The Economist backs Cable, but it's no lurch to the left!

Cable looks to the heavens for inspiration

In a further sign that Cameron and Osborne are losing economic credibility even among their own side ahead of the 2013 Budget, The Economist's editorial has come out in favour of Vince Cable's proposals which he outlined in the New Statesman earlier this week.

Although more clearly articulated, Cable's proposals and modest critique of Osborne's strategy are actually more right wing than what the two Eds' Labour Party is calling for. Call it 'austerity-lite-lite'. Vince has since been feted by many, including now the journal "read by more of the world's political and business leaders than any other magazine".

The Economist backs the case for extra borrowing, made by Cable:

"All in all, the present evidence does indeed – with qualifications – point to some weakness of domestic demand and a low risk of expansionary policies spilling over into significant domestically generated inflation."

As the editorial points out, "between 2009-10 and 2011-12 public-sector net investment plunged from £48.5 billion to £28 billion" a large part of the reason for the appalling construction figures.

However, like Cable, The Economist also advocates that some "expansionary policies" i.e. public investment, should be funded by cuts to pensioner benefits and that perennial punchbag, welfare. The Economist also supports Cable's call to remove the ringfence around NHS funding.

This highlights how Cable is still very much on the Orange Book wing of the Liberal Democrats. Austerity is failing, the markets are unhappy, and what Cable and The Economist reflect is the capitalist class scrabbling around for an ideologically compatible solution to the enduring slump.

The fact that the right is divided, and Cameron and Osborne increasingly isolated, is reason for joy, but Labour and the trade union movement should not be taking sides in this internecine squabble.

Instead the struggle goes on to stop austerity in its tracks - not simply find another route for it to get to the same destination.

The left should take some encouragement however that its analysis is being proved right and that the right is having to adopt some of our proposals. In the case of The Economist both for more borrowing to invest, and - surprisingly - for a Land Value Tax:

"One reason why companies sit on development land is because they do not pay taxes until the offices and warehouses are built. It would be much better to tax the land value: that would make hoarding expensive and force owners to sell to someone who can use the site. Once in use, the site value and the tax would rise—creating a virtuous circle, as the revenues pay for better infrastructure, making land more valuable."

Banks are serially corrupt. But Vince Cable's shareholder plan won't work

Prem Sikka

Banks are serial offenders and can't be controlled by shareholders. Vince Cable, the business secretary, has correctly identified the problem of corruption at banks, but his policy prescription of asking shareholders to invigilate abusive organisations and executives has not worked and will not work. Contrary to Cable's claims, shareholders are traders and speculators rather than owners. They barely hold shares for more than three months and do not have a long-term interest in the business. They have been utterly ineffective at curbing corrupt practices at banks, as evidenced by the tide of scandals.

Banks are under the spotlight for the Libor scandal and mis-selling of loans to small businesses, but they are serial offenders. The mid-1970s secondary banking crash highlighted fraudulent practices, which also engulfed the property and the insurance sectors. The government bailed out the banks and in turn had to resort to loans from the International Monetary Fund.

In the 1980s the financial industry sold around 8.5m endowment policies for repaying mortgage loans. These were not suitable for all borrowers. Banking staff received commission for selling the policies. The risks were often not explained to the borrowers. Banks made profits but eight out of 10 policies failed to pay the promised returns and did not even provide the amounts needed to redeem the mortgages. A 2004 UK Treasury committee report estimated that 60% of borrowers had been the victims of mis-selling, facing a shortfall of around £40bn.

This was followed by the pensions mis-selling scandal where people were encouraged to abandon good employer-based pension schemes and join a private one instead. The £13.5bn scandal affected some 1.4 million people.

The late 1990s saw the precipice bonds scandal. Some 250,000 retired people were lured to invest £5bn in investments misleadingly described as low risk. Thousands of investors lost 80% of their savings.

The 21st century did not provide any respite from financial scandals. Payment protection insurance is still being played out; some 3 million people were sold expensive and unnecessary insurance and are battling for compensation which could top £10bn. Now we have the Libor and small-company loan scandal.

In between the above, banks engaged in organised and aggressive tax avoidance, tax fraud, money laundering, corruption and feeding misleading stock market research to investors to drum up business and higher fees – just to mention a few of their misdeeds.

Fines, penalties, forced compensations and regulatory action have become part of normal banking business and the costs are just passed on to customers. It is hard of think of any instance when shareholders have sought to curb rapacious behaviour of banks or their executives. They have always been focused on short-term gains and cared little about the social consequences of the quest for higher returns.

Democracy and public sunlight are effective antidotes to institutionalised corruption and should be applied here in large doses. If the government is serious about changing the predatory culture of banks then it needs to change the whole system of corporate governance. The market pressures for higher returns should be checked by turning all banks into mutuals and co-operatives. Employees, customers and borrowers have a long-term interest in the business of banks and should be empowered to elect and remunerate directors. Directors need to be made personally liable for the cost of criminal practices. At the moment banks are fined, but executives walk away with a stash of profit-related pay, with virtually no penalties. All major banking contracts should be publicly available so that we can all see the shady dealings.

The banking regulators have frequently come from the finance industry and are too close to banks. They act only after the stench of scandal has become too strong, and frequently they have been part of what a US senate report described as a "cover-up". This inertia should be checked through annual hearings by the Treasury committee. All policy meetings of the banking regulators should be held in the open, and information in the regulator's possession – including background papers – should be made publicly available.

The above is not a magic bullet for eradicating institutionalised corruption, but the beginning of reforms necessary to curb the worst excesses of an industry that has damaged the lives of millions of people.

This article first appeared on Comment is Free

An X Factor spin to the election battle

Jeremy Corbyn MP, writing in the Morning Star

Monday night's Channel 4 debate between Alistair Darling, Vincent Cable and George Osborne was portrayed as an X Factor competition with the threesome all allowed to give their own broadly similar analysis to the situation facing this country.

An instant opinion poll after the event awarded a 36 per cent victory to Professor of Hindsight Cable with Darling and Osborne tying for second place on 32 per cent.

Rather surprising this, in view of Osborne's peculiar decision to announce that the Conservative government would remove the National Insurance increase and would thus offer up £5.6 billion of "efficiency savings."

Apparently the Tories think they are marching into power on the slogan of efficiency savings, but I would recommend that every public worker be seriously concerned about this because it sounds to me and many more like cuts by another name.

Where all three agreed was that there has to be a repayment of the £167bn deficit and the question was more on the timetable for repayment rather than the principles behind it or of the sort of economy that we should have in the future.

The Tories, as we well know, are a party representing the interests of the very rich and the purpose of Labour ought to be to represent the organised working class and radical people of this country.

For all his analysis of the way the banking crisis came about, Cable essentially offers broadly market solutions to the problem and claims the Lib Dems are neither representatives of the Tory rich or militant "trade unions." Interestingly, the Lib Dems equate a similarity of power and interest between the incredibly rich backers of the Tory Party and trade unions who represent people in work.

This would suggest a complete lack of understanding of the role or rights of trade unions in our society.

The three big industrial disputes at the present time - the BA cabin staff strike, the civil servants' dispute over severance pay arrangements, and the rail workers' defence of signal and safety workers' jobs and conditions.

Even if successful none of these disputes will make any member of any union better off, but they will save jobs and protect conditions.

And all of these actions are defensive. If anyone has any doubts as to what happens when the bankers are allowed to impose a solution on the economic crisis, they only have to look at the latest twists and turns in Greece.

The once highly popular PASOK government in Athens is seeking to obey the diktats of the world's bankers and the European Bank, thus creating more unemployment and a deeper recession.

In turn this will further increase the jobless rate in one of Europe's poorer countries.

The alliance of the European leaders enforcing these measures on Greece and now on Portugal are the result of the creation of an independent central bank dedicated to "market stability," not social justice.

The Morning Star reported the publication for discussion of the People's Agenda by the Labour Representation Committee, which boldly poses the question in whose interests our economy has to be run.

The pamphlet stresses that despite the increases in pensions, welfare benefits and child allowances the low taxation rate among the richest means that inequality in Britain is probably the highest in Europe.

In its proposals for an incoming government, the point is strongly made that contracting out of public services, marketising education and league tables for schools have forced public services to focus more on cost-cutting than quality.

The pamphlet quite rightly calls for a massive house-building programme and while the government's recognition of the role of council housing in the past two years is welcome - as is the change in local authority finance - a massive problem of those living in overcrowded accommodation remains.

This results in underachieving children and many who have no chance of council housing being forced to live in very expensive private rented accommodation.

It is time to control this absurd market and prevent the exploitation of the vulnerable through extortionate rents.

The People's Agenda also makes demands for a decent minimum wage, the repeal of anti-trade union laws and the public ownership of crucial industries.

After the election the incoming government will inherit an unprecedented opportunity in the public ownership of most of the banking system.

This should be brought under public control and not left in the hands of a holding company whose sole function is to dispose of the shares at the first opportunity.

Labour was founded by the trade unions and socialists in Britain at the start of the 20th century and its very survival depends on the support of that same coalition.

To win the election, this coalition must be mobilised. Afterwards, the crisis of free market and bankers' Britain must be dealt with by ending the obscenity of inequality and replacing it with the goal of equal opportunities and social justice.