7 July 2012     

Banking on corruption

By John Malloy


In January 2011 the now-ex chief executive of Barclays, Bob Diamond, infamously commented that while there had been a post-2008 crash period when banks were subject to criticism, the “period of remorse and apology for banks needs to be over.” Given that Diamond once defined the corporate culture as “how people behave when no-one is watching,” the current interest rate fixing scandal that led to a record £290 million fine for Barclays makes clear how the banking industry behaves when no-one is looking. It is to act corruptly.
     Even the record fine of £290 million is equivalent to a mere ten days of their profits, or, as the Left Economic Advisory Panel's Andrew Fisher pointed out, “the equivalent of a £200 fine for the average worker earning £26,500 a year.”
     The link between this scandal and the war on public provision is twofold. Firstly, Diamond personally, in speeches he has made, and his class generally have been cheerleaders for the “age of austerity” and back up their demands for public-sector cuts and labour market “restructuring” around the fear, should governments not toe the neo-liberal line, of what the markets and their credit rating agencies would insist upon before borrowing is facilitated. The current crisis makes it clearer than ever that these markets are anything but free and are now demonstrably rigged.
     In other words, the “independent” test of “respectable” government behaviour, the capitalist mincer through which the peoples of Europe are to be put, whether it be in Rome, Athens, Belfast, or Dublin, is calibrated by those who are simultaneously making rigged bets, using our money, on our future.
     Secondly, for all the hollow “stable door” rhetoric about what now needs to be done, the neo-liberal triplets—Tory, Labour, and Lib-Dems—were champions of light-touch regulation, with the shamelessness of New Labour only challenged by the then Conservative opposition for not being light enough. Now in government and championing wholesale cuts, the Tories’ bogus concern is shown by the fact that, as the Independent on Sunday reports, “Serious Fraud Office chiefs complain that their ability to investigate cases has been compromised by cuts to their budget, which fell from £51m in 2008–09 to £33m this year—and it is set to fall to £29m by 2014–15.”
     What these cuts mean, as Sukhdev Johal of Manchester University's Centre for Research on Socio-Cultural Change points out, “is effectively banking regulating itself. We have reached a point of complexity in which this closed system of regulation is undermining democracy. This regulation system has to be broken up this time and it has to be done decisively.” More directly, Fisher again states: “The UK bank system is broke and institutionally corrupt. It needs not tinkering but nationalisation.”
     Meanwhile a local cheerleader for public-sector cuts and market solutions for all our problems, Richard Ramsey, has been remarkably silent on this crisis in the banking sector. Of course, as chief economist at Ulster Bank he may have some other local issues to occupy his attention.

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