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Back to Front - Keynes for the banks


They tell us the figures are going to be bad, and then the figures turn out to be even worse. The latest, dreadful, figures on the economy, showing that overall production fell 1.5 per cent in the last quarter of 2008, illustrate that Brown’s management of the economy outdoes Thatcher’s in sheer incompetence.

On top of this, sterling has plunged by 25 per cent against the dollar in just six months. The pound has fallen by 40 per cent against the Japanese yen and is now trading close to parity against the euro. It is being forecast that our living standards will fall to the lowest of any major economy over the next year – if policy does not change.

And that’s for those who manage to stay in work. The latest unemployment figures show that redundancies in the three months to November leapt by 225,000 – the highest figure since comparable records began in 1995. Want something worse? Wait for the December figures, due out in late February.

In a crisis (or, indeed, at any time) Brown and his doomed government seem to know only one solution: ask the bankers what they want, and give it to them. Hence the latest tranche of billions of pounds of taxpayers’ money heading their way. We need capital controls to influence investment flows, directed credit programmes, and planning of investment and manpower. But Brown instead embraces free movement of capital, labour and goods, and refuses to regulate foreign investment.

What says Brendan Barber of the TUC? “Government must strain every sinew to make [the recession] as short and shallow as possible, but it must also set up a tough public inquiry into what went wrong and why.” Tough talk! The crisis of capitalism, the collapse of industry, the impoverishment of Britain, needs not just a public inquiry but a “tough” one!

What we actually need is a revolution in thinking. And a revolution in practice.

We need to direct investment into industry. But Brown promises just £20 billion for industry, and doesn’t deliver. We could borrow to invest on high-return projects in transport, R&D, technology, housing, education and infrastructure. The national debt would rise, but so would the nation’s assets. But Brown refuses to direct investment into producing in Britain, preferring to borrow to bail out his buddies the bankers. He sticks to the EU’s stability pact, which limits useful borrowing.

We need to separate commercial from investment banking to prevent the hucksters of Wall Street and the City losing our deposits in bonus-driven speculation. But Brown refuses to check the banks’ freedom to gamble. Stock markets, like betting shops and casinos, do not create value: those who own the businesses merely take money from those who have little. But Brown believes that finance rules and that industry is unnecessary.

The bankers have blackmailed the government – again – into bailing them out. Brown talks Keynes, but it’s Keynes for the banks and monetarism for industry. He has already given the bankers £600 billion of our money to buy up their bad debts. Now he wants us to give them another £200 billion, with no conditions, not even insisting that they make good use of it. With £200 billion we could rebuild British industry.

The choices are stark – industry or finance, Britain or the EU, survival or destruction.