Tuesday 30 September 2008

Gordon Brown: a dream speech

Last night I had a dream, in which Gordon Brown appeared and made a speech which went something like this (it was more eloquent, but I can just about remember the gist):

'Good evening. All of us are worried by the financial turmoil that has hit the world economy in the past couple of weeks. Rest assured that my government will do everything necessary to prevent the crisis hurting your savings and prospects.

But as we get to grips with the immediate crisis, now is the time to ask ourselves some searching questions about the kind of world we are living in - and the kind of world we want to live in.

Is it right - is it right - that our hard-earned savings and wealth can be at the mercy of such an unstable system? Is it right that our livelihoods are subject to the unpredictable swings and roundabouts of a financial system that offers huge, undeserved rewards for a tiny minority? Capitalism is one thing; but this 'casino capitalism', as it has rightly been called, is quite another.

Now I know what some of you will say. You'll say: 'But Gordon, this has happened on your watch. You sat back and let the financial sector have the freedoms it demanded, the very freedoms that have produced this mess.'

I have to tell you, in all candour, that you would be right to say this. It was a mistake. Now we must put this mistake right.

But why did we make this mistake? We made it because after the huge changes that Margaret Thatcher brought about, and the collapse of Communism, virtually everyone started to believe in the free market. People of all parties - Labour, Liberal and Tory - believed that the way forward was through privatization and deregulation.

But the difference between Labour and the Tories is this: as social democrats we are always ready to learn the hard lessons of experience and to do what is necessary to bring capitalism back under control. That is why I am announcing today the setting up of a new Royal Commission to consider what reforms are necessary to the financial sector. Finance must serve the real economy, and not the other way around.

Perhaps the Tories will support us in this. But probably not. After all, the philosophy of deregulation which has brought us to this mess is, more than anyone else's, their philosophy. It is what - since the days of Margaret Thatcher - they have been in politics to do. That is why their ideological soulmates in the US, the Republicans in Congress, refused to support the vital rescue plan for the US economy. Be in no doubt: the blind free-market ideology of the US Republicans puts our economy at risk as well as their own. That free-market ideology threatens us all.

In 1979, Margater Thatcher led our country in a new direction: away from the state and towards the market. That philosophy, whatever its strengths, has been pushed to excess, and we are now all suffering the results of that. This is the moment when the Age of Thatcher comes to an end. This is the moment when we must learn not only that the state has to be put in its place, but the market too.'

1 comment:

George CA Talbot said...

"Finance must serve the real economy," is a nice idea but how could PM Gordon Brown advocate it when so many believe in self interest, competition and choice? Banks got themselves deregulated by claiming this was necessary for them to remain competitive once exchange controls were ended. But I could not get the Treasury, the Bank or any politician to countenance reinstating them as a matter of principle. And since 1997, free capital has overvalued the pound and yielded current account deficits. Currently it is 4% of GDP. I anticipate this borrowing spree will end badly as they usually do!

Thatcher's deregulation of banks was part of a trend and I urge anyone who wants to change this to think about our faith in self interest and in usury. While these remain, reform can change little of consequence. Now would be a good time to start thinking.

We have a deep problem with money and usury. Money was introduced as a tool to facilitate exchange. Sounds simple and it is. But for most of history, usury has been forbidden. That is hard to fathom. Nevertheless, three centuries ago, Europe legalised usury between consenting adults since when banks have profited from collecting savings and making loans. People feel there is no harm in this providing the conditions of the loan are known to the parties. But history tells a different story and reactions to the credit crunch show we have become addicted to credit.

In fact, the amount of money must be limited and exchanged sensibly for goods and services. Each needs a float but money should not be saved. There are other ways to save and invest that don't involve interest bearing loans. Loans seem sensible but tend to end in tears for reasons that current events illustrate more clearly than usual. These simple constraints are hard to meet in one nation. I assume this why Keynes tried to introduce a global currency for trade. The US vetoed his Clearing Union and he was forced to accept Bretton Woods because he feared the labour government would fall without a US loan. This introduced the IMF that has failed to act for many years.