Amid the arguments that the UK is headed towards a new housing bubble, it seems clear that the so called recovery is simply a “return to normalcy”, with none of the lessons from the crash being learned and dooming us to make the same mistakes.
At the time of the crash, the bailouts themselves seemed to be as much about letting the banks carry on with their damaging behaviour unencumbered as saving the country from economic catastrophe. In a reversal of the old demand “nationalisation without compensation” the government simply gave the banks money to cover their bad debts whilst not using its shares to influence the governance of the banks and direct it towards investment to aid the recovery.
Since then the proposed bank regulations have been less than satisfactory. While there is much talk of breaking up investment and retail banks to stop them gambling with savers’ money, there has not been enough to make sure that banks keep capital in reserve to stop more crises.
Indeed the government has been desperate to privatise the nationalised banks, with the sale of Lloyds beginning in September. Again rather than use these shares to influence the economy, promote investment and lend to industry the government is just handing them back to the people who first caused the crisis.
For the recovery to have long term sustainability the problems and contradictions which caused the crisis must be righted, not just putting us on the same old course that got us into this mess. David Harvey argues that the problems of the crisis can be seen as over-mighty power in capital. Indeed since the 1980s, with the rise of Thatcherism, the neoliberal project sought to increase profits at the expense of wages, limiting the latter’s share of GDP greatly and crushing collective bargaining in industry. Bank regulation became not only desirable for rich bankers but necessary to keep demand artificially propped up with credit in a low-wage economy. In the end even this cheap credit failed, causing the crisis.
Instead of learning form these mistakes, the Tories carry on with the attacks on living standards which caused this crisis in the first place. They seem to see the 2008 crash as merely a bump in the road and are continuing with the neoliberal project of austerity which will only strip demand out of the economy even further and cause more financial problems in future.
What is needed is a fundamental re-balancing of our economy, not only away from finance and into industry as is so often talked about but away from the complete dominance of the power of capital and give more power to labour. For a sustainable economy increased industrial democracy is an imperative, securing for workers higher wages and more say over companies’ behaviour so that we are never again held to ransom by the large banks keeping demand afloat.
