Scottish Sunday Express - Breaking news, sport and showbiz from the World's Greatest Newspaper
Newspaper Cover Page
Our Paper

Front and Back Pages, E-Edition and Back Issues...
Weather
 3°C
London
Horoscope
Wednesday 3rd December 2008 Make us your HOME PAGE  What is RSS?
 
Columnists
Have Your Say - User Comments

ARTICLE SUMMARY

Have greedy bankers ruined the economy?

BANKS AND CITY bosses were yesterday accused of being responsible for the credit crunch.

INDEED

16.05.08, 6:03pm

Well, i don't think labour have done any worse than anyone else. I mean, we have outperformed germany, france, and the US over the last decade. and brown was internationally viewed as a capable finance man when that was his job.

in the end though, 'the market' will always run rings around goeverments because the odds are stacked in thier favour. they can always pick up and leave. it is their 'ace in the hole'.

as for alternatives, well it is difficult.

china is an interesting case of a communist government who believes that they can 'reign in' global market forces to the point where they can exploit thier potential, yet still excersize serious control over the economy (and thier citizens). I personally think that project is doomed, but it will be interesting to see how it pans out.

i guess another alternative is the sort of green approach, focusing on 'localism'... trying to opt out of the global economy as much as possible by focussing on local crops, businesses etc, smaller units of political administration, to control monetery flow on a local scale instead of watching money fly around the planet unfettered.

however, that strategy involves the unpopular goal of 'living with less'. i.e. being prepared to pay more for goods and food, have smaller houses, drive less, all the sorts of things we take for granted now. it's not the sort of thing that most people see as 'progress'. although i might.

the problem is, and here's where i really sound like a lefite, is that there is an inherent contradiction in capitalism between the interests of those who make money off of capital, and those who make money off thier own labour. the labour element will tend to favour some regulation, because they want stability in thier lives to raise their families. the capital element will always run away from regulation becasue they continually need to seek new markets to grow and maximise proft.

this uneasy peace worked in the post war consensus because domestic markets (and in the case of us, colonial markets as well) grew steadily, therefore big bisiness had an interest in 'nations' and thier health, and strong domestic growth meant they could supply stability through funding a welfare state. this is not the case anymore.

yes, pleasent debate.

so would you go all out free market? if not, what?





• Posted by: crayfishbanker • Report Comment

PETER/CFB

16.05.08, 5:50pm

Excellent Thanks

• Posted by: Mickle • Report Comment

User Image

CFB

16.05.08, 5:31pm


Well I am not sure where that takes us. We almost seem to agree.

Your case seems to rest on socialism v capitalism.

I think you would prefer a (leftie) socialist government but, as you say, you are not getting that with Brown’s lot. Therefore, I am not sure how you could ever achieve a true left government here. Try George Galloway’s lot if you dare!

If you want a competent capitalist government (because you think that is the only way to compete with the rest of the world), you will not get that with Brown’s lot either.

New Labour is actually in bed with the capitalists but it does not understand the intricacies of market theory and practice. The money market has gone out of control because cleverer people are running rings around New Labour’s bureaucratic approach to regulation.

Although I never promote political parties on here, I think it is becoming obvious lately that there are more competent and more experienced capitalists than Brown’s lot.

However, does your argument have to socialism v capitalism?

Is there another way to control the financial markets?

Good debate.

• Posted by: Peter_Pan • Report Comment

PETER

16.05.08, 4:21pm

well, if you want more strict control over banking and financial industries, or even business in general, you start to move away from a free market capitalist model and more towards the principles of a managed economy (socialism).

it is generally an uneasy balance, as business will always complain thier hands are too tied up, and move their capital somewhere else.

one thing i do know is that you cannot have it both ways. many on here complain (falsely) about 'socialist labour' or even 'commie' labour (who are no longer socialist, let alone 'commie'), but at the same time say that business needs to be controlled and regulated more. these arguments are basically at odds with eachother.

it is hardly a secret here that i am a bit of a leftie. so i certainly wouldn't mind more regulation and control of the unfettered. but i think that if you want a 'capitalist' society, , (and the material benefits it brings) as most people seem to, you have to accept the downside of that, which is a loss of control. that is just the way that particular system works, and flourishes.

• Posted by: crayfishbanker • Report Comment

User Image

CFB

16.05.08, 4:10pm


De-regulation.

That word takes me back to my original point.

Should the naughty children be left to play in the playground unsupervised? I suppose we can always blame the parents. Its never the government's fault is it?





• Posted by: Peter_Pan • Report Comment

WELL,

16.05.08, 3:46pm

I think that ultimately, when the primary goal is the maximisation of profit. people look for ways to make money. they take advantage of loopholes. that works for a while until too many people take advantage, then it starts to collapse.

you can call the inflation of stocks, or loose lending practices 'corruption', but say in the stock example, what salesman does not try to get all he can get for whatever he is selling?

similarly, if a bank has found a way to make money by relaxing lending criteria, of course they are going to go for it. thier primary interest is no 'society' or 'the good of the nation' but providing maximum profit and value for thier shareholders. that is just what capitalism is. especially global capitalism.

business interests, and neo liberals (including thatcher) sold us on the idea that a deregulated environment is what is needed for business to flourish.

a deregulated environment is what we now have. and business flourishes (it's not like banks are going to lose money on this economic slowdown). it is capitalism in its full, unfettered glory.

• Posted by: crayfishbanker • Report Comment

User Image

ECONOMICS

16.05.08, 3:26pm

crayfishbanker

Blimey! Did you get that from your Business School textbook? I know you are trying to elevate the discussion but I think you have missed the point.

There is always going to be a tendency towards cyclical boom and bust in any economy (but not of course, according to Gormless Gordon!)

Anyway, I think the key point of the accusation in this article is not that capitalism is either good or bad. The article implies that a bad (or even negligent) management culture has grown up without challenge from the regulatory authorities.

In a well-organised financial market, there must be an effective financial control system in order to achieve safety and stability. Both are essential to ensure that people’s deposits, investments and pensions, homes etc are not at risk.

If you allow traders to pump up the price of stocks, shares, houses etc in order to generate bonuses, commissions and through frauds like insider dealing that does NOT represent a true "capitalist" market. You could politely call it a "fictitious" market or more correctly, it is a "crooked" market.

Capitalism is not the same as fraud. I do not think you can use capitalism as an excuse for "bent salesmen" - they are let’s just say “unlawful” and the regulators should be barring them from the financial sector. In my opinion, capitalism is not to blame.

The question we are answering is "Have greedy bankers ruined the economy"? Well, let us just say that weak regulation has encouraged the growth of, shall we say, "suspicious" financial activity and "shady" salesmen in the financial sector.

That brings me back to Gordon Brown's wonderful big idea - the Financial Services Authority. Good one wasn't it?

• Posted by: Peter_Pan • Report Comment

ECONOMICS

16.05.08, 2:30pm

peter et al,

that may have been the case a number of decades back, but i think you are right to look at the 1980's as the turning point. for a number of reasons.

capitalism needs growth in the economy to survive. By the 1970's domestic markets were saturated and profit margins low.

businesses responded in two ways to this by the mid 1980's:

1. they started to look at global markets for expansion. thus ushering the era of 'globalisation' of markets and labour, and finance.

2. they tried to expand domestic markets through the expansion of credit (i.e. to fuel the economy by getting people to borrow more).

of course, every new strategy to accumulate wealth or profit (wether is be new divisions of labour, new industries, or new froms of financial speculation) goes through an initial perios of sucessful growth (say, for example with certian banking and lending strategies, or high tech stock options, or whatever), followed by the eventual abuse of that system to squeeze as much profit as possible out of it, and its subsequent decline when people start to see the inherent flaw in that particular capital accumulation strategy.

examples of these include

-the property boom in the 1980's.

-the financing of the asian 'tiiger'economies and their collapse in the late 1990's.

-the high tech stock bubble and it's collapse in 2001.

-the sub prime mortgage market and the global mortgage market borrowing in the last few years.

now nalin, you are correct in suggesting that the labour government took credit for a boom that was largely out of their hands (apart from their strategy of making the UK 'finance friendly' as well as other strategies like immigration ect. which did assist our economy and were withing thier control). but really, what governement would not do that? it does not erase the fact that current fluctuations have little do to with anything gordon brown or labour has done. they are a straw in the wind just like the rest of us.

global financial fluctuations are pretty much beyond the control of most governments. in many was we have been lucky that, with the ascendency of china, we have had a major economy growing to buffer most countries against a declining united states (who, in previous decades would have taken us all down with them).

now of course, China has been good for our economy, but now thier insatiable demand for food, fuel and raw materials is starting to rase the price of all of these commodities, and hitting us in terms of inflation.

it is difficult to accept that really no one has any control over the economy these days. but that is the situation, and one we tacitly accepted in the 1980's when we decided, along with the US, to go headlong into a globalised economy. It has brought us cheap goods, cheap food, higher standards of material living, but also made us far more vulnerable to the outside world.



• Posted by: crayfishbanker • Report Comment

User Image

EXACTLY NALIN

16.05.08, 1:19pm

Brown and his cronies have taken credit for the past 11 years of a relatively booming economy and now Brown blames world markets for the impending fall in the economy.
He cant have it both ways.

• Posted by: marigold • Report Comment

User Image

CRAYFISHBANKER

16.05.08, 1:18pm


You are half right :-)

Capitalism isn't new and we have survived downturns in the past, but the financial problems we are seeing now are unprecedented. (Northern Rock to name but one).

British banking used to be an extremely staid, sound and stable profession. Terribly boring, No place for salesmen then. Bank managers used to say "no" when people were over-committed. We were capitalists then and we still are.

For those of us old enough to remember it, though there was a key point where things changed. It all changed after previously tight credit control was weakened in favour of competition. After "big bang" (1988 I think) unrestrained competition and American banking practices flooded all over the British banking market. Aggressive banking worked OK in the good times, but, as you say, the economy goes round and round like swings and roundabouts. Round and round and up and down.

Perhaps old-fashioned British banking was the more viable strategy in the long run as, in the main, it made sure it kept something in resereve for a rainy day.

Hey, lets study economics!

• Posted by: Peter_Pan • Report Comment

User Image

BOOM - AND WHO TAKES THE CREDIT? GORDROWN AND HIS GANG

16.05.08, 1:14pm

so, has the economy been 'ruined'? ....seems a silly question, since economic cycles are part and parcel of what 'the economy' is...
• Posted by: crayfishbanker"

But isn't i a fact that GoDrown and his gang have been taking credit so far, so why not also accept some brick bats for their incompetence and mafia style presidential rule which penalises innocent people?

• Posted by: Nalin • Report Comment

NO, LABOUR HAS, BUT THE BANKS HAVN'T HELPED

16.05.08, 12:36pm

The banks are now taking full advantage of the situation and have massively increaced their profit margins. They are also trying (and succeeding) in putting brokers out of business by operating a dual-pricing system. The presence of brokers kept rates keen,and helped competition resulting in better deals for customers. It is for that reason that the big lenders want the brokers out of the equation.

• Posted by: redwhiteandblue • Report Comment

IMAGINE THAT...

16.05.08, 12:30pm

capitalists being greedy...

isn't that the point?

Surely people recognise that economies go in boom and bust cycles. this has always been the case... it's just part of the way things work. to be overly surprised or dissapointed in the fluctuations in the economy is like being dissapointed or surprised that winter has arrived.
we've been booming for a decade... it's about time things slowed down a little.

so, has the economy been 'ruined'?

seems a silly question, since economic cycles are part and parcel of what 'the economy' is...

• Posted by: crayfishbanker • Report Comment

User Image

PETER_PAN

16.05.08, 12:13pm

This was a strange phenomenan and one I could never get to grips with.
Staff had 2 distinct training modules.
ie. We were taught the rules and regulations of banking law and the consequences of breaking such laws.
On the sales side we were trained to sell, sell sell and had targets to meet which were often quite challenging.
One set of training often seemed at odds with the other.
But in the bank I worked for we had to be seen to be "sticking to the rules" even though they were stretched from time to time.
I worked for them for 13 years by which time I had had enough and hopped it to less financially rewarding work but much more spiritually rewarding work !

• Posted by: marigold • Report Comment

User Image

MARIGOLD

16.05.08, 11:52am


You were the fly on the wall. The voice of experience if you like. You must have seen it all and you probably did not like what you saw. However, I am sure you would have been out on your ear if you had disagreed. A quick P45 job? Say no more!

Correct me if I am wrong.

However, do you not agree with my point that the FSA (like all Labour/EU creations) was too concerned with writing rule books, re-tape and implementing useless regulations than in keeping banking really clean? Did your managers not take the view that "rules are there to be broken"? Did they say "Only the sales targets matter"?

If I am right on this, why the h*ll did Gordon Brown's wonderful FSA beaurocray not pick up on such bad practice until it was too late?

Answer = incompetence


• Posted by: Peter_Pan • Report Comment

Have your say on this article
HOROSCOPES
TV GUIDE

Todays best TV right here for you at the Express. • See Guide

TODAY'S CARTOON

The Political Cartoonist of the Year