We can but hope that is the case but the terrible Supreme Court decision regarding lobbying is a step back in the US at least for less power to big money, rather than more.

This might be over-optimistic. There was no real global attempt to reform the economic system until the 1940s (Bretton Woods), by which time governments had taken command of the levers of industry and finance by default, due the the exigencies of total war. Indeed, in 1938 there was a post New Deal slump as Roosevelt answered to the siren voices of the markets by attempting to cut the deficit. One wonders if it’s possible for any kind of similar intervention without such impetus. Perhaps the post-war control of capitalism was a one-off, and we’re simply doomed to suffer recurrent crises – with a consequent denuding of the public sphere (see Naomi Kline’s ‘Shock Doctine’). Maybe liberal economic ideology has such a hold that it can only be shaken by global conflict.

Certainly, the financial services industry with its powerful friends in the media has regained the initiative.The government and the public sector is in the dock, even as the bankers make off with the loot! In the Alice in Wonderland world of economic orthodoxy it makes perfect sense for a nationalised bank (which RBS effectively is) to lend £7bn (backed by the British taxpayer) to an American company to buy out a (at least partly) British manufacturer, so that it can be asset stripped to the advantage of institutional investors, leaving some of those very taxpayers to lose their jobs. Should the scheme falter, it’s the same taxpayers who will suffer the default – and all in the name of the ‘free market’. It’s heads we win, tails you lose genius.

Worth noting in Adam’s longer exegesis of Perez’s ideas it’s actually a little bit different.

The search for profit and innovation in other areas comes quite naturally: markets aren’t of course perfect but they do respond to incentives. If finance is where you go to lose money then naturally capital flows to other parts of the economy.

Perez’s analysis is entirely support of a near laissez faire attitude….rather than that activism that Adam has tacked onto the end of it.

Here’s a stimulus plan:- hire a fleet of coaches, drivers, security guards to bus the useless bankers from Canary Wharf and Leadenhall Street out to Heathrow; guaranteeing them a troupe of guards right up until they board the plane to go wreck some other poor dupe’s economy.

I would have greater hope of some improvement if there was a coherent alternative. Skidelsky’s book on Keynes is an inspiring read, for example. However, I see little or no attempt from anti-free marketeers to move beyond advocating the leviathan state or fantasy cooperative schemes. The former is scary (and, in this country, politically not going to happen) and the latter based on the positive denial of reality.

If you want a problem, it is that populist banker bashing (see above, ad nauseum) has replaced analysis. I refer again to Keynes, only to highlight that there was a time when it was possible for liberals to analyse the financial system without resorting to cheap shots and barely disguised threats of violence.

perhaps not glass steagall, but just as well becuase we need more than that

Tim,

I think you are seeing Perez through neo-classical eyes. She doesn’t really draw boundaries between the economy, the state, culture, technology etc. For her these are all inseperably bound up and contribute to the creation of the paradigms that shape business practices as well as wider politics.

She would certainly not see the market as some sort of self-organising phenomenon which always works out for the best. She is very clear that at certain points in the big historical patterns she identifies, the state may have a more pro-active role to play in order to ensure that the full productive potential of a new technology and paradigm is achieved and also to address the social downsides of an inherently volatile economy. In particular, Perez does think the reining in of finance is vital after a crash to achieve beneficial change.

Having said that, and as I point out in my Compass Thinkpiece, Perez nor I think the crash simply means a return to old style state intervention. It will be a different sort of intervention but what exactly is still not entirely clear.

I’m guessig that the contributor who claimed Perez’s thesis was consistent with a laissez-faire approach hasn’t read it.

e.g. “Hence, the tasks are complex and wide-ranging: designing an adequate and
enforceable regulatory framework; devising ways of effective intervention to
reshape the demand profile to extend the Information Revolution; and decisively
acting on both sides of the world divide to stimulate a truly global economy,
expanding wealth generation across the planet.”

It’s interesting that Perez’s concerns were articulated in 2002, following the last bubble: “misjudge the situation and treat it as one more passing recession or rise up to the task of
confronting a serious structural problem, starting by understanding its nature.”

The lessons weren’t learned then, and are being ignored once more by the market fundamentalists claiming TINA even as the state keeps the market functioning.

As Perez argues: “At this turning point, short-term financial criteria, apart from the risk of
stimulating dishonesty, can no longer serve to guide investment and technology
decisions directed to the steady expansion of production and markets. As at
equivalent moments in the past, regulation is one of the main instruments to
achieve that switch.”