Mar 29 2011

Demos pamphlet on banking “a monstrosity”

Posted by: Nick Shaxson in: Thoughts

I missed this while away on holiday, but it’s worth bringing up: a pamphlet on financial services reform produced by the supposedly centre-left Demos think tank in London. It is, appallingly, entitled, City Limits: the progressive case for financial services reform.

Despite the title, and the fact that Demos calls itself “Open Left” there is nothing progressive about this: it’s an apology for the banks. The Guardian reported it straight;  but for a far more informed read, go to the highly respected, expert-level Naked Capitalism blog. I don’t think it was being too harsh when it called it

“a 100-page abortion of a pamphlet . . . this monstrosity”

Here is one section of the pamphlet, for example:

“We highlight the crucial importance of the financial services sector in yielding taxation revenues to the state, which can be spent on the government’s priorities, not to mention generating jobs in the centre of London and across the country. There is also strong anecdotal evidence that the existence of a world-class financial services sector in London indirectly benefits other sectors such as manufacturing. In addition, there is strong evidence from the new interviews conducted for this research that the perception of political risk in the sector has risen hugely in recent years, and that this has the potential to reduce the competitive position of London.
. . .
the banking crisis was not caused by having banks that were too large and too few, and so it would be illogical to conclude that the banks should be broken up.
. . .
a recommendation that the UK government needs to put a far greater priority on influencing the direction of EU policy rather than continuing its current reactive approach
. . .
We hear repeatedly from politicians on left and right the argument that the recession was caused by us somehow being ‘over-dependent’ on financial services and therefore peculiarly vulnerable to financial crises, so it is desirable to rebalance the economy so that a smaller proportion of our national wealth is created from the financial services sector – perhaps in favour of manufacturing – to make our economy more robust in the future. . . . This is a poor argument, for a number of reasons.

And so on. Just look at those 15 recommendations at the end. But instead of further dissecting this Demos pamphlet myself, I’ll turn over to Naked Capitalism’s long and excellent blog, which looks at this in the context of global financial regulation. I can’t endorse the whole blog because there are a couple of things in there about U.S. financial regulation that are beyond my ken, but I applaud them in particular for their ferreting out of this sentence in the report:

“I am particularly grateful to: the City of London Corporation for its financial support and helpful suggestions.”

Read Treasure Islands on the City Corporation – and weep. Now, if you have time and like the gory details of financial regulation, read on. Why did it require a U.S. site to do the demolition job that’s required here? Where is the British media? (Forgive me if I missed a good UK-based dissection of the Demos pamphlet, but I can’t find one.)

Demos versus the New Economics Foundation (NEF) on banking?

NEF, hands down.

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