When a politician claims that he always saw the storm on the horizon, it is often more informative to read what he was saying when the sun was still shining. Before I listened to the latest thoughts from Gordon Brown and David Cameron on the crisis of capitalism, I first reminded myself what they were saying before the boom went bust.
Let’s start with Gordon Brown in June 2005 giving the chancellor’s annual speech to the City at the Mansion House. Addressing the bow-tied ranks of moneychangers, he paid lavish homage to “your unique innovative skills, your courage and steadfastness.” They had his personal thanks “for the outstanding, the invaluable contribution you make to the prosperity of Britain.” Though even the financiers may have wondered what courage had to do with it, they clapped long and hard.
“Britain needs more of the vigor, ingenuity and aspiration that you already demonstrate.” Thanks to their “remarkable achievements,” we had the huge privilege to live in “an era that history will record as the beginning of a new Golden Age.”
Or, as it turns out, an era that history will record as ending in the Great Crash of 2008. Their “ingenuity” engineered the most seismic financial crisis in 80 years. Their “aspiration” has destroyed swaths of their own industry and the rest of the economy. Their “vigor” is propelling us into recession. What he then hailed as a “Golden Age,” the prime minister now deplores as an ‘Age of Irresponsibility’.
David Cameron has had some fun at the expense of the prime minister, which might make you assume that the Tory leader had foreseen, as Gordon Brown had not, that it would all turn to dust. So here is Cameron in June 2006, offering his thoughts on “the new global economy.” He trumpeted “the victory of capitalism, privatization and liberalization.” Not to be out-groveled by Gordon Brown when talking about bankers, the Tory leader lauded the “highly innovative” City as “the biggest international finance center in the world.”
A generation of leaders, here and in much of the rest of the world, fell under the thrall of high finance. The commanding heights of politics were surrendered to the bankers. The markets were allowed to set the rules for the politicians. Leaders couldn’t tax wealth more than the markets were prepared to allow. They couldn’t spend, borrow, intervene or regulate without the permission of the dealing rooms. When Bill Clinton was in the White House, he would rage about the way in which his presidency was dictated to by ‘a bunch of bond traders’.
This side of the Atlantic, Tony Blair and Gordon Brown took a short spoon to supper with the devil. He seemed such a seductive fellow when the financial sector was growing four times as fast as the rest of the economy. The credit boom kept house prices rising, shop tills ringing, tax revenues flowing, the country feeling prosperous and voting Labour.
Gordon Brown and David Cameron are meanwhile scrambling to reposition themselves for the world of the bust. The prime minister would prefer we forgot that drivel about a “Golden Age” and look out those of his old speeches in which he argued for a global surveillance system of financial markets. Cameron would be obliged if we’d pretend we hadn’t heard him extolling the gamblers and concentrate on his more recent call for “economic responsibility.”
This parochial blame game takes place in the context of a much more important global realignment of the balance of power between finance, government and the rest of society. The barons of capital have been devoured by their own excesses. Forced to go running to the state for help, large chunks of their firms now owned by the taxpayers they previously treated with contempt, the bankers are now the supplicants to the politicians. Humiliation has been visited not just on the individual chief executives and chairmen who have lost their jobs; an entire class has been discredited in voters’ eyes. High finance will not vanish, but its numbers, glamour and power will shrink.
There is no appetite, beyond the denuded ranks of revolutionary socialists, for a command economy anything like the model so discredited by the experiment with the Soviet Union. Governments have taken over banks out of necessity not ideological conviction. But there has been a shift. The intellectual and political climate now favors those skeptical about the more exaggerated claims made for markets. George Bush has been forced to nationalize banks. It looks increasingly likely that he will be succeeded by Barack Obama governing with the help of big Democrat majorities in Congress. David Cameron, who as recently as his party conference was inviting us to regard him as the son of Thatcher, is now denouncing “irresponsible capitalism.” Gordon Brown has rediscovered a purpose for his premiership and a potential legacy in the reform and regulation of global finance.
The full extent and shape of this power shift will take time to become clear. This much is already certain. Political leaders will not fawn before money as they once did. The era of uncritical awe for financiers is over. The epoch of blind faith in the market is done with. When our leaders go to the City in future, they will no longer take kneepads with them.
