Wednesday, 26 November 2008

If We Had A Choice We Wouldn't Start From Here..

McFall, the arch labour loyalist, was on Newsnight last night huffing and puffing about threatening the banks with full nationalisation if they don't start lending again. A year ago, suggesting that a New Labour politician would be making such nosies would have been grounds for a visit from the CPN. Now it is the fall back option of choice even for the IMF. So most of the Left are feeling a certain wind in their rhetorical sails, if only because of the sheer delight of being able to implicitly start every sentence with that silent, unspoken, " Well, we did tell you so..."

But here's a question from the American Left:do we want the banks even if we could fully nationalise them?

"Buy a bank and its liabilities are now yours. If you happen to be the US government, your full faith and credit is on the line for every penny. There is nothing radical, not to mention equitable or practical, about underwriting the vast quantities of dubious financial instruments that metastasized during the past decade. You want a publicly owned and managed bank to lend against the tide and finance reconstruction? Start a new one."

Is this practicable? How on earth would we get the mortgages and pension funds out of the clutches of the existing banks and yet leave them with the debt which they themselves magicked out of all those complex and rarefied financial instruments of destruction? If someone could convince me that we could disengage those mortgages and pensions I'd be really happy to let the whole bloody City of London collapse under the weight of its own moral failings.


  1. Well, things only really get nationalised because of a perception that capital has failed to run them properly.

    Amid the talk of 'socialising the losses', we forget that losses of some kind are almost always the rationale behind people wanting to socialise things, even on the socialist left. If there were no losses, we'd all be indefinitely employed for a decent wage...

  2. Tom,
    Thanks for your comment.

    I think the point is that many of the losses incurred by the banks didn't arise from productively useful behaviour. When,say, the coal industry was nationalised after the war, or the car industry was saved (for a while) from collapse in the 1970s through nationalisation, there was pretty widespread agreement that the country needed coal and cars.

    Relating this analogy to the finance industry it is certainly true we need (a)pensions, (b) mortgages, (c) a means of allocating capital to promising enterprises and (d) most of all, a functioning system of payments between individuals and enterprises. But I struggle to believe we need the kind of derivatives markets where so many of the losses occurred. There's a very interesting article on hedge funds, and how the big banks are often entwined with them, in the current LRB (I'd post the link but it's a subscription service).

    So if it were possible to separate out the socially useful bits of banks from the 'unproductive' bits I'd jump at the option. But my original post basically said I couldn't see how this might be done. I regret that I still can't.

    Interestingly, Ken Livingstone* is very critical of the acquisition of the RBS shares- he thinks we overpaid for them, big time. See

    * Well, either Ken, in whose name the blog is maintained or, quite possibly, John Ross, his long time economics adviser who often posts there.