Manifesto for a free market

In covering the unfolding financial crisis, journalists duck and weave along with the people who have to bear the burden of policy making but without carrying any of the real responsibility. They have the privilege and the freedom of non-responsibility and the daily churn – today’s oracle is tomorrow’s fish and chips wrappings and all that. (Though if you’re interested in the latest foray into the theme of journalists’ responsibility for financial collapse, read this report of the Treasury Select Committee’s encounter with Robert Peston et al by Michael White – yes, another journalist and a political one too ). Over-excitability is decidedly absent in the Independent today, where City editor Jeremy Warner issues the most ambitious set of prescriptions to tackle the crisis long term that I’ve seen yet – cogent, well-argued and easy to read. I summarise the seven points of his “Manifesto to save the free market” below.

1. Start fire-fighting
Previously unacceptable levels of public debt become inevitable and may be part of the cure.

2. Restore sound money
To win credibility in markets, governments must set out a clear road map for restoring balanced budgets and reducing public debt over the medium term. Any attempt at “quantitative easing” – the technical term for printing money as a way of funding these newly acquired, public liabilities – should be used with the utmost caution.

3. Nationalise the banks
Only by nationalising the banks outright and funding vital domestic lending directly from the public purse can governments properly address the viciously negative effect of bank “deleveraging”.

4. Complete Doha
Some countries already see protectionism as the medicine. In fact it is the poison which will stifle all hope of swift recovery. Yet … it’s entirely reasonable for nations to want to support their key strategic industries through the storm with subsidy, soft loans and other forms of government assistance. The temporary suspension of such rules therefore looks justified provided it is done according to an internationally agreed framework with a firm commitment to their reintroduction as soon as economic conditions improve.

5. Introduce counter-cyclical measures
Governments must move swiftly to reform the Basel capital requirements, which encourage banks to lend recklessly during the good times but to wrench the gears into reverse during the bad. The same is true of “fair value accounting”, which similarly encourages banks to expand their balance sheets during the boom but shrink them during the bust.

6. Reduce capital imbalances
The Chinese and the rest of the developing world have been lending us the money to buy their goods. For years, economists have been saying it’s unsustainable. A free-floating Chinese exchange rate would be a good place to start.

7. Enforce corporate responsibility
A statutory code of conduct may have to be introduced to ensure generally accepted ethical values are injected back into the system, and to encourage long-term thinking in investment decision making. Bankers should be forced to take something similar to a Hippocratic oath. Alternatively, they could be made personally liable for failings within their institutions, leading to confiscation of their ill-gotten gains when things go wrong.

8. Retribution
There will be no closure on this crisis, or end to the growing sense of public injustice, until those responsible are subjected to the full force of public and criminal inquiry.

9. Don’t forget climate change
Developing nations cannot be frogmarched by the West into a low-carbon future but helped and nurtured into it.

10. Reform international institutions
a treaty-based organisation such as the World Trade Organisation, with powers of enforcement on internationally agreed standards, is a reasonable aspiration. (to enact the above.)

  • It was Sammy Mc Nally what done it

    Before fixing the system it needs to be understood.

    Has anyone actually seen an international comparisonon between Ireland, UK, Europe and the US ( ideally Asian contries too ) which shows the key economic indicators which will determine their relative vulnerability to the current economic crisis?

    What is best for Germany may not be best for the UK or Ireland.

    These inidicators to include levels of personal debt and levels on National debt and the estimates of the countrys borrowing requirements over the next 5 years. It would of course be very interesting to see the extent that Banks, in so far as they exist within 1 state are exposed to their domestic property market and international ‘toxic’ debts.

    It is ridiculous that last week on the “Politics Show the BBC (cant remember the interviewer name) was unable to ask El Gordo a single diffiuclt economic question or present a single difficult single international comparitor when el gordo was jabbering on about Britains response to the crisis.

    The various governments around the world may not have created the current problems but some countrys were run much more ‘prudently’ than others and therfore far more fit and able to withstand the crisis.

    It would be nice to hear what governments saying tha with hindsight waht they would have done differenlty – until they say that – governments talking about fixing things will correclty not have much credibility.

  • Jean Baudrillard

    Interesting post Brian.

    It would also be useful to come up with a similar ten point list of what can be done at the regional level. I’d be interested to read people’s ideas what (if anything) the NI Executive could be doing (or could have done) to lessen the impact of the downturn on Northern Ireland.

  • Dev

    ‘I’d be interested to read people’s ideas what (if anything) the NI Executive could be doing (or could have done) to lessen the impact of the downturn on Northern Ireland’

    They could resign en masse

  • Greenflag

    Warner’s manifesto raises the main issues which need addressing . Some comments on some of the points

    1) ‘Previously unacceptable levels of public debt become inevitable and may be part of the cure.’

    Note the use of the word ‘may be ‘ . It seems that the huge ‘bail out ‘ using taxpayers moneys to keeping the ‘banks’ going has instead been used to pay out 18 billion dollars in bonuses on Wall St . Taxpayers have reached a point where further ‘bail out ‘ money to ‘private ‘ institutions is no longer credible . Thus bank nationalisation even if temporary will have to be part of any ‘recovery.

    2)“quantitative easing” – the technical term for printing money as a way of funding these newly acquired, public liabilities – should be used with the utmost caution.’

    Unless like Adolf Hitler in 1938 you are planning a world war which you will win and at the end of which you will find it ‘easy’ to redistribute scarce resources and strategically valuble commodities at your ‘ease ‘ . Otherwise it’s the Zimbabwe Dollar or Yugoslav dinar route via high inflation with accompanying high interest rates which if inserted in present circumstances would probably lead to an entire collapse of western capitalism and any accompanying ‘civilisation’ :

    7. Enforce corporate responsibility ‘(Bankers should be forced to take something similar to a Hippocratic oath. Alternatively, they could be made personally liable for failings within their institutions, leading to confiscation of their ill-gotten gains when things go wrong.

    The ‘Hippocratic Oath ‘ is ancient history at least in the USA . A medical or legal degree is now seen as an automatic precondition for the attainment of ‘millionaire ‘ status . The entire Private Health care system is designed for ‘profit ‘ first and health care a distant second if that . Aided and abetted by the Insurance and Drug Industries the so called ‘hippocratic oathers ‘ are accomplices in the ‘gouging ‘ of whatever is left of the american middle and working classes .

    Why ‘alternatively ‘ ? . Surely an ethics oath AND personal liability should be the norm . Anybody who now still believes that the bankers a CEO’s of major insurance and financial services corporations can be trusted to behave ‘ethically’ is living not in cloud cuckoo land but perhaps in the garden of eden before the advent of the naked lady , snake and apple scene 😉

    8. Retribution
    ‘There will be no closure on this crisis, or end to the growing sense of public injustice, until those responsible are subjected to the full force of public and criminal inquiry’

    Sounds right but in the case of Mr Bernard Madoff 9 years and 50 billion dollars too late.
    The SEC (Securities Exchange Commission ) was told 9 years ago about the near certainty of Madoff’s investment firm being a glorified ‘ponzi ‘ scheme . Madoff was able to use his immense wealth and reputation to fend off any investigations . In short the ‘authorities ‘ mostly ‘lawyers ‘were bamboozeld and cowed by Madoff’s power and their lack of understanding of the complex new ‘mathematical ‘ formulas concocted by the masters of disaster on Wall St.

    Retribution in situations like Madoff’s should not only include confiscation of all wealth but financial crime on such a scale should warrant the death sentence .

    Retribution should not be restricted just for the ‘bankers ‘ and financial services con men but also for the ‘public ‘ officials and politicians who turned a blind eye to the looting of the citizens on whose ‘taxes ‘ they depend for their salaries and some of whom no doubt who benefited financially from turning the ‘blind ‘eye ‘

    10 ) A new world financial order will be a prerequisite for any ‘permanent ‘ recovery . This won’t happen for at least another 6 months to a year if that . So get ready for a long ‘wait’ at the edge of the financial abyss 😉

  • Greenflag

    And as if 50 billion was not enough the ongoing investigation into Madoff’s winning of the gold medal for the financial world’s biggest ever Ponzi scheme – new information emanating form sources close to the SEC indicate that there are several hundred ‘accessory ‘ activators (Madoff’s supporting cast of sharks ) in Europe who’s ‘looting ‘ is still being hidden by European banks and Investment companies .

    To the above must be added fresh revelations that even worse financial news awaits the American ‘middle class’. To add to the multiplicity of woes such as the 3 trillion dollars in lost equity , the pillaging of retirement and pension funds and increasing unemployment now Americans are being warned of the imminent collapse of many insurance companies .

    Thise of us who know how to pay insurance premiums must often wonder where these companies invest their (formerly our) monies . It appears and it should’nt be a surprise in the self same places as the Wall St con men :(.

    And so that half a million dollar /pound /euro life insurance policy that you think will ‘protect’ your family if you decide to jump from the 57th floor ledge (assuming suicide is not a disclaimer ) may just be another bag of shredded paper 🙁

  • Greenflag

    Dev,

    ‘They could resign en masse’

    So just ading another 108 on to the dole queues and saving 3 million a year in administrative costs ?

    Anyway who would take their place ? There is no opposition apart from the IRA (now sleeping dogs ) or the UDA and Loyalist paramilitaries ( half asleep dogs ) ? And we all know what their operational methods can lead to don’t we ?

    jean baudrillard,

    ‘I’d be interested to read people’s ideas what (if anything) the NI Executive could be doing (or could have done) to lessen the impact of the downturn on Northern Ireland.’

    You will alas be deafened by the silence of the response ;(

  • NCM

    Now’s the time to replace entirely this unjust and corrupt system, not shore it up for another century.

  • runciter

    It is probably worth pointing out that, while it may be a useful concept in certain economic models, there is no such thing as a ‘free market’ in the real world.

    Why Mr Warner would want to “preserve an economic system” that clearly does not work and is causing disastrous consequences worldwide is a mystery.

    I guess some people are slow learners.

  • NCM

    Runciter: “I guess some people are slow learners.”

    Or have a vested personal interest in seeing that capitalism never falls, lest they have to make their own living through their own toil rather than farm off of the work of others.

  • Harry Flashman

    Some stupendously ignorant ideas about capitalism above. Not surprising really usually coming from people who have never actually had to work for their own living as opposed to having the wages of other workers forcibly removed from the people who earned the money and given to them by the government.

  • NCM

    Harry Flashman: “people who have never actually had to work for their own living as opposed to having the wages of other workers forcibly removed from the people who earned the money and given to them by the government.”

    I take it you are referring to the bankers given taxpayer bailouts. Right on!

  • Harry Flashman

    No I’m talking about government officials who survive by means of sucking parasitically from the wealth generating sector of society.

    But you knew that anyway.

  • runciter

    No I’m talking about government officials who survive by means of sucking parasitically from the wealth generating sector of society.

    Why does it only bother you when government officials do it?

    Is there some reason why bankers are exempt from your moral indignation?

  • kensei

    No I’m talking about government officials who survive by means of sucking parasitically from the wealth generating sector of society.

    There are a few countries in the world that have no taxes and no government. I’m not sure you’d wnat to live there.