Wednesday, 23 May 2012

Decisiveness isn't just for others

Yesterday, Gordon Brown came out strongly in support of David Cameron’s position on the Euro.  The former Labour Prime Minister and the current Conservative PM are united at last in demanding decisive action from someone else – Germany, apparently – to bail out the Euro zone. 
I’m sure that it’s far from being the first time that they have agreed – after all, their economic policies presented at the last election were almost identical – but they usually manage to avoid saying it, and somehow pretend that there is a huge gulf between them.  But then, Gordon Brown isn’t the only former PM to seek to wear the mantle of statesmanship after losing an election, even if the garment doesn’t fit him any better than it has fitted its previous wearers.
That decisive action is necessary is, as far as it goes, difficult to disagree with.  It does, however, rather gloss over the analysis of cause which should precede that decisive action.  And most of all, it glosses over the UK’s rôle in the Euro crisis.
Any financial crisis of this nature has two elements which combine to impact on its seriousness.  The first is the financial problem itself.  On that score, there can be little doubt that Greece, the centre of the current crisis, has got itself into something of a self-inflicted mess after, to all intents and purposes, having doctored the figures to qualify for Eurozone membership.  That is not to excuse those who could and should have spotted the doctoring, such seems to have been the scale of it, but the root cause lies with Greece itself.
If the crisis were limited to that, I don’t doubt that it would be manageable with good will on all sides, but then the second factor kicks in – the reaction of the ‘markets’.  The way this factor is usually treated, one might think that market reaction can be treated as though it were a rational phenomenon; a group of people taking a long hard look at the financial fundamentals before coming to a considered conclusion about the prospects, and setting interest rates accordingly.
The reality bears little resemblance to that.  It is more a case of a group of wild animals stampeding in a particular direction because one of them got spooked and the others are afraid of being left behind unless they blindly follow.  It is often irrational and subject to a herd mentality.
And that brings me back to the UK’s rôle in all of this – for where is the pre-eminent European habitat of these wild herds if not in the City of London?  And how have they been allowed such free rein to bring down whole economies in the interests of pursuing their own narrow financial interests if not for the deregulation – or studious lack of regulatory action - by the last five UK Prime Ministers, Labour and Tory alike?
We undoubtedly need some decisive actions, but two of those are in the hands of the UK PM himself.  The first is a firmer regulatory control over the speculation and gambling in the City, and the second is the financial transaction tax which both parties in government have so firmly rejected.  Neither of those actions would do anything to touch the underlying problems, but they might help, at least a little, to stop the exacerbation.
But the UK Government seems intent on doing exactly that of which so many accuse (with some justification) the Welsh Government – criticising others as a substitute for acting themselves.

1 comment:

Spirit of BME said...

The two actions you recommend, I can only support one of them.
“Firmer regulation” is not the answer, but being an ultra-conservative you might expect me to say that.
The FSA Banking Regulation ran to a thousand pages and RSB never broke one rule or law, H.M Inland Revenue Regs run to eleven thousand pages, but is not efficient.
Control regulations are always tied to a Leviathan of an administration, which never catches up with markets or human developments and when you get firmer regulations what gets squeeze out is – human discretion. You get the position that only the written word is correct and you have no authority to intervene in a fast moving crisis, so volume is not the answer.
We do need in the Banking sector more financial crimes , as most people are still angry with the “crooks in suits “ that run our banks and MPs for that matter, many of us would have been satisfied if we saw them on TV being led out in handcuffs and ankle chains and crying for their mothers. However, a discussion document by HM Ministry of Justice on what new crimes should be put on the statute has just been watered down ,as the “chaps “ in the city saw themselves been carted off to the clink. This only underlines that all power and governments eventually turn into criminal enterprises, as the Blessed Adam Smith always said.
As a member of Blaid I certainly support the introduction of a financial transaction tax – the bigger the better, as it will be a disaster and the pain it will inflict people of Wales will be great, as it will be levied by a very uncompetitive industry, which will only make them richer. That in turn may well move people to seek the end of English rule in Wales and bring our freedom one day closer.