Priyamvada Gopal in The Guardian
The numbers are clearly unacceptable. Several colleges in both Oxford and Cambridge frequently admit cohorts with no black students in them at all. Roughly 1.5% of total offers are made to black British applicants and more than 80% of offers are made to the children of the top two social classes. With offers made overwhelmingly to those in London and a handful of the home counties, both universities are consistently excluding entire ethnic and regional demographics. They also continue to admit a grotesquely disproportionate number of privately schooled students. In effect, the two ancients are running a generous quota scheme for white students, independent schools and the offspring of affluent south-eastern English parents.
There is undoubtedly a great deal that both institutions can and must do to remedy this. Our admissions processes at Cambridge are not sufficiently responsive to the gravity of the situation. Despite periodic panics in response to such media “revelations” or staged political scolding, and notwithstanding the good intentions of many involved in admissions, questions of diversity and inclusion are not taken seriously enough in their own right.
The focus on educational achievement, itself defined in purely numerical terms and worsened by internal league tables, means there is little sense of meaningful diversity as an educational and community good in its own right. Despite having contextual indicators that would allow us to diversify our admissions, we balk at non-traditional attainment profiles for fear that the student will not be able to cope once here.
For any Oxbridge college to not have a single black student at any given point in time, where they would rightly not tolerate having low numbers of women, is not just about looking institutionally racist but also impoverishes the educational and social environment we provide. The same holds true for regional and class exclusions.
When I first came to Cambridge in 2001, having taught at different institutions in the US, I was struck by the relative whiteness and sheer cultural homogeneity of this university. Even the minimal improvements I’ve seen since then in some years – more students from ethnic minority backgrounds, more young women from northern comprehensives – have made a huge difference both to me as a teacher and, more importantly, to what students are able to learn from each other.
Not all of them will get first-class marks, but they both gain a lot from and have a great deal to give to the educational environment here, not least by expanding the definition of what counts as achievement. We need more of them. (At Cambridge, in recent years, a quantum of vocal BME students as well as students from northern comprehensives has demanded change, often to good effect. There is some cause for hope.)
There is also undoubtedly a culture of denial when it comes to matters of race and racism, which students speak of both in class and privately and which I have experienced when I’ve tried to draw attention to them. And more than one student from northern comprehensives has told me about being discouraged by teachers from applying and feeling amazed to have received an offer only to feel alienated by the stultifying class conformity of the affluent south-east once they get here.
It is simply not good enough for Oxford and Cambridge to say that they are welcoming of diversity and in effect blame certain demographics for not applying despite their outreach programmes. It is Oxbridge that must change more substantially to provide a better environment for a diverse student body. The two ancients must be held to account; homogeneity must fall.
But should they be the only ones held to account? In having a necessary conversation about elitism and exclusion, are we forgetting – or being encouraged – to not have a larger one about wider deprivation and systemic inequality? It is striking that some quarters only too happy to periodically attack Oxbridge for its failings, from rightwing tabloids to Tory ministers, are rarely interested in the roots of inequality and lack of opportunity of which Oxbridge exclusion is a symptom but is hardly the origin.
We should be careful that a headline-friendly focus on these two institutions alone does not become an easy way to avoid even more painful and challenging questions. It seems somewhat selective and inadequate to focus on what David Lammy rightly calls “social apartheid” at Oxbridge without discussing the widespread and worsening economic apartheid in this country.
We know that access to university education in general is sharply determined by school achievement that, in turn, is shaped by parental income and education levels. In an economically stratified society, it is inevitable that most young people from economically deprived backgrounds have a substantially lower chance of achieving the kind of marks that enable access to higher education.
Hence it is incoherent to have a discussion about access to higher education without having one simultaneously about economic disadvantage, which, in some cases, including British Caribbean and Bangladeshi communities, has an added ethnic minority dimension to it. In a context of worsening economic fault lines, there’s a whiff of something convenient about only attacking the admissions failings of top universities.
The other obvious missing dimension to this discussion is the existence and encouragement for independent schools. It’s somewhat contradictory to encourage a market culture where money can buy a deluxe education and then feel shocked when the well-off get their money’s worth by easily meeting the requirements for offers from high-status institutions. It’s worth saying that as long as independent schools, hardly bastions of ethnic diversity, exist, there will remain a fundamental apartheid between two kinds of students.
Oxbridge, or even the Russell Group of universities more broadly, can only do so much to mitigate this state of affairs, which lifting the tuition fee cap will only worsen. Lammy notes that more offers are made to Eton than to students on free school meals.
But why not also question the very existence of Eton and the lamentable state of an economic order that necessitates free school meals for many? Add to this the parlous condition of state education with its chronic underfunding, inflated classroom sizes, an undermining testing and target culture and difficulties in recruiting and retaining good teachers.
The same politicians who rightly point to Oxbridge’s demographic narrowness are rarely willing to grasp the nettle of a two-tier educational structure in which some are destined to do much better than others. Who, for instance, would be willing to call for the abolition of private schooling, subject as such a suggestion would be to shrill denunciations about how individual choice, personal aspiration and the workings of the market are being interfered with?
There are other tough discussions that could be had if the aim truly is to address and undo inequalities in university demographics. Would politicians and institutions be willing, for instance, to impose representational quotas for both ethnic minorities and state-educated students that reflect the national pie-chart?
Currently, the Office for Fair Access (Offa) makes some toothless demands around “widening participation”, a rather feeble phrase, which are not accompanied by penalties for failure. Lammy, whose suggestion that admissions be centralised has some merit to it, not least towards undoing the unhelpful internal collegiate caste system at Oxbridge, has made also a comparison between Oxbridge’s abysmal intake of black students and Harvard’s healthy numbers.
Would the political and intellectual classes be willing to have a discussion about something like “affirmative action” in the US, a process of “positive discrimination” by which underrepresented ethnic minorities and disadvantaged groups are given special consideration? We must hope so. For failing a wide-ranging discussion aimed at radical measures, all the huffing and puffing about Oxbridge is destined to remain a yearly ritual, each controversial headline simply making way for the same unsurprising headlines every year.
Sunday, 22 October 2017
Saturday, 21 October 2017
Pakistan and Accountability
Najam Sethi in The Friday Times
The split in the House of Sharif is in the open. Nawaz and Maryam Sharif stand apart from Shahbaz and Hamza Sharif. The former want to resist the forceful encroachments of the “Miltablishment” into the affairs of both state and government. The latter see this as a politically suicidal “confrontation” and are resigned to working within the parameters defined by Miltablishment.
The first public manifestation of this split came during the recent bye-elections in NA-120. Hamza exited the scene, leaving Maryam to campaign in a constituency nurtured by him in his capacity as manager of the PMLN electoral machine in the Punjab. The margin of victory – which was deemed critical to the political strategy of father and daughter who were hoping to build a narrative of martyrdom on it — seemed to prove Shahbaz’s point about the power of the Miltablishment. The PMLN vote was significantly eroded by three late developments: the birth of two pro-Miltablishment right wing religious parties that sliced off nearly 10% of the PMLN vote; the “disappearance” of a few core PMLN party workers tasked with galvanizing the voters on election day; and the eruption of over two dozen contenders with a few thousand votes among them that would have gone to the PMLN in normal circumstances.
Now Hamza has gone on TV to acknowledge the political differences in the House of Sharif. But both he and Maryam are now engaged in damage control. Hamza says that these political “differences” do not amount to an unbridgeable rift and he and his father are hoping to persuade Nawaz and Maryam to abandon the path of “confrontation” in the larger national interest. Maryam says she spent a delightful afternoon sipping tea with uncle Shahbaz and cousin Hamza and talk of a family rift is wishful thinking by detractors.
Meanwhile, the Miltablishment remains in an aggressive mood. Having come so far to knock out Nawaz Sharif, it is now silencing the voices of prominent television anchors and channels who are deemed “soft” on Sharif or don’t agree with its “state narrative”. Tactics range from pressurizing cable operators to take troublesome channels off air, calling up channel owners and ordering them to sack critical anchors and attacking dissidents on social media as unpatriotic agents of foreign powers.
Now, in an unprecedented intervention, the army chief has publicly dilated on the “ill-health” of the economy and expressed concern that this is hurting “national security”. Although doomsday scenarios of the economy have been floating around for decades and the situation today is not as bad as on several occasions in the past, this is another damning indictment of the Sharif regime and finance minister Ishaq Dar (he is also in the Miltablishment’s gunsights like his boss Nawaz Sharif). The PMLN prides itself with restoring growth and foreign investment. Ahsan Iqbal, the interior minister in charge of CPEC, has aggressively rebutted the charges, while Khaqan Abbasi, the prime minister, has hurriedly called a meeting to brief the army chief of the “true” situation and allay his fears. But it may be noted that this Miltablishment “intervention” is no less significant than its intervention some years ago in which unfounded allegations of multi-billion dollar “corruption” of the political elite in Sindh were linked to the growth of “terrorism”, paving the way for the arrest of key aides and confidantes of PPP leader Asif Zardari, the removal of a chief minister and the consolidation of unequivocal Miltablishment sway in the province.
But if the political outlook for Nawaz Sharif is not good, the fact remains that the Miltablishment is in no position to impose martial law or even install a hand-picked “technocratic” regime in Islamabad. The Miltablishment has alienated both mainstream parties PPP and PMLN without ensuring that the PTI will win the next elections or indeed play ball even if it does. In fact, it cannot even depend on the support of the two mainstream religious parties Jamaat I Islami and Jamiat I Ulema Islam. Its efforts to build an anti-Nawaz Forward Bloc in the PMLN are also floundering. Nor can it count on the judiciary to approve any such intervention. Indeed, the prospect of sitting in the hot seat with a bristling international community breathing down its neck must be very unsettling. Under the circumstances, martial law can be ruled out.
A technocratic government is also a non-starter. There is no constitutional way to bring it about or sanction it. The only situation in which it may be theoretically possible with the support of the judiciary is one in which elections have been called, parliament has been dissolved and a neutral federal interim government is in place which can be leaned upon to extend its existence and “clean up” the mess. But this would lead to a breakdown of federal-provincial relations and put unbearable strain on state, economy and society.
The tragedy of the nation is that those who would hold the Sharifs and Zardaris accountable are themselves unaccountable and don’t inspire confidence.
The split in the House of Sharif is in the open. Nawaz and Maryam Sharif stand apart from Shahbaz and Hamza Sharif. The former want to resist the forceful encroachments of the “Miltablishment” into the affairs of both state and government. The latter see this as a politically suicidal “confrontation” and are resigned to working within the parameters defined by Miltablishment.
The first public manifestation of this split came during the recent bye-elections in NA-120. Hamza exited the scene, leaving Maryam to campaign in a constituency nurtured by him in his capacity as manager of the PMLN electoral machine in the Punjab. The margin of victory – which was deemed critical to the political strategy of father and daughter who were hoping to build a narrative of martyrdom on it — seemed to prove Shahbaz’s point about the power of the Miltablishment. The PMLN vote was significantly eroded by three late developments: the birth of two pro-Miltablishment right wing religious parties that sliced off nearly 10% of the PMLN vote; the “disappearance” of a few core PMLN party workers tasked with galvanizing the voters on election day; and the eruption of over two dozen contenders with a few thousand votes among them that would have gone to the PMLN in normal circumstances.
Now Hamza has gone on TV to acknowledge the political differences in the House of Sharif. But both he and Maryam are now engaged in damage control. Hamza says that these political “differences” do not amount to an unbridgeable rift and he and his father are hoping to persuade Nawaz and Maryam to abandon the path of “confrontation” in the larger national interest. Maryam says she spent a delightful afternoon sipping tea with uncle Shahbaz and cousin Hamza and talk of a family rift is wishful thinking by detractors.
Meanwhile, the Miltablishment remains in an aggressive mood. Having come so far to knock out Nawaz Sharif, it is now silencing the voices of prominent television anchors and channels who are deemed “soft” on Sharif or don’t agree with its “state narrative”. Tactics range from pressurizing cable operators to take troublesome channels off air, calling up channel owners and ordering them to sack critical anchors and attacking dissidents on social media as unpatriotic agents of foreign powers.
Now, in an unprecedented intervention, the army chief has publicly dilated on the “ill-health” of the economy and expressed concern that this is hurting “national security”. Although doomsday scenarios of the economy have been floating around for decades and the situation today is not as bad as on several occasions in the past, this is another damning indictment of the Sharif regime and finance minister Ishaq Dar (he is also in the Miltablishment’s gunsights like his boss Nawaz Sharif). The PMLN prides itself with restoring growth and foreign investment. Ahsan Iqbal, the interior minister in charge of CPEC, has aggressively rebutted the charges, while Khaqan Abbasi, the prime minister, has hurriedly called a meeting to brief the army chief of the “true” situation and allay his fears. But it may be noted that this Miltablishment “intervention” is no less significant than its intervention some years ago in which unfounded allegations of multi-billion dollar “corruption” of the political elite in Sindh were linked to the growth of “terrorism”, paving the way for the arrest of key aides and confidantes of PPP leader Asif Zardari, the removal of a chief minister and the consolidation of unequivocal Miltablishment sway in the province.
But if the political outlook for Nawaz Sharif is not good, the fact remains that the Miltablishment is in no position to impose martial law or even install a hand-picked “technocratic” regime in Islamabad. The Miltablishment has alienated both mainstream parties PPP and PMLN without ensuring that the PTI will win the next elections or indeed play ball even if it does. In fact, it cannot even depend on the support of the two mainstream religious parties Jamaat I Islami and Jamiat I Ulema Islam. Its efforts to build an anti-Nawaz Forward Bloc in the PMLN are also floundering. Nor can it count on the judiciary to approve any such intervention. Indeed, the prospect of sitting in the hot seat with a bristling international community breathing down its neck must be very unsettling. Under the circumstances, martial law can be ruled out.
A technocratic government is also a non-starter. There is no constitutional way to bring it about or sanction it. The only situation in which it may be theoretically possible with the support of the judiciary is one in which elections have been called, parliament has been dissolved and a neutral federal interim government is in place which can be leaned upon to extend its existence and “clean up” the mess. But this would lead to a breakdown of federal-provincial relations and put unbearable strain on state, economy and society.
The tragedy of the nation is that those who would hold the Sharifs and Zardaris accountable are themselves unaccountable and don’t inspire confidence.
Referendums get a bad press – but to fix Britain, we need more of them
Voting once every five years alienates us from politics. Participatory rather than representative democracy would allow us more say in how we run the country.
George Monbiot in The Guardian
You lost, suck it up: this is how our politics works. If the party you voted for lost the election, you have no meaningful democratic voice for the next five years. You can go through life, in this “representative democracy”, unrepresented in government, while not being permitted to represent yourself.
Even if your party is elected, it washes its hands of you when you leave the polling booth. Governments assert a mandate for any policy they can push through parliament. While elections tend to hinge on one or two issues, parties will use their win to claim support for all the positions in their manifestos, and for anything else they decide to do during their term in office.
If you raise objections to their policies, you’re often told, “If you don’t like it, stand for election.” This response is revealing: it suggests that only 650 people out of 66 million have a valid role in national politics, beyond voting once every five years. Political control under this system is so coarse and diffuse that democracy loses all but its crudest meaning.
It is astonishing that we put up with this. The idea that any government could meet the needs of a complex, modern nation by ruling without constant feedback, and actual rather than notional consent, is preposterous.
Last week I considered some ideas for creating a more participatory economy. This column explores the potential for a more participatory democracy. I’m not proposing we abandon representative democracy, but that we temper it with meaningful deliberation and consent.
I recognise that this is an unpropitious time to call for more referendums. But the Brexit vote was the worst possible model for popular decision-making. The government threw a massive question at an electorate that had almost no experience of direct democracy. Voters were rushed towards judgment day on a ridiculously short timetable, with no preparation except a series of giant lies.
Worse still, an issue of astonishing complexity was reduced to a crude binary choice. Because the only options presented were in or out, everyone knows what the majority voted against; no one knows what kind of Leave it voted for. Why could we not have had a multiple choice, presenting the different ways in which we could have stayed in or left Europe? Without permission to make a nuanced decision, we had no incentive to achieve a nuanced understanding.A lively and intelligent politics demands an active and empowered electorate that can hold its representatives constantly to account. I propose three models that we could draw upon.
The first is the Swiss system. There, the people vote in about 10 or a dozen referendums a year, clustered into three or four polling days, challenging federal laws or proposing constitutional amendments. Referendums are triggered when someone can gather enough signatures. These plebiscites foster a strong sense of political ownership: people perceive that government belongs to them. This might explain why, in its survey of 40 nations, the Organisation for Economic Co-operation and Development discovered the Swiss had the highest levels of trust in government. Far from causing voter fatigue, the process stimulates a rich culture of engagement, debate and persuasion. Across the year, about 80% of the electorate vote in referendums.
When I mention the Swiss system, people tend to react with horror. What if, as they often do in Switzerland, people make conservative choices? Well, they are entitled to their conservatism. A true democracy reveals the character of a nation: in Switzerland it is generally conservative. And if you don’t like it, you have the opportunity, through the debates surrounding these plebiscites, to change people’s minds. (There is, however, an argument for preserving some constitutional norms, to prevent majorities from oppressing minorities).
The second model operates in Reykjavík, the Icelandic capital. Here anyone can propose an idea for improving the city or allocating its infrastructure budget, and anyone can vote for or against it. The most popular ideas are submitted to the city council. The scheme has been remarkably successful: 58% of the city’s people have taken part so far and 200 of their proposals have been adopted by the council. The result is better amenities and a resurgence of civic life.
The third, most radical, model is the Kurdish system. Particularly in Rojava, in northern Syria, but throughout the Kurdish region, the people have sought to introduce a system first proposed by the US ecologist Murray Bookchin and refined and adapted by the imprisoned leader of the banned Kurdish Workers’ Party, Abdullah Ocalan. It’s called democratic confederalism. Here, power is devolved not from the top down but from the bottom up: the primary political unit is a local assembly representing a village or an urban district. These assemblies then elect people to represent their interests in wider confederations, which in turn choose members to provide a voice in the region as a whole (Ocalan rejects the idea of the nation state). The federal government is purely administrative: it does not make policy but implements the proposals passed up to it by the assemblies.
The introduction of this system has been bumpy: perhaps unsurprisingly in a region under constant military attack. But it has been accompanied so far by a great enhancement of the representation of women, the development of a cooperative economy and stronger environmental protection. There’s a danger in this model of photocopy democracy – political control becomes fainter and greyer as decisions are passed upwards – which might permit political capture. There’s also a danger of granting excessive power to civil servants. But already the system, though haltingly, seems to be creating an oasis of democracy and trust in the Middle East’s political desert.
So how do we decide whether and how to reform British politics? Democratically, of course. The first step should be a constitutional convention, composed of citizens chosen by lot, accompanied by a small number of parliamentarians (to encourage parliament to accept the results). Its purpose would be to identify the principles that could govern our politics, then put them to the vote in a multiple-choice referendum. What does democracy mean, if the people are not allowed to choose their political system?
While I voted remain, my aim is to make the most of Brexit. In the chaos that will accompany our departure from Europe lies an opportunity to do everything differently. Taking back control? Yes, I’m all for it.
George Monbiot in The Guardian
You lost, suck it up: this is how our politics works. If the party you voted for lost the election, you have no meaningful democratic voice for the next five years. You can go through life, in this “representative democracy”, unrepresented in government, while not being permitted to represent yourself.
Even if your party is elected, it washes its hands of you when you leave the polling booth. Governments assert a mandate for any policy they can push through parliament. While elections tend to hinge on one or two issues, parties will use their win to claim support for all the positions in their manifestos, and for anything else they decide to do during their term in office.
If you raise objections to their policies, you’re often told, “If you don’t like it, stand for election.” This response is revealing: it suggests that only 650 people out of 66 million have a valid role in national politics, beyond voting once every five years. Political control under this system is so coarse and diffuse that democracy loses all but its crudest meaning.
It is astonishing that we put up with this. The idea that any government could meet the needs of a complex, modern nation by ruling without constant feedback, and actual rather than notional consent, is preposterous.
Last week I considered some ideas for creating a more participatory economy. This column explores the potential for a more participatory democracy. I’m not proposing we abandon representative democracy, but that we temper it with meaningful deliberation and consent.
I recognise that this is an unpropitious time to call for more referendums. But the Brexit vote was the worst possible model for popular decision-making. The government threw a massive question at an electorate that had almost no experience of direct democracy. Voters were rushed towards judgment day on a ridiculously short timetable, with no preparation except a series of giant lies.
Worse still, an issue of astonishing complexity was reduced to a crude binary choice. Because the only options presented were in or out, everyone knows what the majority voted against; no one knows what kind of Leave it voted for. Why could we not have had a multiple choice, presenting the different ways in which we could have stayed in or left Europe? Without permission to make a nuanced decision, we had no incentive to achieve a nuanced understanding.A lively and intelligent politics demands an active and empowered electorate that can hold its representatives constantly to account. I propose three models that we could draw upon.
The first is the Swiss system. There, the people vote in about 10 or a dozen referendums a year, clustered into three or four polling days, challenging federal laws or proposing constitutional amendments. Referendums are triggered when someone can gather enough signatures. These plebiscites foster a strong sense of political ownership: people perceive that government belongs to them. This might explain why, in its survey of 40 nations, the Organisation for Economic Co-operation and Development discovered the Swiss had the highest levels of trust in government. Far from causing voter fatigue, the process stimulates a rich culture of engagement, debate and persuasion. Across the year, about 80% of the electorate vote in referendums.
When I mention the Swiss system, people tend to react with horror. What if, as they often do in Switzerland, people make conservative choices? Well, they are entitled to their conservatism. A true democracy reveals the character of a nation: in Switzerland it is generally conservative. And if you don’t like it, you have the opportunity, through the debates surrounding these plebiscites, to change people’s minds. (There is, however, an argument for preserving some constitutional norms, to prevent majorities from oppressing minorities).
The second model operates in Reykjavík, the Icelandic capital. Here anyone can propose an idea for improving the city or allocating its infrastructure budget, and anyone can vote for or against it. The most popular ideas are submitted to the city council. The scheme has been remarkably successful: 58% of the city’s people have taken part so far and 200 of their proposals have been adopted by the council. The result is better amenities and a resurgence of civic life.
The third, most radical, model is the Kurdish system. Particularly in Rojava, in northern Syria, but throughout the Kurdish region, the people have sought to introduce a system first proposed by the US ecologist Murray Bookchin and refined and adapted by the imprisoned leader of the banned Kurdish Workers’ Party, Abdullah Ocalan. It’s called democratic confederalism. Here, power is devolved not from the top down but from the bottom up: the primary political unit is a local assembly representing a village or an urban district. These assemblies then elect people to represent their interests in wider confederations, which in turn choose members to provide a voice in the region as a whole (Ocalan rejects the idea of the nation state). The federal government is purely administrative: it does not make policy but implements the proposals passed up to it by the assemblies.
The introduction of this system has been bumpy: perhaps unsurprisingly in a region under constant military attack. But it has been accompanied so far by a great enhancement of the representation of women, the development of a cooperative economy and stronger environmental protection. There’s a danger in this model of photocopy democracy – political control becomes fainter and greyer as decisions are passed upwards – which might permit political capture. There’s also a danger of granting excessive power to civil servants. But already the system, though haltingly, seems to be creating an oasis of democracy and trust in the Middle East’s political desert.
So how do we decide whether and how to reform British politics? Democratically, of course. The first step should be a constitutional convention, composed of citizens chosen by lot, accompanied by a small number of parliamentarians (to encourage parliament to accept the results). Its purpose would be to identify the principles that could govern our politics, then put them to the vote in a multiple-choice referendum. What does democracy mean, if the people are not allowed to choose their political system?
While I voted remain, my aim is to make the most of Brexit. In the chaos that will accompany our departure from Europe lies an opportunity to do everything differently. Taking back control? Yes, I’m all for it.
British banks can’t be trusted – let’s nationalise them
Owen Jones in The Guardian
Sometimes the case for a policy is as overwhelming as the level of ridicule it will get from the punditocracy. The nationalisation of Britain’s failed banking industry – the sector responsible for most of our country’s current ills – is one such example. According to a recent poll, half the electorate support nationalising the banks, despite almost no one arguing for such a policy in public life.
It may well be because the banks plunged Britain into one of its worst economic crises in modern history, spawning, according to the Institute for Fiscal Studies, perhaps our worst squeeze in living standards since the 1750s. The fact that they have been bailed out by the taxpayer but allowed to carry on as though little happened – including more top British bankers in 2013 being gifted bonuses worth over €1m than all EU countries combined – while public services are gratuitously slashed, has rightly riled some British voters.
Nationalisation of the banks is not about vengeance, though. Sure, the rip-off inefficiency of rail privatisation, or the failure of the great energy sell-off, or the fact that even the Financial Times has argued that privately run water is an indefensible debacle – all are testament to the intellectual poverty of the “private good, public bad” argument. None quite compete, however, with the matter of the banks leaving the entire western world consumed with the gravest series of crises since the second world war.
Would Brexit, Donald Trump, or the gathering demands for Catalonia to secede from crisis-ridden Spain have happened without the financial collapse? Almost certainly not. It is now somewhat darkly comic to note that most commentators and politicians claimed Labour lost the 2015 election because it was too leftwing. It is notable, then, that over four in 10 voters back then believed Labour was too soft on banks and big business, compared to just over one in five who differed.
Economist Laurie Macfarlane says the banks make a mockery of the nostrums of free-market capitalism. Because the banks were given state bailouts after their catastrophic failures, there is the assumption that, when another crisis hits, the same will happen again.
No other industry enjoys the same protection. They are “too big to fail”, which means they benefit from an implicit subsidy – worth £6bn in 2015. The Bank of England is their lender of last resort. State-backed deposit insurance of up to £85,000 per consumer is another de facto mass public subsidy.
As the New Economics Foundation says, it is commercial banks who are now responsible for creating the vast majority of money in economies like the UK, a source of vast profit. This is called “seigniorage” and – as the foundation puts it – it represents a “hidden annual subsidy” of £23bn a year, or nearly three-quarters of the banks’ after-tax profits. And banks are an essential public utility: it is almost impossible to be a citizen without a bank account, and there is no public option when it comes to making electronic payments.
Even now, as Macfarlane notes, the British state technically owns a fifth of the retail banking industry because of its stake in Royal Bank of Scotland. Repeated RBS scandals, and the aftermath of the EU referendum result, have dented the worth of the company’s shares, meaning that the state selling its stake would result in eye-watering losses. Meanwhile, small businesses have struggled to get the credit they need, and escalating household debt threatens the foundations of the stagnating British economy. But the state’s arms-length approach means RBS has failed both its customers and the broader economy. A profit-driven banking sector closed 1,150 branches in 2014 and 2015; about a third of those were owned by RBS. The bank once promised never to close the last branch in town; the pledge was broken, and 1,500 communities have been left with no bank branch. Vulnerable customers and small businesses inevitably suffer the most.
By contrast, foreign publicly owned banks are self-evident successes. Take Germany: KFW, the government-owned development bank, is crucial in developing national infrastructure as well as the renewable energy revolution. On a regional level, state-owned Landesbanken are responsible for industrial strategy. Then at the most local level, there are Sparkassen: they focus on developing relationships with local businesses and consumers. They’re not beholden to shareholders – instead, they have a stakeholder model, focused on helping local economies – indeed, their capital has to remain in local communities.
It is impossible to understand Britain’s current plight without examining the country’s rapid deindustrialisation in favour of a financial sector concentrated in London and the south-east. And according to New Economics Foundation, while foreign stakeholder banks lend two thirds of their assets to individuals and businesses in the real economy, that’s true with only a tiny proportion of British shareholder banks. Overwhelmingly, it goes to mortgage lending and lending to other financial institutions.
Our current banking system is rigged in favour of a crisis-ridden City. The New Economics Foundation suggests transforming RBS – in which the state still has a three-quarter share – into a network of local banks. Labour’s 2017 manifesto backed a review into these plans. A management board would run the network day to day, but a board of trustees would ensure the bank was accountable to the broader economy and customers, not shareholders.
A third would be elected by workers, a third by local authorities and a third by local stakeholders. The mandate of each local bank would be to promote local economies – not least their small businesses – rather than the City of London. Here is a model of democratic ownership that can, in time, be extended to the rest of the economy.
Can it really be argued that private ownership of the banks is a case study of the glorious success of free market capitalism? The principle architect of Labour’s recent manifesto, Andrew Fisher, called for the nationalisation of Britain’s banking sector in his 2014 book The Failed Experiment: And How to Build an Economy That Works. He was surely right then and he is right now. As Macfarlane notes, there are different possible routes to the banks’ nationalisation: whether it be swapping corporate shares for government bonds, using quantitative easing to buy up shares, or simple nationalisation without compensation. Labour is right to call for a German-style public investment bank, backed up by similar publicly run local banks.
But such proposals are not in themselves sufficient. Britain’s privately run banks have proved a disaster for everyone except their shareholders. The only good alternative is public stakeholder banks, run by workers, consumers and local authorities, with an obligation to defend the best interests of our communities. Privately owned banks have proved a catastrophic failure – for our economy, our social cohesion and our politics. There is surely no alternative to public ownership.
Sometimes the case for a policy is as overwhelming as the level of ridicule it will get from the punditocracy. The nationalisation of Britain’s failed banking industry – the sector responsible for most of our country’s current ills – is one such example. According to a recent poll, half the electorate support nationalising the banks, despite almost no one arguing for such a policy in public life.
It may well be because the banks plunged Britain into one of its worst economic crises in modern history, spawning, according to the Institute for Fiscal Studies, perhaps our worst squeeze in living standards since the 1750s. The fact that they have been bailed out by the taxpayer but allowed to carry on as though little happened – including more top British bankers in 2013 being gifted bonuses worth over €1m than all EU countries combined – while public services are gratuitously slashed, has rightly riled some British voters.
Nationalisation of the banks is not about vengeance, though. Sure, the rip-off inefficiency of rail privatisation, or the failure of the great energy sell-off, or the fact that even the Financial Times has argued that privately run water is an indefensible debacle – all are testament to the intellectual poverty of the “private good, public bad” argument. None quite compete, however, with the matter of the banks leaving the entire western world consumed with the gravest series of crises since the second world war.
Would Brexit, Donald Trump, or the gathering demands for Catalonia to secede from crisis-ridden Spain have happened without the financial collapse? Almost certainly not. It is now somewhat darkly comic to note that most commentators and politicians claimed Labour lost the 2015 election because it was too leftwing. It is notable, then, that over four in 10 voters back then believed Labour was too soft on banks and big business, compared to just over one in five who differed.
Economist Laurie Macfarlane says the banks make a mockery of the nostrums of free-market capitalism. Because the banks were given state bailouts after their catastrophic failures, there is the assumption that, when another crisis hits, the same will happen again.
No other industry enjoys the same protection. They are “too big to fail”, which means they benefit from an implicit subsidy – worth £6bn in 2015. The Bank of England is their lender of last resort. State-backed deposit insurance of up to £85,000 per consumer is another de facto mass public subsidy.
As the New Economics Foundation says, it is commercial banks who are now responsible for creating the vast majority of money in economies like the UK, a source of vast profit. This is called “seigniorage” and – as the foundation puts it – it represents a “hidden annual subsidy” of £23bn a year, or nearly three-quarters of the banks’ after-tax profits. And banks are an essential public utility: it is almost impossible to be a citizen without a bank account, and there is no public option when it comes to making electronic payments.
Even now, as Macfarlane notes, the British state technically owns a fifth of the retail banking industry because of its stake in Royal Bank of Scotland. Repeated RBS scandals, and the aftermath of the EU referendum result, have dented the worth of the company’s shares, meaning that the state selling its stake would result in eye-watering losses. Meanwhile, small businesses have struggled to get the credit they need, and escalating household debt threatens the foundations of the stagnating British economy. But the state’s arms-length approach means RBS has failed both its customers and the broader economy. A profit-driven banking sector closed 1,150 branches in 2014 and 2015; about a third of those were owned by RBS. The bank once promised never to close the last branch in town; the pledge was broken, and 1,500 communities have been left with no bank branch. Vulnerable customers and small businesses inevitably suffer the most.
By contrast, foreign publicly owned banks are self-evident successes. Take Germany: KFW, the government-owned development bank, is crucial in developing national infrastructure as well as the renewable energy revolution. On a regional level, state-owned Landesbanken are responsible for industrial strategy. Then at the most local level, there are Sparkassen: they focus on developing relationships with local businesses and consumers. They’re not beholden to shareholders – instead, they have a stakeholder model, focused on helping local economies – indeed, their capital has to remain in local communities.
It is impossible to understand Britain’s current plight without examining the country’s rapid deindustrialisation in favour of a financial sector concentrated in London and the south-east. And according to New Economics Foundation, while foreign stakeholder banks lend two thirds of their assets to individuals and businesses in the real economy, that’s true with only a tiny proportion of British shareholder banks. Overwhelmingly, it goes to mortgage lending and lending to other financial institutions.
Our current banking system is rigged in favour of a crisis-ridden City. The New Economics Foundation suggests transforming RBS – in which the state still has a three-quarter share – into a network of local banks. Labour’s 2017 manifesto backed a review into these plans. A management board would run the network day to day, but a board of trustees would ensure the bank was accountable to the broader economy and customers, not shareholders.
A third would be elected by workers, a third by local authorities and a third by local stakeholders. The mandate of each local bank would be to promote local economies – not least their small businesses – rather than the City of London. Here is a model of democratic ownership that can, in time, be extended to the rest of the economy.
Can it really be argued that private ownership of the banks is a case study of the glorious success of free market capitalism? The principle architect of Labour’s recent manifesto, Andrew Fisher, called for the nationalisation of Britain’s banking sector in his 2014 book The Failed Experiment: And How to Build an Economy That Works. He was surely right then and he is right now. As Macfarlane notes, there are different possible routes to the banks’ nationalisation: whether it be swapping corporate shares for government bonds, using quantitative easing to buy up shares, or simple nationalisation without compensation. Labour is right to call for a German-style public investment bank, backed up by similar publicly run local banks.
But such proposals are not in themselves sufficient. Britain’s privately run banks have proved a disaster for everyone except their shareholders. The only good alternative is public stakeholder banks, run by workers, consumers and local authorities, with an obligation to defend the best interests of our communities. Privately owned banks have proved a catastrophic failure – for our economy, our social cohesion and our politics. There is surely no alternative to public ownership.
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