Written by Former OULC Membership Officer and Co-Chair Elect, Euan Huey.
Now over a decade on from the financial crash, former Prime Minister, Gordon Brown is warning we’re sleepwalking into another financial crisis. Why does the Financial system remain a liability? And what can we do to tackle the bastion of a dysfunctional economic model?
The collapse of Lehman Brothers over a decade ago signalled the beginning of a Global Banking Crisis that would eventuate in Britain’s longest economic recession since the thirties. The recession unleashed a wave of insecurity and crisis for families throughout the UK, with unemployment reaching 2.5 million in April 2009. Yet, ten tears on and still clamouring for a recovery, the horizon looks just as bleak.
The International Monetary Fund recently warned that the world economy is at risk of another financial crisis. In part this is due to the failure of legislatures to fully reform financial institutions in the wake of the crash: a process that was cut short. However, resolving this issue is not as simple as merely enacting those reforms from 2008. Indeed, this focus neglects the important steps were taken in the immediate period post-crisis to protect future consumers and tax-payers. This is one of the issues involved in discussing financial regulation: the focus is too retroactive.
Former Labour Prime Minister, Gordon Brown, highlighted that the global economy still lacked an early warning system and a mechanism for monitoring what has been lent to who and on what terms. More appropriate approaches to financial regulation a decade on will focus on the changes to banking and finance that have occurred in the last decade. For example, the emergence of digital currencies and trading platforms, while offering some potential benefits likely carry risk that regulators and legislatures are unaware of. Thus, adaptability remains one of the central problems for financial regulators in much the same way that the 2008 that saw banking became far more complex and intricate.
But those having this debate are thinking too small…
If we’re serious about financial regulation, addressing the power of financial institutions and the political consensus that underpins them is fundamental. Banks have done more than risk pension funds in the past ten years, they have altered the core of our society – shifting power away from people, away from governments and changing the driver of economic growth from innovation to debt-fuelled consumer spending. A future Labour government must think hard about the measures needed to rebalance our economy and temper the volatile power of financial institutions.
At the Labour Party Conference in Liverpool in 2018, the People’s Chancellor, John McDonnell, announced policies to raise the accountability of corporations to their workers – granting them 10% of shares and a third of board members. This marks an immensely positive shift in changing the culture of British capitalism, but it must be extended to the financial sector – aiming to restructure banks into co-operatives, into smaller, more transparent institutions and offer consumers a new choice in state-owned national and regional investment banks that make socially responsible investments. A Labour government must do all it is capable of to ensure that the next revolution in finance is ethical, to stimulate a sector that funds the redevelopment of de-industrialised areas, green industries and scientific innovations rather than funding deforestation, fossil fuels and the arms trade. The next Labour Prime Minister must work on an international stage to regulate and reform a globalised system that has created run away debt and disenfranchised ordinary people on a global scale.
Tackling this issue holds the key to addressing issues of climate change, housing, poverty, declining productivity, the rise of the far-right. This is an issue of power and democracy as much as of economic prosperity, and an issue that can be solved.