As many of you will know, the Independent Commission on Banking recently
delivered its interim report on how the UK’s banking system should be
reformed to avoid the kind of collapse we saw in 2008.
The Commission has recommended only that the banks’ retail operations be
“ring-fenced” so that more risky investment operations don’t impact on
them in the case of losses. This, many commentators have said, means the
Commission has “bottled it” by stopping short of the outright separation
of retail from investment banking that many experts said was needed.
Should we be surprised? As the Financial Times (Monday 11th April)
reported in an article entitled “Banks hope their lobbying pays off”:
“Ever since Sir John Vickers’ Independent Commission on Banking was set up
last summer by the incoming coalition government, the sound bites have
been increasing in volume.
The rhetoric has reached a crescendo in the past two weeks, as banks –
fearful of what today’s interim report from the commission will say – have
stepped up their campaign against a radical shake-up.
Their message is a simple one: ‘Make life too tough and too costly in the
UK, and we will go elsewhere'”.
My comment: To anyone having even a rough understanding of how the globaleconomy works, the commission’s weak recommendations should come as no surprise. The clear conclusion is that governments, working independently and without international coordination, simply no longer have the power to effect meaningful reform in today’s world.
As every day passes, evidence such as this should, logically, lead people
to support campaigns such as Simpol in ever-greater numbers. But since
most people still see governments as autonomous, powerful entities that
are capable of substantive reform, they cannot see the reality that they
are, in fact, highly constrained by the fear of losing jobs and tax
revenue to competitor countries.
But sometime hopefully soon, reality will have to break through.