Who Needs Balls – Ed or Dave?
January 21, 2011Posted by on
In a 2009 article in the First Post with the title ’How Labour’s Faustian pact with capitalism led to the financial crisis’, Nick Cohen contended that the seeds of the current crisis are to be found in the 2001 Financial Services and Markets Act. This Act required the Financial Services Authority “Not to discourage the launch of new financial products”. So said the government as it laid down the terms of trade for London’s banks and hedge funds. In addition, the FSA had to avoid “erecting regulatory barriers”, also “it must consider the international mobility of the financial business” and “avoid damaging the UK‘s competitiveness”.
Gordon Brown, a man who campaigned as a student for a socialist transformation of Scotland, provided both an epitaph and an indictment for his Labour generation when he gushed to the meeting of City bankers: “What you have achieved for the financial services sector, we, as a country, now aspires to achieve for the whole British economy.” The “whole British economy” is sharing that achievement now. The money dazzled them, of course. Figures show how Labour’s social programmes were financed by taxes from the banking bubble. Financial services’ share of GDP rose from 6.6 per cent to 9.4 per cent between 1996 and 2006; trade surplus went from £8.7bn to £25.1bn; City jobs from 265,000 to 338,000; and City bonuses from £1.7bn to £8.5bn.
Looking at the ruinous consequences of Labour’s naivety, Nick Cohen concluded: “I don’t know what is sadder: the government’s demands that the working and middle classes bail out speculators, who earned more in a year than they will earn in their lifetimes; or the self-delusion of a once-honourable party, which abandoned its traditional suspicion of bankers and was then shocked when the world fell apart around it”.
Ed Balls served under Gordon Brown at the treasury and no doubt made a significant contribution to New Labour’s fiscal policies and the speeches of Brown. His ambition to be ‘The Chancellor of the Exchequer’ has long been an ‘open secret’. The Brown-Balls relationship always made me think of ‘The Godfather’ when Don Michael Corleone says, “There are many things my father taught me here in this room. He taught me: keep your friends close, but your enemies closer“. Now, as Shadow Chancellor, Balls’ ambition is closer to being realised, but I would be surprised if they end there, and no doubt Ed Miliband is well aware of this.
As Shadow Chancellor Balls is holding a winning hand and he is astute enough to play it well There are no city bankers around to finance the Tories, who need to develop sustainable economic growth by some other means. To achieve this, the electorate, as the patient, is being asked to swallow a ‘bitter pill’, a ‘purgative’ if you will. The patient isn’t taking too kindly to this treatment. Balls can offer a much gentler remedy and its efficacy is irrelevant as Balls will not have to administer it. That is, unless the patient switches to Balls, at which point the patient will be given a fresh prognosis. The new remedy may also be a bitter pill to swallow. And, like the current treatment, the reason for the remedy will be the failure of the previous treatment. Without the correct diagnosis any prognosis is flawed, I fear that the patient may never recover.