9 October 2008

Brown, New Labour and the Banking Crisis

It is far easier to comment on the underlying structures of society than it is to predict the consequences of a crisis in the system.

The current disintegration of world banking is the most significant event in the history of capitalism since the collapse of historical communism in 1989. While 2008 may well be as influential as 1929 in reshaping the cartography of capitalism, one myth peddled by some on the left needs knocking down. A financial collapse, with whole layers of the population losing their savings and pensions, would do nothing to promote socialism; indeed, apart from being painful and heralding in bottomless recession, such a crisis would release the political forces of the nascent far right across Europe, just as it did in the 1930s.

Though complex, the basis of the current crisis is clear. Banks, as a consequence of lax regulation, lent money in return for dodgy securities; their lending produced a credit boom whose deceptive glow was the allure of first Thatcherism and then New Labour. Blair and Brown from 1994 onwards exchanged Labour’s social democracy for that gloss and so brought us down the road to where we are now.

That said, Brown’s resolute decision to acquire the power to part-nationalise British banks is a welcome and decisive measure to deal with the problem even though tougher restrictions could have been imposed. Chalking up this success (supposing it is successful) may save Brown from the potential meltdown awaiting both him and New Labour in 2010.

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