On the BBC this morning, Geoff Mulgan accused governments around the world of poring good money after bad, propping up big failing industries including banks and car manufacturers. A former policy adviser to the Blair government and now Director of the Young Foundation, Mulgan’s opinions carry a lot of weight. He points out that all initiatives so far are biased towards big business and very little is being channeled into iniatitives that help us prepare for future needs, such as green industries and finding new models for supporting an increasingly aged population.
Mulgan is not alone in questioning the wisdom of bailing out the banks, with eminent economists proposing alternative solutions in bastions of the conservative media, including the Financial Times, the Wall Street Journal and Daily Telegraph. Nobel economist, Joseph Stiglitz says we should let the bad banks fail and set up new good banks instead. Paul Romer, from the Stanford Institute of Economic Policy Research has the same idea. Accepting that we need banks, Romer says “Turning bad banks into good banks is a difficult and risky way to get them. It’s simpler and safer to start entirely new banks.” Financier and philanthropist, George Soros, stops short of the new bank idea but argues that we should not purchase the toxic assets of bad banks. William Buiter, from the London School of Economics, sees a common logic between these proposals and says that “Bailing out the holders of existing bank debt and other bank creditors would be outrageously unfair: they did the lending and made the investments, they should eat the losses.”
Less eminent writers are also tackling the issue on the blogosphere. Irish blogger, Niall Larkin, blogged about a conversation he had with an economist friend about the possibility of dumping bad banks in place of new, good internet banks, perhaps using the Post Office and Credit Union network for on-the-ground activities. The commentary includes a post from a lady in New Zealand who tells us about the Kiwibank that is doing exactly that. And, even the right-wing Daily Telegraph published a blog by Tracy Corrigan where she references Voltaire for reasons “Why executing bankers is good for morale”.
I’m not sure that execution is either a humane or practical way to fix things, but the blog sums up the sense of moral outrage people in the UK have been feeling recently. Last week, some of the leading bankers in the country appeared before the Treasury Select Committee to account for themselves. Despite glib apologies, it was abundantly clear that none of them felt any real remorse. One of them gave great offense when he described his income as modest and, on further questioning, we learned that he has been earning an average of £1million per year. This in a country where the minimum hourly wage is under £6.
The committee hearings occured at the same time that we learned that the banks intended to pay themselves their customary enormous bonuses. Despite swallowing up billions of tax payers money, the government said it was necessary to pay the bonuses due to contractual obligations. An online petition was set up to stop the bonus payments and is open for any UK citizen or resident to sign.
On the Baseline Scenario, blogger James Kwak, suggests excessive bonuses be paid in the form of toxic assets from the institution. “That would get the assets off the bank’s balance sheet, and into the hands of the people responsible for putting them there – at the value that they insist they are worth.”
Irish economist and writer, David McWilliams has also given thought to how we can turn crisis into opportunity. Describing public service cuts as “social vandalism”, McWilliams turns his focus on the social consequences of mounting unemployment. He suggests following the course taken by Argentina during economic crisis, where they matched middle-aged, out-of-work experts with young, innovative but inexperienced entrepreneurs. The process led to to the establishment of many successful businesses and helped turn around the economic decline.
This blog describes just a handful of the ideas and suggestions that are out there. But, for all the great ideas, it will take political will to make a difference. We won’t stop propping up the old order until we make it clear to our rulers that nothing less is acceptable. In these desperate times it is not enough to talk about things and expect somebody else to do them for us. We are all responsible for our future.
References
http://short.ie/mulgan
http://short.ie/corrigan
http://short.ie/stiglitz
http://short.ie/romer
http://short.ie/soros
http://short.ie/buiter
http://short.ie/larkin
http://www.kiwibank.co.nz/
http://petitions.number10.gov.uk/bank-greed/
http://short.ie/baseline
http://short.ie/mcwilliams
–
Published with permission from Triona Carey.
Follow her on twitter: @Triona
