The Economy

I was intrigued by the ideas outlined by the right hon. Member for North-West Hampshire (Sir George Young). We would all do well to think carefully about them. My intention probably differs from his because I have no interest in rescuing the system as is, but his ideas may well be part of the system we have to move towards. I would like to use my time to put on the record a number of heresies about the mess we are in. I have no desire to reach for the olive branch held out by the shadow Chancellor on a consensus that can be agreed on in the G20 or in this House. I have no desire whatever to save free trade from protectionism. I have no desire to reform the International Monetary Fund, rather than replace it. I have no desire for an agreement that would rescue regulators by giving them some sort of global therapy network where they could cry on each other's shoulders. The current crisis is an ideological one; it is a crisis of globalisation, and we should acknowledge that, rather than pretend it is somehow accidental. As soon the deregulating bandwagon got running and production started to chase the lowest labour costs and the least environmental obligations, we were always going to face a looming crisis. Beginning in the 1970s, this was a crisis of overproduction. The crisis took us into other contradictions. Those who were producing on the back of cheap labour still wanted markets to sell in. Within the industrial world, the problem was that this put a squeeze on median wages, and the sections of consumer society to which corporations wanted to sell their products were workers who no longer had the wages to buy goods that they used to produce themselves. To get out of that mess—square the circle—the answer was burgeoning credit. Unfortunately, that was sold to us as a solution that would deliver everlasting growth. Public debt was changed into private debt—it went off balance sheet. Somehow we allowed ourselves to be mesmerised and think that this would give the world a way out of the mess we were creating. Had we not done that, we would have faced deflationary problems. As it is, we now face a global recession that runs the risk of becoming a global depression. This was always inevitable, and we need to acknowledge the collusion between successive Governments in the past 20 years. Many of us on the Labour Benches argued that new Labour's economic and political error was to sign up to an agenda scripted by the old Conservatives, but that, too, is part of history. We have to address the fact that in our position, there is probably no choice other than to have an interventionist Government with clear notions of where we want to end up. The question is what sort of interventionism we have and where we intend to redirect the economy. In principle I am in favour of bank nationalisation. The Government were right to be willing to step in to guarantee savings. They were probably not right to accept that, as part of the deal foisted upon us by the banking and finance sector, we should somehow have a duty to pay off other people's gambling debts. It is not the duty of the taxpayer to bail out the speculator, but that was the financial absurdity that we allowed ourselves to be bounced into. Before the Governor of the Bank of England tut-tuts about a second financial stimulus—targeted at the real economy this time, I hope—I want him to explain to the public and the House how he justifies the £1.5 trillion stimulus that made up the rescue package for the financial services sector that took us into this mess. I find myself in the same position as Joseph Stiglitz, the former World Bank governor, who says that it is not the job of Governments to do anything other than rescue narrow banking, real banking, proper banking or whatever we want to call it. We ought to have the courage to say that we will allow investment banking to collapse. This will allow us to get back to a proper framework in which those who run up gambling debts have to take responsibility for them and we do not saddle the taxpayer with them. I suspect that what I am saying is what is said to virtually every Member by people in their constituency. We are challenged by members of the public saying to us, "This is not my crisis, these are not my debts. Why should I accept the liabilities and the mess that have been created for us by gamblers?" Had we nationalised the banks and brought them into public ownership as utilities, we would be in a very different position. We could have instructed them to lend into the real economy rather than charge prohibitively to repay the Government or restock their own finances. Part of the problem that firms across the country are facing is in accessing any of the money that has been put into the banking system as notional liquidity. The UK has put £285 billion of up-front support into the financial sector, which is 20 per cent. of the UK's GDP and four times the average percentage of the G20 countries that are meeting this week. My argument to the Chancellor is that we have to draw a line and make it quite clear to the financial services sector that we will not take on any more of its bad debts. If that results in collapse, so be it. We should take in fire sale assets and not the debts that we should not carry. However, even if we do that, it will not be enough. I hope that the Chancellor will introduce measures in the Budget that allow us to shift from the old to the new economy. Many of those who have the courage to think beyond where we are suggest that, when we come out of the credit crunch, we will find ourselves knee-deep in the climate crunch. The economic issues that define our political agenda and our future will centre on food security, water security and energy security. To those in the energy sector, sustainability will mean a shift to renewable energy sources, not a replication of the polluting energy sources on which we have relied in the past. We need a new Bretton Woods, with two distinct features: first, all the aspects that Keynes wanted to include—all the internationally rebalancing mechanisms between rich and poor; and, secondly, the ecologically balancing measures, which were not even considered at that time. Like it or not, we live in an era of protectionism. The World Bank recently reported that 17 of the 20 countries that it examined had introduced protectionist measures in the past few months. I hope that our choice will be environmental protectionism rather than the protectionism that has done so much damage in the past. However, we cannot continue to pretend that protectionism is not the realistic scenario that we face. Our history shows that the countries that became the most rich and powerful insisted on the right to protectionist policies to become rich and powerful. In our context now, perhaps we are required to do that to survive. In the debates in the G20 this week, I hope that we will have the courage to say that we will not put more money into the banking coffers, but that we will shift the basis on which funding is provided to international institutions through introducing a new global Tobin tax. We need to get corporations to fund a way out of the mess that they created, not citizens and taxpayers. Outside the House, on the streets of London and cities throughout the world, protesters demand a different regime from the one we have constructed so far and anything that Parliament has debated. They regard our debates as a feast of fools and, unless we have the courage to go further, they will be proved right.