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When will Labour tackle market failure and revive the role of the State?

scared businessman hiding on the ground with business graph down conceptThe roll call of shame and disgrace about the record of the private banks, privatised utilities and outsourcing companies has now reached such a pitch that surely Labour must now challenge the whole culture of ‘the market knows best’ and in the extreme form of the neoliberal ideology that ‘government should get out of the way and leave it all to the market’. That is now so utterly discredited that patching up a failed system or tweaking at the edges the overblown corporate power or regulatory cosiness simply will not do.

As everyone can see, the marketising obsession that Thatcher and Reagan initiated in the 1980s has now run its course, disastrously, not only in bringing about the worst financial crash for a century and the prolonged austerity that has followed, but now an almost daily succession of scandals that should destroy any political party that continues blindly to pursue it.

The worst recent example of banking misfeasance is the claim made by Vince Cable’s adviser that RBS deliberately wrecked viable small businesses in order to make profits for itself. If that charge is proven, then there is a strong case for bringing a criminal prosecution against RBS. But that is only the last of a very long list of criminal misdemeanours by the big banks that exposes them as out of control. That list includes Libor rigging (Barclays and many others), money-laundering for drug cartels and pariah states (HSBC), mis-selling of pensions & product protection insurance & interest rate swaps, and now the likely manipulation of the foreign exchange market for the benefit of the banks’ trading at the expense of millions of clients.

The penalties which run into billions of pounds are paid at the expense of shareholders, but at no financial or occupational loss to directors, and no custodial sentencing even for the worst offenders. The current banking system is now so rotten, it is so over-powerful and yet so unwieldy and unmanageable, that it should be broken up. Either, as Cable’s adviser proposes, no bank should have more that a 10% market share, or RBS and Lloyds should be retained under public control and if Barclays and HSBC do not conform to the national interest, they too should be brought into public ownership.

A similar pattern of incompetence, mismanagement and fleecing the public revenues for private profit can be seen in the record of privatisation and outsourcing. The nationalised industries which were subject to real accountability have been replaced by private semi-monopolies that are virtually unaccountable – the likes of G4S, Serco, Capita and Atos. All of these have been found seriously failing, whether over the Olympics, claiming huge taxpayer funding for tagging prisoners who were either dead or had left prison, or making work capability assessments of the disabled which were wildly inappropriate and often made by staff without the relevant skills.

The energy companies and the water companies have become bywords for exploitation and profiteering. These broken systems will not be made good by tighter regulation. They are corrupted from within and will only regain the public’s trust and display the integrity and high standards the public demands if their free-wheeling market deregulation if reversed. It is time Labour took a stand.

Image credit: tomwang / 123RF Stock Photo

3 Comments

  1. Chris Wilson says:

    And will an incoming Labour government do anything about regulating the banks? No it won’t. And will Michael Meacher continue to accept the Labour whip? Yes he will. Can you give me a example of hypocrisy?

  2. Jon Williams says:

    Agree, but the Tories might say Labour had 13 years to properly regulate the City and introduced PFI schemes where Government lending would have been cheaper…

  3. Robert says:

    To write this and state Thatcher without writing about the Blair and Brown is shocking, Thatcher, Major, Blair and Brown, with Darling as well.

    I sit back now and listen to Miliband to be honest I just seems to go numb, because none of them really know how they will stop this happening again.

    Gas and electricity companies are doing what companies do make profits, to expect them to see people as anything else is a bit rich.

    How can we sort out the gas and electricity, we have to buy the stuff on the open market gas is now like Oil as it runs out the prices are going to go up and up, electricity how many power stations did labour build, in fact did labour build anything except debts ah yes hospital and schools all on PFI.

    lets see nationalize the power industry again including the sales section stuff the EU if they do not like it.

    problem is Miliband would have the runs if somebody said that to him.

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