As the Government Gleefully Butchers the State, Mervyn King Blames Banks for Cuts, Questions Public Indifference and Warns of Future Crisis

6.3.11

For opponents of the gleeful butchers of the coalition government, bent on destroying the State to pay for Britain’s deficit, while protecting their thieving friends in the City who caused the financial crisis in the first place, and turning a blind eye to the corporate tax avoiders who could make up the shortfall instead, there was good news on Friday, as the results of a by-election in Barnsley Central were announced.

The Liberal Democrats saw their share of the vote drop from 17.3% in last year’s General Election to just 4.1%, and the Tories saw their share of the vote drop from 17.3% to 8.2%. Although the former MP Eric Illsley left under a cloud, imprisoned for fiddling his expenses, Labour bounced back under their new candidate Dan Jarvis, a former soldier who served in Afghanistan and Iraq, who took 60.8% of the vote, and observed that the people of Barnsley Central were sending the “strongest possible message” to David Cameron and Nick Clegg.

“Your reckless policies, your broken promises and unfair cuts are letting our country down,” he said. “I grew up in Margaret Thatcher’s Britain. I remember how angry it made me feel. Whole communities abandoned to unemployment, public services run down, talents wasted, opportunities taken away. Thatcher was wrong then and Cameron is wrong now.”

The voters of Barnsley Central were not the only people to deliver a damning verdict on the government and its policies last week. On Tuesday, in testimony to the Commons Treasury Committee, Mervyn King, the Governor of the Bank of England, said, as the Guardian described it, that “people made unemployed and businesses bankrupted during the crisis had every reason to be resentful and voice their protest.” King told the committee that “the billions spent bailing out the banks and the need for public spending cuts were the fault of the financial services sector.”

These are his exact words:

The price of this financial crisis is being borne by people who absolutely did not cause it. Now is the period when the cost is being paid, I’m surprised that the degree of public anger has not been greater than it has.

I was surely not the only reader bemused to find that I agreed 100 percent with Mervyn King’s analysis, but I couldn’t find anyone else in the Guardian prepared to point a finger so unerringly at the banking sector, and, by extension, at the coaltion government that has chosen to present its unprecendented programme of cuts to State funding for everything from the arts to the universities and from welfare to the NHS as being solely the fault of the Labour government.

The actor Bill Nighy popped up to claim that King’s comment that “he was ‘surprised that the degree of public anger has not been greater than it has’ suggests that either he had a very high expectation, or that he has misread the public mood.” Nighy, who noted, “I have been arguing for the last year that the banks, hedge funds and other titans of the City of London whose gambling got us into this trouble should pay to clean up the mess they caused,” took the opportunity to point out that he is “an ambassador for the Robin Hood Tax campaign, which calls for a tiny tax of just 0.05% on every casino-style financial transaction in order to help poor people, reverse public service cuts at home and abroad, and tackle climate change.”

This is all very worthwhile, but either Nighy has a different concept of anger to me (and Mervyn King) or it was he who had misread the governor’s remarks. The Robin Hood Tax campaign is one thing, but it is quite another for citizens to rise up in vast numbers, brandishing pitchforks, and setting off for the City with a Tahrir Square-style determinaton to not return home until the thieves responsible have been toppled from power, and the balance of blame and payment shifted to where it belongs.

Elsewhere, columnist Deborah Orr also turned up, claiming, “Yes, Mervyn King, we know the banks are to blame,” but failing, also, to summon up the anger that King sees as bafflingly absent from British life. Instead readers received a sound enough history lesson:

Both main parties had busied themselves with handing power over to the international financial sector for three decades, and their political surrender created an unaccountable financial elite that was and is, famously, too big to fail. It is too big, even, to be bossed around now that it has failed and been bailed out, apparently. A couple of years on from the crash, and still the nation waits fretfully for a coming report that will suggest some possible reforms. How can reform of the public services be so urgent, and reform of the financial sector so . . . laissez faire? It’s purely because politicians have themselves made the financial sector so monumentally powerful that it has become an unelected court of Versailles. Their paralysis is born of a refusal to own up, even to themselves.

This is all well and good — and true — but, again, there is no mention of pitchforks.

Beyond the students and schoolchildren who brought palpable anger back to Britain’s streets before Christmas, and who actually threatened the malignant politicians risking the collapse of Britain’s university system just to make overstretched young people even more in debt, perhaps the only people prepared to contemplate pitchforks, but to decide instead that economically disruptive political theatre is a good way to start the revolution, are the activists of UK Uncut, who are targeting banks and high street chains for their thievery and tax avoidance, with a simple but powerful message — and one that focuses unerringly on the only analysis that matters: recognizing that the banks, corporations and hypocritical politicians are the enemy, and that only the rich and the super-rich will benefit if we the people fail to make our voices heard.

This could be through the kind of anarchic street theatre favoured by UK Uncut, which has a long and powerful history in the UK, or though the creation of our own Tahrir Square, or, for that matter, through the creation of our own version of the occupation of the capitol building in Madison, Wisconsin, where, for three weeks, up to 100,000 people have been braving the winter cold in the first concerted opposition to further Republican greed at the expense of workers that has been seen in the US for decades.

If America can do it and we can’t, then we really are in the deepest of holes, and perhaps deserve to have so many of the things that are central to any notion of the common good — the NHS, the welfare state, our universities — privatized or otherwise broken. Forget the further impoverishment of the poor, the attacks on the unemployed and the disabled, the loss of hundreds of thousands of jobs and livelihoods, the increase in homelessness, and even the criminalization of homelessness, and Ignore the fact that Cameron, Osborne, Clegg and their cronies have no mandate for these sweeping changes, and that they lied or omitted to mention most of them on the campaign trail or in their manifestoes.

Forget too, if you will, that, in an interview with the Daily Telegraph on Friday, Meryvn King warned that Britain risks another financial crisis unless it undertakes fundamental reform of the banking sector, even though the government is still furiously blaming the Labour government and ordinary people for the country’s financial problems, and George Osborne is “believed to be cautious about major structural changes” to the banking sector, even though these should, logically, involve more than empty hand-wringing about the kinds of bonuses announced recently, and the indecently small amounts of tax paid by banks, and should also lead to what the Guardian described as “a clear separation between high-street and investment banking operations to prevent the public from footing the bill for catastrophes on City trading floors.”

Readers who want to be truly alarmed by George Osborne’s love affair with bankers and big business should read George Monbiot’s recent columns about the Chancellor’s deliberate attempts to make Britain a kind of offshore tax haven, crippling “the common good” still further, and should compare the Chancellor’s position to that taken by Mervyn King, in some of the key passages in his interview with the Telegraph:

[A]lthough Mr King thinks the worst of the crisis was handled correctly, he does not think we are out of the woods. “We allowed a [banking] system to build up which contained the seeds of its own destruction”, and this has still not been remedied: “We’ve not yet solved the ‘too big to fail’ or, as I prefer to call it, the ‘too important to fail’ problem. The concept of being too important to fail should have no place in a market economy.”

I quote to him the recent remarks of Stephen Hester, the chief executive of the largely publicly owned RBS, in which he seemed simultaneously to say that RBS should pay little tax because it had made little profit, but also that it should pay big bonuses because its investment arm had made big profits. Wasn’t there some sort of contradiction? Mr King nods. The remark illustrates, he says, the clash between the needs of high-street banking and the ambitions of investment banking. The key question, in his view, is not why an individual bank says it needs to pay bonuses (the reason cited is always the need to keep talent), but: “Why do banks in general want to pay bonuses? It’s because they live in a ‘too big to fail’ world in which the state will bail them out on the downside.” They are tempted to excessive risk and excessive payments: “It is very unproductive to single out individuals. Bankers were given incentives to behave the way they did. That’s what needs to change. We must resolve this problem.” He has high hopes that the independent banking commission will do so. In the Governor’s mind, this is not ultimately a technical but a moral question. It goes to the heart of whether people are ready to accept life in a free economy.

Over the past 30 years, he says: “We changed Britain away from a sclerotic economy with inefficiencies and problems in labour relations. Everyone got to the point where we no longer expected government to bail us out. Everyone bought in to market discipline. We were all better off. It was working very successfully.” But now, people have every right to be angry, because “out of what seems to them a clear blue sky”, the crisis comes, they find they do lose their jobs and there’s the sharpest fall in world trade since the 1930s. “But, surprise, surprise, the institutions bailed out were those at the heart of the crisis. Hedge funds were allowed to fail, 3,000 of them have gone, but banks weren’t.” Could there be a repeat? “Yes! The problem is still there. The ‘search for yield’ goes on. Imbalances are beginning to grow again.”

Are you angry yet? I certainly hope so.

Andy Worthington is the author of The Guantánamo Files: The Stories of the 774 Detainees in America’s Illegal Prison (published by Pluto Press, distributed by Macmillan in the US, and available from Amazon — click on the following for the US and the UK) and of two other books: Stonehenge: Celebration and Subversion and The Battle of the Beanfield. To receive new articles in your inbox, please subscribe to my RSS feed (and I can also be found on Facebook and Twitter). Also see my definitive Guantánamo prisoner list, updated in July 2010, details about the new documentary film, “Outside the Law: Stories from Guantánamo” (co-directed by Polly Nash and Andy Worthington, on tour in the UK throughout 2011, and available on DVD here), my definitive Guantánamo habeas list and the chronological list of all my articles, and, if you appreciate my work, feel free to make a donation.

30 Responses

  1. Nikki Turner says...

    I’ve read a lot of negative comment about Mervyn King in the last few days but, in my opinion, no one should under estimate the importance of his outspoken attack on bankers. Especially at a time when the Government has clearly established it has no control what so ever over the financial sector. I sincerely believe Mervyn King is one of the last men of ‘integrity’ left in a very corrupt banking world and, as the Telegraph articles today on the subject of the FSA report into RBS have shown, we cannot rely on the FSA to clear up the mess the financial sector is in because they seem quite content to bury it. I think it can only be a positive thing that regulation of the financial sector goes back to the BoE and Mervyn King has made it very plain he won’t be giving bankers the easy ride the FSA did. What’s to criticise?

    p.s. I seem to remember David Cameron having a similar view on who was to blame for the financial crisis back in 2009. Or was that a different David Cameron?

  2. Andy Worthington says...

    Thanks, Nikki. I agree re: Mervyn King’s “integrity,” hence my interest in his rather revolutionary analysis of the apathy of the British people. I find it fascinating that such an establishment figure should be actively asking why people aren’t out in the streets!
    As for David Cameron, back in 2009 he was wearing his “trust me” suit, whereas now, of course, we’re starting to see that ugly pinched little mouth of his for what it is.

  3. Andy Worthington says...

    On Facebook, Dejanka Bryant wrote:

    Andy, this is excellent. It should be published in some major UK newspapers. Shared.

  4. Andy Worthington says...

    Dez Troy-Carter wrote:

    It should indeed, but hey, don’t expect the corporate gravy train of mainstream media to stop in this station!

  5. Andy Worthington says...

    Dave Bones wrote:

    so why do you guys and gals think rebellion is absent on this island?

  6. Andy Worthington says...

    Carol Anne Grayson wrote:

    Fantastic article Andy…I actively support the Robin Hood Tax but this is apathetic Britain…there seems to be a collective mentality with many that we “put up and shut up” and those of us that do regularly protest or write of our discontent are often viewed as “radical” using a negative definion of the word or “extreme”. Drives me nuts… it is also affecting justice now too… I was told recently by government ministers that they could not pay much compensation for a specific injustice as they did not have enough money… Why should justice be determined by the economic state of the country when govt and big banks have squandered and plundered the public purse and our money…

  7. Andy Worthington says...

    Adrienne Murphy wrote:

    I am for 12 weeks more a local authority worker and like most my bosses are cutting the front line staff whilst increasing the back office functions of HR by giving them different job titles…as well as creating new senior management postions on very high wages!!!!!!!..I dont expect there will be much left in 12 months time but i do believe this country will see riots and civil unrest, once the savage cuts start to bite…i think nerdy nick and thatchers devil child dave are in for a rough ride…as are the population in general when they cant get the health care they need or their bins emptied, there will be nobody to look after granny and worst of all when we get another monster like Ian Huntly, because this government in its wisdom of scrapping the CRB checks to save money will be making it so much easier for the very people to carry out their sick and vile crimes. I look at the middle east and now wonder why are the west leaving these brave people to fight monsters like Gaddafi alone…wouldnt be oil would it!!!!

  8. Andy Worthington says...

    Toby Holmes wrote:

    another fantastic article andy. spot on

  9. Andy Worthington says...

    Tashi Farmilo-Marouf wrote:

    How are you going to find any truths written in the Guardian, or any other newspaper that is being funded by advertising dollars (pounds – whatever) that are supported by the same people that are bleeding the rest of the country dry? It’s rare that anyone is really allowed to write freely, even in democratic societies… or so it seems. Thank God for the internet :)

  10. Andy Worthington says...

    Carol Anne Grayson wrote:

    Just having a similar debate with one of the heads of journalism at Peshawar university… and also the narrow-mindedness of presentation…journalists too afraid to escape the confines of their narrow boxes…thats why its good to read Andy and others who are not afraid to go wider…

  11. Andy Worthington says...

    Tashi Farmilo-Marouf wrote:

    Exactly. I appreciate Andy’s bravery

  12. Andy Worthington says...

    Thanks, everyone. I really appreciate the support. I’d be on the story of our smug little boil-in-the-bag leaders permanently if it wasn’t for everything else going on. And I’m glad you appreciate me being forthright. There is some good writing out there in the mainstream, especially in the Guardian, but like the articles by Bill Nighy and Deborah Orr I referred to, they lack the kind of urgency required. That said, Johann Hari in the Independent is doing a great job.
    Dave asked why we think rebellion is absent on this island — it’s not absent, but it’s not even Wisconsin-sized yet, and that means that far too many people are still wandering around in a daze, which I find inexplicable. This has been something very close to a literal life-or-death issue (as it will actually be for some of the most vulnerable people in society) ever since these Etonian butchers and their lapdog first laid out their outrageous plans, and there are so many disgraceful and damaging things going on (while the Neros of the financial world are positively encouraged to keep fiddling) that I find it hard to accept that so many people can be shrugging it all off.

  13. Virginia Simson says...

    I just sent this to Dr. Michael Hudson and his gang8 group.

  14. Andy Worthington says...

    Carol Anne Grayson wrote:

    It surely has to happen in the UK… the US as you say are moving in Wisconsin and there is the June protest in Washington DC… I think part of the problem is that we lack a focal point… there are lots of small campaigns alL doing their own thing but there are some very common issues…. govt mishandling of affairs, greed, cuts, corruption, corporate influence, flawed foreign policy that impact on all of us… it seems folks don’t always “join the dots” and see that…if all that strength of feeling could be focused and harnessed it would be much more formidable and would force the govt to take more notice…we are just TOO POLITE… OFF WITH THE GLOVES… WE HAVE BEEN KICKED BELOW THE BELT LONG ENOUGH!!!

  15. Andy Worthington says...

    Virginia Simson wrote:

    They are AFRAID, and the maze of the class system has left them OBEDIENT in the extreme. My husband had a posh accent, but was all fur coat and no knickers. Time after time in the UK, we would go somewhere and people, becuz of James’s height and accent – would kowtow as if we secretly royalty. The accent is a uniform. Here in the states it’s more CLOTHES, the ties and shirts you wear that gives one “authority”. It’s a shame bound culture. Look @what’s happened in Japan, another SHAME BOUND culture.
    My experience in London was that so many people were hooked on tranx, still sending their kids to boarding schools, afraid/ashamed to show affection to each other.
    To my mind, the only person who showed British culture for what it is, is George Mikes. It takes an OUTSIDER to point out the emperor wears no clothes over there. Dr. Marietta Higgs is a New Zealander, for example.
    You are a BRAVE VOICE in a cultural desert. Your writing is superb. Your heart is something else. I have no idea how you got that way unless you grew up north of Watford (LOL) but you keep on banging away. As I refer to the ruling elite there, The Worthmores, are going to go down, eventually. It’s do or die … since Fiscal Crash 2008.

  16. Andy Worthington says...

    Thanks, Carol and Virginia.
    Nice take on the class divide, Virginia, and thank you for the kind words. You also may wish to know that the north of Watford comment is spot-on. Born in Manchester, grew up in Hull!

  17. Andy Worthington says...

    Virginia Simson wrote:

    I think it is worth noting that NA came out of the upper class in the UK. It took years before an actual northerner, working class person got credentialed to work in a rehab center. I mention this becuz it just show you how terribly subservient people actually are there.
    It may be that the backlash against the real tyrants in the belly of the best are going to have to come from somewhere other than the home counties. I know UK Uncut grew out of London pub, but who is to say what their backgrounds actually were. And don’t forget that London is loaded w/Irish people who are pretty fed up at this point.
    No country should be paying back these “loans.” The bank$ter$ need to GROW UP and take responsibility for their casino. We’ll have to FORCE them, too – remember yesterday in Egypt they FINALLY got people out of underground prisons .. it took awhile.

  18. Andy Worthington says...

    George Kenneth Berger wrote:

    I’ll share this soon, Andy. It might interest you to know that the Swedish weekly I subscribe to, “Arbetaren,” (The Worker), had the following headline two weeks ago: The banks saw the crisis coming; Saved themselves–Left the bill for everyone else (my trans.)

  19. Andy Worthington says...

    Carol Anne Grayson wrote:

    The north-south divide is still there…and like Andy, am a northerner and proud of that…I used to get sick of the attitude “you can’t run a campaign from the north” (Newcastle) well with the net it makes it a lot easier than at one time… I get sick of London being seen as the only centre of UK activism lol… We are in many ways more independent and have had to become inventive thinkers being so far from what is consider “the action” also we have a proud traditon of campaigning here with Red Ellen, Jarrow March and Miners Strike…once many years ago Brit govt was so concerned at Bolshevism up north and exchange visits to Russia that ships off the coast had guns trained on a tiny Durham village for a few days haha…maybe things haven’t changed that much …just different targets these days…

  20. Andy Worthington says...

    Carol Anne Grayson wrote:

    Little Moscow lol…there was a fair people sick of Brit govt back then…

    http://www.newworker.org/ncpcentral/littlemoscow.html

  21. Andy Worthington says...

    George Kenneth Berger wrote:

    The headline I mentioned above is based on this US Govt. document
    http://www.fcic.gov/report

  22. Andy Worthington says...

    Lizzie Cornish wrote:

    Well…*I’m* bloody angry with them, and I wrote and told them too…Here’s their pathetic reply..

    Dear Lizzie,

    I am replying on behalf of the Conservative Party Co-Chairman, the Rt Hon Baroness Warsi, to thank you for your e-mail.

    It is very good of you to get in touch and make us aware of your thoughts. Your comments have been noted.

    Thank you again for writing.

    Yours sincerely,

    Harry Chichester
    Office of the Party Co-Chairmen

    The Conservative Party
    30 Millbank
    London
    SW1P 4DP

    chairman@conservatives.com
    http://www.conservatives.com

  23. Andy Worthington says...

    Lizzie Cornish wrote:

    And my reply to them….

    Dear Harry,

    My dearest Dad was also called Harry, and my son now carries his name too. Dad would have been 96 years old now, were he still alive…His grandson is just 16.

    What is happening in this country, and around the world, is NOT what my dearest Father went to War *for*, it’s what he went to War *against*….

    I am now seeing the rise and rise of the mega wealthy, and the demise, down, down, deeper and down, of the ordinary people of the world, many of whom are now struggling beyond belief…

    I expected more from you than just a standard email, and I have to say I am beyond disappointment, to be honest…

    I wanted to talk with David Cameron about what is happening in Great Britain, as this is my Country, one that I love with all my heart and soul..as did my Father before me…It makes my heart break and ache beyond belief to witness what is now going on….

    Lizzie

  24. Andy Worthington says...

    Lizzie Cornish wrote:

    And my second reply to them….gee whizz I was mad with him last night when I got that email!!!

    >>>>In fact, Harry, I’m afraid that I have to say that a man who shares the name of both my Son and my Father should have done more than just fob me off with a standard reply.

    Mrs. Warsi would have done far better had she taken the trouble to thank me herself, or…better still…taken the trouble to actually get David Cameron to talk to me….

    I do not go in for Rt. Hon…or any other titles, as my Dear Dad brought me up to believe that I am better than no man (or woman) and no man (or woman) is better than me…We are all equal in my eyes…

    I know that my Country and her People are going to hell on a handcart at the moment..and unless someone is prepared to stand up to try to unite the people, someone who is apolitical and completely unbiased…who cares from their very heart and soul with an absolute passion, then things are not going to get anywhere near better…

    This Country, and her People, including ALL her politicians, Bankers and Corporate Bastards, (excuse my language) need the biggest kick up the backside they’ve ever had, in order to get them to turn away from staggering greed and capitalism towards a fairer and more caring society…and that society HAS to start from the TOP, down…NOT the other way around…

    We have no True leaders left in this country, no Good Men and True who care so much that they cannot sleep at night! It’s no good being a leader if you’ve come from wealth and riches, with no real idea what it’s like to struggle! It’s no good being a Labour politiician who becomes a Lord….

    WHERE are the Men of Honesty and Integrity???? I *KNOW* they exist, because I was raised by one…and his love of his country runs through my veins…

    So please, tell Mrs. Warsi that she should have had the decency to have at least written to me herself, rather than not even read my email and get someone else to send out a standard reply….

    Standard replies are for Standard People…
    I gave up being a Prole a very long time ago…

    Thank you, Harry..and please, remember that it is an honour and a privilege to share my Father and my Son’s name…and that from now on I expect FAR more, FAR better of you..

    Lizzie

  25. Andy Worthington says...

    Lizzie Cornish wrote:

    Sharing this, Andy…thanks.

  26. Andy Worthington says...

    Anne McClintock wrote:

    Thanks for posting this, Andy

  27. Andy Worthington says...

    Brilliant! Thanks, everyone. What engaging comments.
    Lizzie, I loved your letters to the Tories.
    I aim to keep on this topic at least once a week, as it’s obviously opening up the kind of anger, analysis and reflection we need, more than much of the mainstream media. My revulsion at the Tories’ policies comes from the heart, after all, not just the brain …

  28. Andy Worthington says...

    George Kenneth Berger wrote:

    That govt report I linked to notes that by 2004, the directors of at least one firm predicted that their lending methods could have “catastrophical consequences” That firm was Countrywide Financial (US?, UK?), and that many other bankers knew that their loans had a false credit rating (whatever that means, and I’m translating from the Swedish as well.)

  29. Andy Worthington says...

    Ann Alexander wrote:

    Yes, Andy, I’m angry!

  30. Andy Worthington says...

    Giles Warrack wrote:

    As Dean Baker and Paul Krugman have pointed out, the Tories are serving as a a useful trial run for the US “Deficit Hawks”. The results so far don’t look that great.

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