Recently appointed Labour peer Maurice Glasman, a leader of London Citizens and considered the ‘father of Blue Labour’, reflects on how the UK got into the financial crisis and who will ultimately pay for it

Glasman, Maurice

English

LSE Research Online

http://blogs.lse.ac.uk/politicsandpolicy/2011/02/11/financial-cris is -city-of-london/?pfstyle=wp February 18, 2011When the City of London’s bubble burst, it was thestate and the real economy that had to take thehitRecently appointed Labour peer Maurice Glasman, a leader of LondonCitizens and considered the  ‘father of Blue Labour’, reflects on how theUK got into the financial crisis and who will ultimately pay for it.The financial crash of 2008 was a big deal.It indicated that the financial services were a volatile star on which tohitch the economic growth wagon.  It indicated that global economiesstill required national solutions. That the practices required forgenerating trust and honesty could not be provided by the market alone.  That the Cityof London played far too powerful a role in public policy and in politics.The bailout of Autumn 2008 was the biggest transfer of wealth from poor to rich sincethe Norman conquest.  The economic slowdown, combined with the borrowingrequired to underwrite the loan to the banks, generated the deficit that will dominateour political life for the next decade at least.The central political battle will be over the narration of this story; its causes, who wasresponsible and how to safeguard against it happening again.It would be easy to say that it was the result of the uniqueness of New Labour’spolitical economy, which aimed to increase both state and market power.  Theabandonment of any conceptual distinction between financial and productive growth orbetween a formal and a substantive economy meant that the rates of return onfinancial investment would always be preferable to investment in what used to be calledthe ‘real economy’.Financialisation and commmodification were accompanied by an intensification of statewelfare as mental illness, displacement, disruption, educational failure, obesity andteenage pregnancy became state responsibilities.  The growth and the damage seemedto be in perfect equilibrium as we spent the proceeds of growth on new hospitals,schools, community cohesion and liberal interventionism.  However the growth,unfortunately, was built on private debt and increasing financialisation, and when thebubble burst it was the state and the real economy that had to take the hit.  This led toa deficit that threatened state bankruptcy and has led to the cuts in public spending. The problem lay not with the market but with the state, not with the banks but with thepoor, and that is where remedy is to be found.  This is, roughly, the position of theGovernment.  More market, less state.  Oh yeah, and a big society.Maurice Glasman spoke at the LSE Public Event The City of London and its Tax HavenEmpire on 1 February. Click here to download a podcast of the event (MP3, 37 mb).

When the City of London’s bubble burst, it was the state and the real economy that had to take the hit

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