Government regulation of the City 2

In my entry to this diary on last Sunday, I recorded that The Observer’s Will Hutton had some very specific recommendations about how this government could help the country cope with the recession it’s now facing.

In his column for  today’s edition of The Observer, Will Hutton argues that the current financial crisis presents the government of the day a heaven-sent opportunity to take control of the financial system and subject it to regulations safeguard public interest.

He believes that ‘the theory has been that markets are so efficient that regulation and state intervention must be as minimal as possible’ , which was never especially good, has now, as never before, been shown to be false.

Polly Toynbee, in her comment is free column for The Observer’s stable-mate, The Guardian, has very similar views as Hutton on what the government should do.

This is the time when government really shows its worth. It should bolster any financial institution that risks setting off domino collapses and then impose stricter regulation to restore probity and try to stop it happening again. As unemployment rises, a good government borrows and spends to get people back to work, to avoid the destruction of a generation that Margaret Thatcher caused in the early 1980s. We still pay for the poverty she created. Borrow to invest in infrastructure, building high-speed railways, trams or renewable energy, keeping people in jobs. This would be the worst possible time for a tax-cutting Conservative-Liberal Democrat government to arrive in office with economic plans to borrow and spend less.

Toynbee, however, openly expresses her doubts about the PM’s being able to take the bull by the horns and do now what he’s failed to do for years.

Brown is not a famous eater of his own mantras. Can you imagine him tearing up his golden rules on borrowing, even if they are slipping? Would he follow Keynes and say when the facts change, he changes his mind? He is unlikely to admit that property should never have been allowed to inflate, or to promise a regulating tax escalator to prevent it happening again. Hard to imagine him now announcing a high-pay commission to issue advisory limits in public companies so shareholders can vote down excess….

I don’t wish to be overly pesimistic, but I’m inclined to think that the country, having spent almost three decades in absolute thrall of untrammelled free marketeering, would exact a very heavy penelty from Mr Brown and Labour, were they, as they should, to consider taking the route tha Hutton and Toynbee recommend.

Although I have not got any great residue of sympathy for New Labour,  I  must say that in failing to act in time, it is now faced with the dilemma – if it acts as it should at this late stage, it’s almost certainly damned, and if it dosen’t act, then it still damned.

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