Douglas Carswell's Blog

The causes of City cronyism

There is, it seems, something seriously wrong with the City.  It is not just the libor scandal.

Government bailouts have socialised many banks losses, while profits remain private.  Mega bonuses have been paid to corporate muppets for running their shareholders' businesses into the ground.   

What has gone wrong?

I am not convinced by those who say it was all down to City de-regulation.  To me, the problem seems to be not excessive free market capitalism, but a lack of it.  Those who claim that the City was de-regulated are perhaps unfamiliar with the Financial Service Authority's 6,000 pages plus handbook.  Corporatism, not shortage of compliance, account for most of the City's failings.

Instead of looking back to the financial service reforms of the 1980s, perhaps the seeds of the current crisis go back even further..... to 1971. 

That was the year that the Bretton Woods currency system for came to an end. To put it crudely, since 1971, the only thing constraining the amount of money and credit that government put into the system has been government.  And government is not very good at reining in government.

Could it be that we have had a massive, decades long credit bubble?  And if so, might it be that forty years of easy-money became almost a kind of  state subsidy for those in the business of flogging credit?  

Free market conservatives must never confuse support for free market capitalism with support of corporate cronyism. 

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