Ken Livingstone: Decade after 2008 crisis, no changes made, richest get richer, inequality growing

Monday, September 3, 2018
By Paul Martin

Ken Livingstone
3 Sep, 2018

This month marks 10 years since the collapse of Lehman Brothers created the worst economic crisis since the Great Depression of the 1930s, but governments have failed to make changes necessary to prevent a similar collapse.
Back in the 1930s, the US government responded to the Great Depression by introducing new laws that made it illegal for the local high street banks, in which we all deposit our own money, to make risky gambling decisions.

If anything, the financial sector is growing more powerful and wealthier than at any time in the past. More and more of the wealth created across the world is going into the pockets of the richest one percent and via methods that mean they seldom pay any tax whatsoever. The result is that across the Western world inequality is getting dramatically worse and the lives of ordinary people are being squeezed and it is the anger of ordinary people responding to this injustice that fuelled the vote to elect Trump as president and to take Britain out of the European Union. To understand how we can cope with this we need to look at the history of how the financial services became the predominant global power.

Over the centuries there have been several unsuccessful attempts to reform the City of London’s financial centre. Following the creation of the Labour Party one of its central planks was its opposition to the City and in particular the independent Bank of England. The leading Labour politician in London, Herbert Morrison, towards the end of WWI said: “Is it not time London faced up to the pretentious buffoonery of the City and wipe it of the municipal map. The City is now a square mile of entrenched reaction, the home of the devilry of modern finance and that journalistic abortion, the stunt press. The City is an administrative anachronism.”

Over the decades that followed the Labour Party continued to pledge to abolish the corporation and include it in the wider London government. Labour’s current shadow chancellor John McDonnell said: “The traditional Labour position was to control the finances of the country in the long term interests of its people.”

In the run up to the 1945 election Labour leader Clement Attlee said: “Over and over again we have seen that there is in this country another power than that which has its seat at Westminster. The City of London, a convenient term for a collection of financial interests, is able to assert itself against the government of the country. Those who control money can pursue a policy at home and abroad contrary to that which has been decided by the people. The first step in the transfer of this power is the conversion of the Bank of England into a state institution.”

When the Bank of England was created in 1694 it was largely to provide credit for building our navy and ushered in a financial revolution which led to the creation of mortgage markets, Lloyds of London insurance, a stock exchange, a financial press and the rapid expansion of overseas trade. But although Attlee’s government did nationalise the bank in 1946, the bank had powerful cards to play, in particular its control over the nation’s money.

Interestingly when Labour lost the 1951 election Winston Churchill’s government did not repeal the nationalisation of the bank. That may well be because Churchill had discovered that during WWII the governor of the Bank of England had transferred a substantial proportion of Britain’s gold reserves to Nazi Germany because we owed them the gold but the governor of the bank never consulted the government before he did this.

Although Attlee had nationalised the bank it continued to be run by the same group of old Etonian merchant bankers. Although the government had acquired powers to issue directions to the bank it admitted in 2010 that ‘Thus far the power has not been used.’

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