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Last Rites for the Anglo American Financial Model

Such is the nature of news and journalism, that the temptation to conflate and exaggerate the significance of events, is a hard one to resist. Run of the Mill daily happenings are frequently referred to as “earth shattering”, pedestrian political spats are elevated into history shaping moments and such is the artificial excitement generated by the 24 hour News machines that most people barely raise an eyebrow. So when something truly seismic happens, it can barely register on the Richter scale. The seismic happening this week has been President Obama’s dawn raid on Wall Street.

To be fair some of the heavyweight commentators and practitioners appreciated its importance, but isn’t it remarkable that no one apparently saw it coming? But just before the commentariat move their caravan on, I would venture that the Obama initiative aimed at separating publicly funded Banks from their Casino betting operations is the most profound political and economic move since “Big Bang”, and the de-regulation of Wall Street and the City of London. In years to come, I predict that this point in time marked the official ending of the Anglo American model. For the President’s intervention marks  the beginning of a return to a more balanced, investment led banking system that will have been forced to acknowledge the significance of factors it has long regarded as peripheral such as ; jobs, manufacturing and industrial productivity, investment and security of supply. I would also predict, for a good or ill, the beginning of a return to more micro and macro interventionism accompanied by a degree of protectionism. We will hear a whole lot less of “privatisation” and “cutting red tape”.

There is another trait that is not particularly popular both amongst politicians and journalists, and it is the tendency to say “I told you so!”  Anyone who has read Karl Marx’s Das Kapital – currently enjoying record sales in Germany – would have to acknowledge that he boldly  “told us” that monopoly capitalism is doomed to periodic collapse, well over a century ago. This could perhaps go some way in explaining how the United States came to have some of the smartest anti-monopoly legislation in place decades ago.  While many of Marx’s political and economic prescriptions have been found wanting in the intervening decades, the old bearded one, who periodically suffered from appalling outbreaks of painful boils, is probably smiling from atop his headstone in Highgate Cemetery in North London.

But you didn’t have to be a Marxist to see, as some of us did over a quarter century ago, that complete obeisance to the Market was bound to land America and Britain in deep trouble. This, by the way, is not an attempt to say “I told you so”, more a plea for those of us who developed a critique back then, to be taken a little more seriously now.  It would also be nice, although I hardly expect it, for some of the same disciples of Friedman, Hayek and the Chicago Business School to pop up and say “Well perhaps the French, the Germans and the Scandinavians, did have a workable system after all”. Because right now, it is the Middle Europeans, the Scandinavians, and yes, the interventionist Market Leninists of Beijing who have the better prospects for recovery and it would appear, a more sustainable balance between finance sector and industry and public and private.

So as France’s State owned National Bank now gears itself up to becoming probably the largest and most influential Bank in Europe, what about “Little England”, I hear you ask? Well, we like you, doused ourselves in Reaganomics, although in our case it was called “Thatcherism”, and successive British Governments of whatever official persuasion continued to worship at the altar of the untrammelled Market place. Under Gordon Brown, Competition Law was further relaxed to allow hostile takeovers and capital Gains Tax was cut from 40% to 10%. Some of the big British banks that did so well out of “Big Bang” are so in hock to the State that they no longer pay any Corporation Tax, they are forced instead to offset their losses – but so far Brown has no plans to follow Obama and dismantle the “too big to fail banks” that have, er, failed.

Perhaps, out of desperation, Britain’s Prime Minister is hoping to make the City of London a Cayman Islands style off-shore haven for over-taxed, over regulated bankers.

If so, will the last one out, please turn off the lights?


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