Gerry Hassan: Fat cats face the threat of a new reformation

Chancellor George Osborne. Picture: Getty
Chancellor George Osborne. Picture: Getty
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THIS week something momentous happened for the future of the Britain, its economy and politics, for Europe, and for our relationship with the Continent. The European Union proposed and agreed a curb on bankers bonuses, over-riding the predictable opposition of the UK government and Chancellor George Osborne.

The EU proposals supported by the European Commission, European Central Bank, and 26 out of 27 EU members, will put a ceiling on banker bonuses of one year’s salary, or two years if approved by a large majority of shareholders.

There was the usual outcry from the British Bankers Association, CBI and others: people who go by the description “the business community” but are actually corporate lobbyists for the big firms looking to maintain the same market dominance for their members.

The City of London we are told is integral to “UK plc”, with its vital statistics continually rolled off. Financial services it is claimed contribute 9.6 of UK output, 12 per cent of tax revenue, and 1.1 million jobs. However, the financial sector has cost taxpayers near to £1 trillion pounds post-crash; and the number of bankers who would be potentially affected by the Euro legislation is a mere 5,000 – 0.5 per cent of financial services.

The British debate is portrayed by bankers and their political allies trying to get the rest of us accept that this is the way of the world: talent is mobile and global, and we should be lucky for the fact that London is the world’s premier financial centre. There is an element of blackmail in this, but more one of asking us to embrace a fatalist and a determinist view of the world.

It just happens not to be true on any level. This is a story about what Anglo-American corporate capitalism has collapsed into: amoral, venal, short-term, about naked power and self-aggrandisement.

The era of New Labour and David Cameron has bequeathed a political orthodoxy which actually has fallen for the mistaken assumption that whatever rich businessmen say is good for them is pro-business.

This is the opposite of being pro-business, which in reality entails standing up to monopoly and oligopoly interests, breaking up large corporate entities and preventing takeovers which allow too much power to accrue with one corporate in a sector, and using trust and competition laws, along with planning and funding, to positively discriminate in favour of small and medium firms.

The context of the evolution of British capitalism is seldom explored, even on the left. The rise of the mercantile classes and Britain’s status as “the first nation of capitalism”, meant that its aristocratic and landed classes, who made their money by fair means and foul in pre-industrial times, didn’t like the idea of real work, getting their hands dirty, and being part of the industrial classes.

Thus Britain historically has always had an establishment who are profoundly anti-industrial, and value much more making money from either doing nothing, and living of landed wealth and inheritance, or by doing deals, hence the importance of accountancy and contract law and the City’s pre-eminent place in these in the global economy.

This is still the dominant view of the British elites, and why the City of London has grown so powerful and over-bearing: it doesn’t actually make anything, and only does deals, hussles and fizzes with a sense of its own power and self-importance.

The City’s pre-eminent position owes a lot to the legacy of Empire. The inter-connection of funding the trade and commerce routes of Britain’s global territories, all contributed to this, at the same time aiding the City’s disconnection from the domestic “real” economy

This is “Britain plc”, “the global kingdom”, which in the mind of market buccaneers and their apologists could float away from the coast of Europe, to the mid-Atlantic, Zurich or Singapore.

It is going to have trouble finding a long-term mooring. The tides are turning against the excesses and ruinations of Anglo-American capitalism – in Europe, North America, and Asia.

Look at Switzerland, long cited by Tory free marketeers. Last Sunday the country held a national referendum which became known as “the fat cat initiative”, on the subject of restricting director pay, curbing golden handshakes and severance packages, which produced a 68 per cent vote in favour of the proposals.

Change is going to require a very different British politics. For a start, the progressive pessimists who conflate short-term bailouts with long-term demographics, sometimes deliberately, sometimes not, and come to the analysis that “we are all doomed” and cannot afford existing public services, have to be challenged.

Then there is the problem of the Treasury and Bank of England, who disastrously got us into this mess, and have then pumped billions of pounds of taxpayers money into the economy and bankers’ pockets, to no effect for the rest of us beyond making us considerably poorer as a nation.

These are the two shining institutions the SNP want to let safeguard the fiscal autonomy of Scottish independence, which can hardly inspire confidence given they are a major part of the problem.

Fortunately reform is coming, from Europe and global institutions, with this week’s initiative on bonuses one of several measures, others already agreed including regulation of hedge funds and a financial transaction tax, the latter of which the UK opted out of.

The question is whether British and Scottish politicians have the courage to overturn the conventions they grew up with over the last couple of decades, and see the new vested interests for what they are: a group who in a way no trade union ever managed to do at its peak, practice a restriction of trade which misshapes and distorts the entire economy and society. We can either join the reform movement, or have it done to us by others