When Vince Cable told the Liberal Democrat Party conference last year that capitalism “takes no prisoners and kills competition where it can”, many thought it was simply a nod to the disgruntled left of his party, still smarting from going into coalition with the Conservatives. But, as 2012 begins, capitalism is on trial from politicians of all persuasions, with MPs falling over themselves to be seen attacking the City and anyone they can caricature as a “fat cat”.
Labour is working to flesh out the predator vs producer capitalism distinction first floated by Ed Miliband in his conference speech back in September. A task with obvious pitfalls for a man still hiding from the moniker of Red Ed. But it is not only the left looking to crackdown on City excesses. Pressure is also building from the right.
The old economic certainties of the the free marketers – the rational marketplace filled with rationally operating individuals leading to rational outcomes – are also less certain than they used to be. Conservative MPs Matthew Hancock and Nadhim Zahawi, killed homo economicus in their book on the financial crash, Masters of Nothing.
Treasury select committee member and George Osborne’s adviser in opposition Jesse Norman recently called for the death of “financial crony capitalism” and some national soul searching over what we want our economic system to look like. He admits this is a debate which may require some soul searching from Conservatives as they distinguish between competition killing neo-liberal ideology and more paternalistic classical liberalism.
He says: “It means insisting on the importance of free markets, entrepreneurship and competition. But it also means acknowledging that good government and values of decency, respect and long-term thinking may require restraining “animal spirits” and reshaping the laws and institutions in which markets are embedded.”
This is a debate with pitfalls for both sides of the political divide.
International influence cannot be overlooked either. EU member states and the Commission have their own ideas about what should happen to financial institutions (more taxes), board rooms (more women) and bonuses (less zeroes). What happens in Europe and the US will continue to shape what happens here.
As City bonus season approaches these are the right noises for politicians to make to a frustrated electorate unhappy with the wilder excesses of the city and big corporations. But, as of yet, there is little of substance behind the grand-standing. Politicians of the left and right will be thinking the same thing: How do we clamp down on excess without killing the golden goose of UK financial services?
With the threat of Greece or even Italy defaulting and a possible eurozone break-up, 2012 was always set to be a year of change. But if this debate moves beyond the Occupy movement’s tent cities and the dusty old rooms in Parliament, and some concrete policies actually emerge, by the end of it we really could be looking at a different future.
Steve Tolley is political reporter at Money Marketing