The People's Flag

Tweet The first elections of which I have any memory are those of 1964 and 1966, when Harold Wilson ended 'thirteen years of Tory misrule'. That wasn't his only good line - I particularly liked the one about the 'white heat of the technological revolution'. I would have voted for him, if I hadn't been too young - although I knew better by 1970, when I was no longer so young.

One of the other big issues of the time was the re-nationalisation of the steel industry, an election promise which was implemented by Wilson. Nationalisation then was about taking state control of 'the commanding heights of the economy' - and it was intended to benefit the taxpayer. All very different from the 2008 version of nationalisation.

In my mind, the shift happened under the Heath government between 1970 and 1974, when the failing aero engine company, Rolls Royce was temporarily taken into public ownership. I still remember the little ditty of the day:

The People's flag is deepest blue
We're buying up Rolls Royce for you
But if it makes a profit then
We'll flog the b****** back again

This year we've seen probably the largest nationalisations in history as both the UK and US governments bail out large financial institutions at the taxpayers' expense. These are not nationalisations aimed at long-term benefits for the taxpayers; they are short term expedients, forced on governments because they simply cannot allow some institutions to fail.

I agree that the governments were left with little choice; they simply could not allow these companies to fail. We need to recognise, however, that these bail-outs must mark a very significant turning point in the way the economy is run. The argument for light or non-existent regulation, and for high rewards for successful companies and individuals, has long been based on the assumption that those who take risks should reap the rewards.

But what has now become clear is that, in some sectors of the economy at least, the risk is ultimately borne by us as taxpayers, not by the people making, or benefiting from, the bad decisions. I cannot think of a more graphic illustration of that than the news that the people in America who ran Lehman Brothers into the ground have had their bonuses protected as part of the takeover by Barclays.

Risk and reward is one long-standing principle – but there's another we should bear in mind; the one about paying the piper. If we as taxpayers are going to end up shouldering the risk, then I think we have every right to expect that governments will exert much more control over the activities which create the risk. For too long, governments have turned a blind eye to the insane way in which the financial markets have been turned into little more than casinos, where even the gamblers have often not understood the bets they've been placing.

And there's another thing that governments need to look at as well. Recent events have been driven in large measure by corporate and individual greed, and often highly short term greed at that. Would the temptation to take silly, excessive risks be as great if the rewards available for so doing were not themselves silly and excessive?