Cyclefree asks are Banks the new Unions?
Back in the 1970’s unions were seen – and saw themselves – as a key constituency whom government had to listen to and consult. Whether beer and sandwiches were actually served at Number 10 was less important than the perception and the reality that governments felt that it was wise to consult the unions on industrial matters and wider economic policy. And this was done because of a desire to achieve consensus, to be seen as treating both sides of industry fairly, because union membership was large and strikes could cause significant economic and commercial harm.
It was also felt that union leaders were the only people able to control the wildcat strikers and other militants who were responsible for some of the disputes which so plagued Britain in the 1960s and 1970s. And very few were willing to challenge the consensus that it made sense to involve unions in economic and industrial policy. All this created what Bernard Ingham described as “the post-war impression of their invincibility”. When a certain M Thatcher, then Leader of the Opposition, challenged this consensus and said that she thought that trade unionists should not get a greater say in the country’s affairs than any other voter, this was viewed with horror by some. How could – why should – things be other than as they were?
Well, disasters usually help change perspectives and the Winter of Discontent finally persuaded many that it was time to cut the unions down to size. 28 years later the role of unions in Britain is vastly different to what it was then. They have certainly been reined in but still exist and still perform useful functions for their members and for society as a whole.
The decline in the unions’ power coincided with the rise of finance. Big Bang, the lifting of exchange controls, the focus on making money, privatisation, the entry into Britain of US investment banks and deregulation of many of the previous controls around credit led to an explosion in the City. The financial services sector boomed and continued booming. It was seen as the Goose laying Golden Eggs. All parties worshipped at the altar of the City: the Tories because they saw it as an example of the sort of profit-focused entrepreneurship which had been lacking. They conveniently ignored the fact that many of those who made money in the City were not so much rainmakers as lucky – lucky to be in the right place at the right time when the heavens opened and the rain fell.
Still, it is amazingly common to find people who have done very well in life downgrading the role of luck in their life and assuming that it is only their skill and intelligence which has resulted in them amassing riches beyond the dreams of Croesus (or, at least, those of most people). The L’Oreal advertising slogan: “Because you’re worth it!” might have been written by bankers for bankers. And Labour too loved the City – or at least entered into a Faustian pact with it – because, finally, it looked as if the City’s tax revenues could help Labour get past the charge that it would tax ordinary people more than they were willing to bear to spend on desirable public services which the public wanted. Banks and bankers could be taxed; money could be spent on public services; the public would be happy and Labour would be in power forever (or at least for a very long time).
Well, we all know how that fable ended: with the 2007/08 crisis, the government having to bail out banks, evidence of widespread chicanery and criminality, some criminal convictions and a public perception that financiers had got away with it, that they had taken the profits and dumped the costs onto everyone else. Governments learnt that some golden eggs are not golden at all and that banks with very large balance sheets can unbalance an economy. And, yet, despite all the well-attested problems associated with an out-of-control and, arguably, too large financial sector, there is still an inclination amongst some in the sector to think that, because they bring in the money, their interests should predominate It is an attitude not so very different to the unions of old: if you don’t do what we want, we can bring the economy to its knees (either through strikes or by upping sticks and moving elsewhere taking all our lovely money with us).
It is an attitude which shows a tin ear for how much of the public views the finance sector. Rather than feel that banks have learnt their lessons and it is time to move on, many feel that banks have not yet been taught a lesson and have not fully paid the price for, at best, negligence and incompetence and, at worst, criminality. It assumes that people are necessarily grateful for the tax revenues when they appear to come from greedy and/or disgraceful behaviour. It assumes that money speaks and should speak louder than the votes of non-bankers.
Now, there is some hypocrisy in the public’s attitude to finance. They like it when it allows them to spend and spend and appear to be richer than in fact they are. And they like the tax it generates. And they are notably disinclined to pay for proper financial advice, preferring to get “free” advice and complain later about mis-selling, or to educate themselves so as to be better able to navigate offers which are often far too good to be true. But still, in the end, they have the votes and banks do not and the financial sector is not, after the scandals of recent years, in a position to take the moral high ground. If you ostentatiously throw your weight around and cause problems for others, eventually those others will cut you down to size.
And yet finance matters. It matters because the development of a modern society has gone hand in hand with the development of an efficient financial sector. It matters because without it much of what we want to do (save, buy a home, spend, invest, start a business, grow a business) cannot happen. And it matters that it operates – or should operate – competently, honestly, without drama and without an inflated idea of its own importance, no matter how much tax revenue it brings in, and that it remembers that it is a service industry, that it is there to serve others not primarily itself. Naïve? Hopelessly optimistic? Possibly. Nonetheless, at a time when banks have started taking some real steps towards the cleaning up of their industry (culture and behaviours and conduct risk are the buzzwords in banks these days and not all of this is just for show), the City finds itself friendless.
The financial crisis may have only been part of the context which led to Brexit. But it – and banks’ reaction to it and their behaviour before, during and after it – is certainly one reason why this government has not made it a priority to argue the City’s case. That and the fact that May does not give the impression of someone who venerates rich financiers in the way that her predecessors did. Now, following May’s speech, we have announcements that some banks are looking to relocate jobs in Continental Europe. Concerns have been expressed that this will be the start of a flood, that it will render us poorer, that we will miss the tax revenues and that by foregoing membership of the Single Market, we will hobble one of our primary and successful sectors. Maybe.
The need to have the “passport” is only one of the factors affecting how financial firms structure themselves: automation, keeping shareholders happy, focusing on those areas where money can be made without undue risk, cost control are all factors which will affect what firms now do in a much tougher regulatory and economic environment. Banks should not expect Continental European countries to be quite as enamoured of freebooting Anglo-Saxon financiers as Britain has been, however much they may welcome the jobs. Maybe it will mean that the British economy can become a little more balanced, a little less dependent on one sector only. Maybe – though Brexit is an odd and potentially harsh way to achieve such a rebalancing.
What is clear is that the City is now learning that it cannot expect the government to put its interests first. No doubt this is a blow to its pride. Perhaps it is a long overdue and salutary one. Whether it would have been better for the government to have made the case to British voters to stay in the Single Market in order not to harm the City is now an academic argument. No politician would now be brave – or stupid enough – to put the interests of bankers before those of other voters.
Ironically, this country may end up doing damage (the extent of which is not clear) to one of its more successful industries at the precise time when that industry is finally learning to behave and when Britain needs all the successful industries it can get as it embarks on its bold solo adventure.
And the moral of this story? “Ognuno e utile. Nessuno e indispensabile.” (Or, as the Irish might say, cemeteries are full of people who thought themselves indispensable.) A lesson for the Tories – looking with disdain and glee at a Corbyn-led Labour party – and for Labour – seemingly entrenched in its heartlands – to ponder.