US Election: It’s still the economy, stupid

Barack Obama has a knack for making history.

In 2008, he became the first African-American man to assume the Presidency. This Tuesday, he also became the president with the highest unemployment rate to win a second term since Roosevelt, and the first since Ronald Reagan to win re-election with the jobless rate over 6%.

No one should underestimate the role of Obama’s campaign in achieving this feat, or the skill and charisma of the man himself. However, commentators also rightly point out that the attitudes of his fellow Americans, especially on the economy, helped him on the road back to the White House. Interestingly, more than half of Americans surveyed in exit polls last night blamed the depressed US economy not on the incumbent, but on Obama’s immediate predecessor, George Bush.

For the Democrat, this proved to be a valuable electoral boon, for while the state of the economy was cited by pollsters as the most pressing issue for voters, this failed to translate into a backlash against the incumbent.

However, on British shores these findings bode ill for the Labour Party. The outgoing Brown government was widely blamed by the Tories, and much of the press, for the parlous condition of the public finances in 2010. Two years on, the Prime Minister’s favourite counter-attack to Ed Miliband’s criticisms of his economic policies is still to pin responsibility for his troubles on Labour’s legacy. Cameron and Osborne revel in the role of righteous garbage men, clearing up the wreck left by Gordon Brown’s team. Boris Johnson himself recently got in on the act, dubbing Cameron “the broom…clearing up the mess left by the Labour government.”

The charge of fiscal incontinence levelled at Labour is, of course, grotesquely overblown. Research by the Fabian Society shows that public spending was in line with historical trends for both Labour and Conservative governments dating back to the mid-sixties. Second term public expenditure (2001-2005) in isolation was lower than any four-year period before 1997. Even in 2010, when public spending ballooned to 46.7% of GDP, this was still at a lower level than in the 1960s, and just 3% higher than the pre-1997 average.

However, Ed’s team has wisely conceded the battle here out of recognition that the Tory narrative holds sway over the electorate and will be nigh impossible to uproot at this stage in the parliamentary term.

Yet Labour will need to start writing a new story on the economy soon if it is to avoid the Republican’s fate in 2015. One Nation Labour offers a tantalizing means of achieving this. The idea that a country cannot prosper if it stands divided against itself is a  powerful one, deftly uniting condemnation for the banking executives who crashed the economy with the (albeit occasionally unjustified and often distorted) resentment felt towards those who seem to get an easy ride from the state.

Obama himself made use of similar ideas in his victory speech, stating: “While each of us will pursue our own individual dreams, we are an American family and we rise or fall together as one nation and as one people.”

If Ed and co begin to flesh out the economic aspects of One Nation, make the case for an economy that serves the many, not the few, perhaps Labour can shake off the mud cast upon it by the Tories and look forward to its own election victory night in 2015.

Louie Woodall is Assistant Editor of the Young Fabians Blog

US Election Night: why all the rage?

As the results start pouring in, it’s worth reflecting on what has been one of the most brutal and bitter Presidential campaigns in recent history.

The 2012 campaign feels a long way distant from the heady days of Obamamania in 2008. Then, President Obama was the change candidate, and barely needed to acknowledge his opponent, let alone attack him. This time round a massive 90% of political ads aired in the states have been negative, or attack ads- with both candidates doling out the mud with equal gusto.

What explains this? Partly it originates with the campaign strategy pursued by the Obama camp. One Obama supporter said that this time round, the message was not about hope, but “about holding the line.”  Marcus Roberts, Deputy General Secretary for the Fabian Society, put it even more starkly:  ”[the Obama team] has created a campaign that is even sharper, faster and bigger then ‘08. And it is 100 per cent focused on winning.” Mitt Romney has played the same game as Obama, fighting attack ad with attack ad.

However, the fury of the campaign is also product of an America that is deeply polarised- or at least one that is depicted as such. There may be a large rump of Americans who hold views and express values that do not belong exclusively to the left or right, but their voices have been crowded out by a partisan media and the clash of the two very different main parties.

Republicans are accused of ‘gay-bashing.’ Democrats of hurting working families. The Republican’s answer to the Great Recession is a smaller state. The Democrats answer is a larger one.

Whoever emerges triumphant from tonight’s brawl- you can bet on one thing. America will remain divided. It will be a tough job for either candidate to bridge the divide after a campaign like this one. But as they say in politics- “leave that for the next guy.”

Louie Woodall is Assistant Editor of the Young Fabians Blog

US Election Night: Obama for equalities

C’mon President Obama, millions of people around the world are rooting for you.

Not only that, but millions of people around the world need you to win to protect and promote their rights. These are the members of the LGBTQ community, whose future looks uncertain under a Republican presidency. Over the last four years, President Obama has taken great strides forward towards equal rights for gay citizens in his own country. Last September, he faced down fierce opposition from the Republican Congress to repeal America’s ‘Don’t Ask, Don’t Tell’ act, which banned gays from serving openly in the military.

Earlier this year, he ordered US government agencies to consider the status of LGBT citizens in foreign countries when allocating overseas aid.

Most prominently, he has fought a running war this year on gay marriage, duelling with social conservatives to support state’s rights to choose whether to enshrine same-sex unions into law. This May, he made US history by being the first President to say that same-sex couples should be allowed to marry:

“I’ve stood on the side of broader equality for the LGBT community…for me personally it’s important for me to affirm that I think same-sex couples should be allowed to get married.”

Compare this to the rhetoric of Republican hopeful Mitt Romney, who said in 2006:

“I agree with 3000 years of recorded history, I believe marriage is a sacred institution between a man and woman and I have been rock solid in my support for traditional marriage”

No wonder LGBT Americans have their fingers crossed for a Democratic victory. However, it is not only gays in the US who fear an Obama defeat.
President Obama has been a shining beacon for LGBT rights across the world. His term in office has substantially raised the profile of issues such as same-sex marriage and gay rights simply by virtue of raising them to the status of a national debate within US borders. There is a palpable fear, therefore, that his removal from office could turn the clock back on vital equalities issues. A Republican President, after all, is hardly likely to preach on gay rights, taking into account the fact that 82% of the party opposes legal marriage for homosexuals.

In the UK, we are in middle of a protracted battle of our own on gay rights. The various liberation and equalities campaigns taking place across the world draw strength from the example of Obama. Without a leader of his prominence on the world stage, it is likely they will struggle to build on the momentum they’ve gained over the past four years.

Louie Woodall is Assistant Editor of the Young Fabians Blog

Equalities Week: The Olympic Legacy

For the first event celebrating Young Fabians Equalities Week, Dame Tessa Jowell MP, Lisa Nandy MP, and Tim Hollingsworth, Chief Executive of the Paralympic Association, were asked what was next for equalities following the Olympic Games.

London 2012 was a proud celebration of diversity.

Men and women, white and black, able bodied and disabled- all enjoyed equal status under the glow of the stadium lights. Now, as the fantastic achievements of the summer games recede into memory, we must ask how the equalities enshrined for a brief moment in the Olympics and Paralympics can be embedded into wider society.

All three panellists agreed that it was disingenuous to talk about a ‘legacy of equalities’ from the games, especially in relation to the disabled.

“We shouldn’t talk about legacy from the Paralympic Games,” said Tim Hollingsworth, “because it suggests immediately that you’ve got to that stage where you want to be and now you want to sustain it. I think this is a journey, and I think the journey we’ve begun is in the foothills of a mountain that needs to be climbed.”

The collective euphoria felt after Mo Farah’s double gold medal-winning runs, or Ellie Simmond’s heroics in the Aquatics Centre, risks making us complacent about equalities without cause by confusing an emotional response to specific events with a fundamental change in underlying attitudes. As Tessa Jowell remarked:

“I think that we’ve got to a more equal place, but I think its precarious, that type of progress that is achieved so quickly is precarious.”

However, it is possible to use the increased status that ethnic minorities, the disabled, and women enjoyed during the games as a springboard to make the case for ’structural equality’- factoring in the need for equal treatment within our institutions and infrasture.

Transport for London pledged to make the 2012 Games the most accessible ever for disabled people, spending £2 million on providing step-free access at all London Overground stations alone. This is a big step in the right direction, but accessibility needs to be rolled out beyond London.

Lisa Nandy thinks the way towards strucutual equality is by making it compulsory for all public sector contracts to include clauses on accessibility:

“The logic of the Olympics is that you use public procurement as a way of moving forwards on those issues [of access]. But having met with transport ministers since the Games, there is still an attitude that there is too much bureaucracy and too much red tape [involved], and we’re [ministers] not prepared to do anything about it.”

The battle for equal access is clearly far from won.

On the essential need for British women and ethnic minorities to acheive equal status in society, the Olympics provides a new generation of role models for everyone to look up to. Yet it is important to remember that British atheletes did not choose a sporting career in order to spend all their time acting as ambassadors for their gender or racial background. We cannot delegate the work of fighting prejudice to a select band of celebrities. It is up to each of us to tackle sexism and racism wherever they spring up.

However, what we can do is hold up medal-winners like Jessica Ennis, Lizzie Armitstead, Nicola Adams, and Anthony Ogogo as examples of how ridiculous it is to discriminate against minorities, immigrants, and women when they acheive so, so much.

London 2012 may be over, but we must not forget the lessons it’s taught us.

Louie Woodall is Assistant Editor of the Young Fabians Blog

What can we do with Royal Bank of Scotland?

Opportunities like this don’t come around very often. A bank- and not just any bank, but the onetime 5^th largest bank in the world- lies in possession of the British state. For the moment it sits dormant, untouched by the Treasury, a priceless gem gathering dust in the national coffers. But it doesn’t have to be this way.

The Royal Bank of Scotland was nationalised in instalments from 2008-09 and is currently 82% owned by the British government. At the height of the financial crisis, a sum of money equivalent to £617 for every man, woman, and child in the United Kingdom was spent on rescuing the ailing behemoth.

Since then, a great deal of thinking has been had over what should be done with it. Ironically, although it was the British taxpayer who footed the bill for this make-or-break purchase, the public voice has been largely shut out of the debate. Yet this most exceptional of circumstances compels the government to do something with RBS that truly benefits the nation as a whole, beyond simply reimbursing the taxpayer for the billions lavished saving it from bankruptcy.

State ownership of the bank gives the government the opportunity to transform RBS into a living, breathing example of what a virtuous financial system could look like.

Progressives are not short of ideas on this. Those on the left recognise that the value to be gained from the public stake in RBS goes beyond returns on owned shares. The real prize would be to reshape the bank to serve the public good, rather than private gain. To do this, the government would first have to fully nationalise the bank by buying up the outstanding 18% share in RBS. This should be the easy bit, as the money spent ensures the state can exercise complete control of the group, allowing reforms to be made immediately.

Next stop, the retail brand. Greg Fisher, managing director of the think tank Synthesis, says RBS should devolve power to its high-street branches and grant local managers autonomy to tailor their service to the specific needs of their customers.

He suggests the bank could learn lessons from the Svenskehandel Bank in Sweden, which weathered the storms of its host nation’s financial crisis in the 1990s because of its decentralised operating structure.

Granting local staff the flexibility to manage their operations in accordance with the situation ‘on the ground’ and fostering a culture where the relationship between banker and customer is key would go some way to diminish the negative influence of an over mighty head office.

What about the commercial investment arm of the group? Liberal Democrats and Labour politicians alike are clamouring for the creation of a ‘British Investment Bank.’ Nationalise RBS and they have one ready-made. There would be no need to replace existing professionals with state bureaucrats, or give politicians free rein to play million-pound roulette with suspect small and medium sized enterprises (SMEs).

Instead, the government would draw up a new corporate charter redefining the aims and objectives of the investment bank, included in which would be an industrial strategy so traders had a clear idea of what sectors to prioritise, and a code of ethics to deter rogues and cowboys from playing fast and loose with taxpayer’s money. The government could then steer RBS without getting itself embroiled in wrongly financing ‘zombie companies’ or furthering politician’s business interests.

Yes, there remain a million little details to be worked out. However great national endeavours often begin as bold statements of principle. This is the right time to make another. This is the right time to transform RBS from an unwieldy corporate behemoth into a powerful engine for social good.

Louie Woodall is Assistant Editor of the Young Fabians Blog

We need a state that responds to regional issues, not a Big Society

Conferences are supposed to highlight the differences between parties. Members and MPs are paraded before the media to denounce their rivals and rally the troops in anticipation of the next round of political combat in the Commons.

However, the bombastic rants of shadow cabinet ministers (think Ed Balls and his criticism of “Butch Cameron and the flat-line kid”) tells us less about the differences between the two main parties than the more subtle ways Labour MPs respond to issues on which there is broad agreement on across the political spectrum. It is by listening out for those key phrases spoken at Fringe events that are repeated again and again that the humble party supporter can understand where his/her politicians will draw the battle lines against the opposition.

At this year’s Fabian Fringe, the emphasis has been on building a more intelligent, more flexible, and more responsive state. The need to “innovate” has been stressed at various events, as has the need to accept and adapt to a post-financial crisis landscape where old ideas and values no longer have the same relevance. In particular, we have witnessed at this conference a de-emphasising of redistributive measures and the role of central government in securing economic fairness in favour of ‘higher level’ mechanisms of achieving more equality, and local or regional means of stimulating change.

There is overlap here with the Conservatives’ rhetoric on the ‘Big Society’, where the powers and responsibilities of providing state welfare and services are devolved to voluntary organisations, civic society, and local government. Is Labour seeking to adopt the ‘Big Society’ from David Cameron in the same way that Ed Miliband adopted ‘One Nation’ from Benjamin Disraeli?

‘NO’ is the resounding response. While both parties are emphasising the importance of localism, participatory democracy, and regionally-tailored services, only Labour is making the connection between these three objectives and central government’s role in making it happen. On the evidence of this year’s conference, Labour is aware that divorcing issues of regional investment, regional pay, and regional welfare from regional democracy and regional funding is a recipe for disaster.

Helen Goodman, writing in The Shape of Things to Come: Labour’s New Thinking, explains that for a more decentralised state to work for the people, Labour must build regional responses on the basis of trust, rather than control:

“The localism agenda of this government purports to give more local accountability, but the various arms of policy are pulling in too many opposing directions for this to work. Labour needs to develop its own collective approach, building on local democratic institutions and expanding and strengthening accountability. Even on a practical level, extracting maximum efficiency from funds will mean trusting local politicians to know their own areas and deliver on priorities in the most efficient way possible.”

However, the party can go further than this. Instead of relying on local representatives to deliver what is needed, Labour could embrace participatory budgeting and champion micro referendums on issues of community spending to ensure that council decisions are fully democratic and placed in the hands of those most affected.

A Labour government would also have to ensure that regions had access to an adequate supply of funding. To this end, it would be prudent to stop talking of a ‘British Investment Bank’ now and start talking about the need for ‘Regional Investment Banks’ instead.

The party could also revive the idea of regional parliaments, buried in the first term of New Labour. These don’t have to consist of expensive ‘white elephant’ legislative buildings or the creation of an extra layer of bureaucracy. Instead, they should be hotbeds of creative thinking on local government, given real powers by Westminster but then left alone to come up with imaginative solutions to their own geographical areas of responsibility.

The truth is that some councils are more innovative and willing to try new things than others. It is up to the state to promote best practice and provide the funds and expertise to ensure each locality is properly equipped to tailor the solutions right for them. The above are just a few ideas on how to achieve this.

Perhaps if some of them are taken on board, we can replace Cameron’s bankrupt ‘Big Society’ with a Britain where communities are fair, free, and properly funded.

Louie Woodall is Assistant Editor of the Young Fabians Blog 

Conference 2012: leaning leftwards?

Opposition affords political parties the chance to change their identity.

Freed from the constraints of the government benches, Labour has the space to transform itself to suit the new circumstances facing Britain today. The party last did this successfully during the ‘90s, when Tony Blair adapted Labour to fit in with a world view where the market was king and the individual trumped society. His fundamental flaw once in power, however, was to entrench this distinctly Tory narrative rather than develop a fresh one that laid out how a fair, free, and equal society could be achieved.

Ed Miliband would do well not to repeat this mistake. The task he faces is to renew the party without detaching it from the cares and concerns of the people. The end goal is to win back the five million votes the party lost since 2010. Does this require a shift to the left or the right? At a fringe event hosted by Liberal Conspiracy and chaired by Rowenna Davis, this was the question posed to a panel composed of MPs, trade unionists, and special advisers.

The consensus opinion was, predictably, that a lurch to the left or the right would damage Labour’s election hopes. If a party moves across the ideological spectrum too far and too fast, voters become disillusioned and confused about what its members stand for. Something like this explains why Labour fragmented in 1983, and perhaps also why so many supporters deserted the party after 1997.

However, this logic does not rule out a gradual and measured move into once abandoned ideologies. In fact, the language peddled by Rachel Reeves and Luciana Berger- present at the Liberal Conspiracy debate- and other MPs at conference suggests that Labour is covertly attempting to shift the consensus leftwards back to its socialist home.

Let’s look beyond the rhetoric and get at the substance of what Labour’s proposing. ‘Predistribution’: a means of placing controls and limitations on the free market. ‘Active industrial policy’: code for a centrally planned economy where the state selects the industries that are our best bet for growth and prosperity. Labour is reviving socialist ideas and cloaking them in the language of prudence and practicality. As the party has turned away from the neoliberal doctrine that so epically failed to bring prosperity, happiness, and equality to the lives of the majority, it has predictably- and rightly- once again embraced the ideology of socialism to capture the electorate’s imagination.

The fact that the 2012 party feels compelled to disguise its leftward shuffle behind a wall of jargon is no great surprise. Labour still treats socialism as a dirty word, tainted by the failures of the 1980s. However, Rachel Reeves gave the game away in the debate when she said:

“An incoming Labour government has to look much more fundamentally at how the economy works in the first place so that it actually delivers for ordinary working people.”

Any classical liberal worth his salt would argue that it is not the government’s role to determine how the market distributes its resources at source. Most party loyalists at the high point of New Labour would have probably said the same.

However, right now Labour is saying that is exactly what the government should do. While the impenetrable language makes Ed’s latest agenda open to ridicule, it at least serves to soften the impact of policy ideas that have the potential to take us rapidly down the leftward path. Yet there will come a point when the country wakes up to the fact that Labour is trying to bring socialism back into fashion. When this happens, the party will have to either embrace this socialist turn or reject it. Let’s hope we have the courage to stand by our beliefs; beliefs that can win the country back for the people.

Louie Woodall is Assistant Editor of the Young Fabians Blog

Fighting the far right

The battle appears to be won. In 2010, the BNP were routed in Barking and Dagenham. The number of BNP councillors has plummeted from a high of 56 to just 3. Britain’s most powerful, and most threatening, fascist party seems to be in a state of terminal decline.

Elsewhere, the English Defence League is also in retreat after a period when it seemed destined to replace the BNP as Britain’s foremost far right organisation.

The EDL’s appeal lies in its ‘anti-politics’ approach to campaigning. Members engage in marches and demonstrations, rather than debate and canvassing. However, leader Stephen Lennon is attempting to drive the organisation down the parliamentary route trod by the BNP in an alliance with the British Freedom Party. This has caused the movement to fracture and split as grassroots members rebel against the leadership’s striving to make the EDL a ‘respectable’ party.

However, while the threat of a fascist renaissance in Britain has subsided for now, the underlying attitudes and issues that nourish the far-right remain present in society.

Polling conducted by anti-fascist organisation ‘Hope not Hate’ revealed that 10% of the population can be classified as ‘latently hostile’ to those racially and culturally different from themselves, and 13% as exhibiting an ‘active enmity’ towards the ‘other.’

Insecurity about the future, and concern that British identity is being steadily eroded by a wave of foreign immigrants, are the key
drivers of such attitudes. While very few can summarise what Britishness means (besides drinking tea and queuing), it is something that is felt to be under attack by multiculturalism and the political doctrine of tolerance.

Cosmopolitan liberals may shrug their shoulders at this concern, rightly pointing out that ours is a nation of immigrants and that the freedoms Britons hold dear are protected by law and not about to wiped out by a radical Islamic agenda or a tidal wave of Polish plumbers. However, the fear that British society is evolving out of all recognition is deep-rooted in the sort of constituencies the BNP prey upon. One Londoner said:

“One of the problems of academics is that they don’t understand how local people feel…I get very wobbly when I get on a bus and there are fifteen people with burkhas on….[the growth of immigrant communities] does wind people up.”

Progressives would be foolish to ignore local people’s concerns and brand all those who fear immigrants as ignorant or racist.

Fortunately, Labour is in a unique position to help change attitudes and strengthen the campaign against fascism. Aimy Saunders, a campaigner with ‘Hope not Hate,’ says:

“The BNP has been more successful in areas where the Labour Party has taken people for granted. 49% of BNP voters used to vote Labour but felt disillusioned with the Labour party and what they stood for at that time.”

The rest are typically first-time voters or non-voters, who cast their ballot for the BNP out of despair that mainstream parties simply don’t understand their concerns.

Labour activists need to take to the streets- as they did in Barking and Dagenham- to win that 49% back for the party and prevent non-voters from supporting fascists at election time.

Local parties should also forge alliances with campaigning groups like ‘Hope not Hate’ to promote ‘community resilience.’

“[At ‘Hope not Hate’] we’re building community links so that when times are hard and the BNP comes
knocking local residents will be able to respond and not be as influenced as much by their ideas,” says Aimy.

This means linking local schools, clubs, and religious collectives together in community-wide projects designed to strengthen a sense of fellowship. In Luton, Dagenham, and Croydon where the BNP have made inroads in the past, ‘Hope not Hate’ has founded community newspapers and sponsored local meetings and events to inspire a spirit of neighbourliness.

Local Constituency Labour Parties and Trade Union branches are well positioned to support such work in areas susceptible to the economic and social pressures that lure people to the far right.

Ignoring the threat of fascism and claiming that far right parties have been routed once and for all is arrogant at best and dangerous at worst. Parties like the BNP may rise, fall, then disappear, but the values they stand for endure.

There is, therefore, a strong moral case for Labour to jointhe struggle against fascism. If we claim to be the party of inclusiveness, we cannot turn a blind eye when attitudes toxic to the ideal of a free and equal society are allowed to find political expression.

Louie Woodall is Assistant Editor of the Young Fabians Blog

Intergenerational tensions must be resolved now

The struggle to achieve a fair distribution of resources across the generations will define politics over the next century.

Where in the post-war world the battle lines were drawn across class and social divisions, intergenerational cleavages will cause the greatest clashes of the 21st century.

Some are already in evidence. The trebling of tuition fees is rightly condemned by students as a cynical ploy by the government to load the burden of reducing the deficit onto the younger generation. However, it passed because the age group it affected is not a big enough an electoral threat to cause politicians to stay awake at night.

Meanwhile, at the other end of the spectrum politicians of all colours leaped to condemn Osborne’s so-called “granny tax,” which gnawed into the pensions of older people. However, scant debate was had over the fact that current arrangements mean many wealthy pensioners receive large benefits that the younger generation can only dream of: free bus travel, free prescriptions, and free TV to list a few.

In the last issue of ‘Anticipations’, Angus Hanton of the Intergenerational Foundation said: “The current younger generation will probably be the first in modern history to have lower living standards.” Meanwhile, graduates will find the promise of a job, a home, and happiness held out to their university-educated parents no longer applies to them.

What can be done? It is impossible to mobilise the young against the old, because this is one political division where faction-fighting won’t work. A student will not be moved to denounce his parents and grandparents for getting it easy while he or she struggles to get by- the bonds of family are too strong for campaigns to pit generation against generation.

Instead, the left needs to lay the groundwork for a grand bargain between age groups. The future of a sustainable welfare state depends on people of all ages negotiating compromises. We must stop viewing certain demographic groups as protected from economic and social realities and accept there will have to be a give-and-take between generations to acheive a future fair for all.

Olaf Cramme, director of the Policy Network, spoke to the Global Youth Challenge Policy Commission and set out this idea in clear terms:

“Surely at the moment the old live at the expense of the young, and unless this is accepted there’s nothing we can do [to change it]. The next step will then be not to polarise [generations] further, but construct an generational compact where you change [the direction of] distributional power,”

One way to do this is to change society’s perception of what constitutes an ’investment.’ At present, too much emphasis is given to what Olaf calls ‘tangible assets,’ those investments that exist as capital and can boost the economy now. The left should mobilise to redress the balance between these and ‘intangible assets,’ namely the money pumped into education, training and skills that is spent now, and reaps dividends in the future.

As long as society feels it is better to cut investment to early years care, education, and training schemes like apprenticeships, then the gulf between the young and old generations will grow and grow.

The intergenerational challenge is not one to be taken lightly. It will require a huge political mobilisaiton across national borders and age boundaries. As Olaf says,

“I don’t think one country alone will succeed, it will be a collective effort. It’s almost too much for one country or one party to organise and break through a recognition by people that there is something wrong with the system, and that young people are falling behind.”

However, to refuse the challenge altogether would be to condemn the younger generation to a future it did not help create, and does not deserve.

Louie Woodall is Assistant Editor of the Young Fabians Blog

Future of Finance Network: reforming the banks

Injecting virtue into our banking industry is at the heart of a progressive response to the financial crisis.

Young Fabian members of the Future of Finance Network, alongside guest experts Rachel Reeves MP, Lydia Prieg of the New Economics Foundation, and Melora Jezierska of the Charity Finance Group, gathered at the House of Commons this month to answer the biggest questions posed by the incoming reforms.

What can be done to protect depositors’ money from being placed as bets in ‘casino’ investment banks? Which policies will serve to safeguard London’s status as a world financial centre and defend the wider British economy from bank failure? How do we make banks servants of society instead of society servants of the banks?

The answers are threefold. First, new regulation has to be calibrated to maximise the public good. Ringfencing the high-street arms of banks from their risk taking investment operations is sound in principle. However, the rules need to ensure that the protected element has enough cash in reserve to act as a buffer in the event of a crisis. It is also important that policy recognises the rights of certain groups that warrant protection to access the ringfenced business- like charities and small businesses.

Second of all, we need to build a banking system founded on social values. Banking relies on trust, on mutual respect between people and institutions, and cooperation. Neo-liberalism birthed a different collection of values- market values- that stripped these qualities from the financial sector and divorced the purpose of banking from the social good.

As a result, the industry was swallowed up by a small group of corporate giants and our banks destroyed more economic value than they created. In the post-crisis age, banks need to be more responsive to the needs of communities. We need to cultivate new ‘challenger banks’ to boost competition in the sector, encourage the growth of different types of financial institutions like credit unions and mutuals, and compel a devolution of power away from corporate multinationals and into smaller, local institutions.

Thirdly and finally, there needs to be a change of culture within the financial sector. This makes demands of society as well as banks. A powerful financial policing authority, established by the state, could patrol the sector for instances of white collar crime and corporate misconduct. Incentive structures that teach salesman to treat clients as cash cows can be ripped up and replaced.

However, citizens also need to take control of their own financial lives so that they can be more selective about where they put their money. Children should be taught about the different ways they can manage their money at school, while the government could sponsor a massive publicity drive to raise awareness of the various institutions apart from banks they can use to achieve financial peace of mind.

Changing the way banks operate and control their assets will be expensive. Estimates based on the Vickers Report suggest the economy will suffer by £600 million to £1.4 billion a year for the next 30 years. However, it’s important to remember that in 2007-2009 the crisis cost the UK £140 billion. If a transformation doesn’t occur, who would bet against an even more destructive crisis engulfing the world fifty years from now?

This is the question progressives ask of an industry reluctant to change its ways. Fabians, Labour members, and socialists must continue to ask it if reform is to be saved from becoming stuck in the mud.

Louie Woodall is Assistant Editor of the Young Fabians Blog