writing in Opendemocracy, Christine Berry says that the left is on the brink of a similar opportunity to the one seized by Thatcher in 1977: if the coming elections put Labour in power this December, they will be assuming power in the midst of a crisis that is simply too good to waste, brought on by a decade of Tory austerity, oligarchic policies, and the Brexit debacle.
Berry lays out a programme for taking on the UK's powerful finance sector, as a key stage in larger reforms that would otherwise be endangered by the lobbying might of the City of London. As she points out, the right time to do this was after the 2008 crisis, but the neoliberal wing of Labour refused to use that moment, instead handing out billions to finance without any kerbs or democratic oversight of the industry that had just blown up the world's economy. Ten years later, we are still waiting for Labour to do its job.
When the next financial crisis arrives, Labour must demand bank breakups, stricter (and streamlined) capital reserves requirements, an end to financial secrecy, and a hard rule that any bank that takes a government bailout will have to subject itself to voluntary nationalisation.
All of this is a prelude to deeper reforms that will permanently weaken The City's grip on national policy, supporting community banks over the big, dangerous players.
Berry is co-author of People Get Ready!, which sets out a roadmap for the next Labour government to make permanent, profound change that will pluralise power and prosperity.
Regulatory measures should therefore be seen not as the main goal but as part of a wider strategy to limit the City's most damaging activities and cut its power down to size, whilst transitioning failing institutions into new forms of ownership. Conversely, 'levelling up' new, more democratic forms of finance is essential groundwork for any future confrontation with the City to succeed. Like it or not, decades of demutualisations, mergers and takeovers have left our financial system dangerously over-dependent on a few big banks. We have also promoted the City as our main export sector, sacrificing other industries and the communities that depended on them in the process. Indeed, this is precisely why the 2008 financial crisis hit the UK comparatively harder than many other developed economies. When the big banks withdrew their lending, there was simply very little else to step into the breach. This means that, however poor a job the City does of supporting the real economy, taking it on without building up alternative sources of finance in advance would cause significant economic and social disruption and could risk deepening a downturn.
The second key task for those seeking to prepare for the next crisis is therefore to build up the new institutions and sectors that can replace the City's vital social functions, leaving us free to take on its speculative activities without major unintended consequences. Most other developed economies have a significantly larger 'stakeholder banking' sector - institutions owned and run for the public benefit rather than for private profit, from Germany's co-operative banks and public savings banks (Sparkassen) to the Swiss cantonal banks. There is good evidence that such banks cushioned the impact of the 2008 crisis in these countries, maintaining lending to households and small businesses while big banks' lending froze. If we can begin to rebuild the UK's stakeholder banking sector and position it to play a similar role in the event of a future crisis, we could simultaneously cushion the economic impact of a crash, expand our room for manoeuvre in confronting the City, and permanently tip the system towards democratic ownership and control.
This won't be easy in a highly uncompetitive market where the big players have such entrenched positions, so we will need to make use of our existing assets. This is one key benefit of Labour's proposals to create a National Investment Bank and Regional Development Banks with a remit to support sustainable and productive lending, and a Post Bank making use of the Post Office's existing branch network to provide access to key retail banking services in every community. Taken together and implemented carefully, these new institutions could significantly reduce our dependence on large commercial banks within a relatively short timeframe.
Thatcher had a battle plan for her economic revolution - now the left needs one too [Christine Berry/Opendemocracy]
(Image: Steve Daniels, CC BY-SA, modified)