The Occupy protesters in London last year had intended to pitch their tents in Paternoster Square, the home of the London Stock Exchange. Hundreds of police officers thought otherwise and the open space outside Saint Paul’s Cathedral became the focus of the attempt to disconcert the 1 per cent.
In the months that followed, the Occupy movement and the Cathedral authorities were thrown together in ways that neither side had expected. Marxist and anarchist critiques of capitalism mixed with complaints about the sinful greed of the City of London and the corruption of the Anglican Church by its near neighbour, Mammon. The country’s established church and its oldest and most exotic local authority combined in the courts to rid themselves of the troublesome campers. Efforts by Occupy to get at the roots of a political and economic crisis revealed how deep the roots went, and how tightly they intertwined.
Since then, some of those involved in the occupations have helped organise a series of events to commemorate the Putney Debates of 1647, when the officers and men and the New Model Army met in Saint Mary’s Church. Once the English start thinking in terms of radical reform, they start looking for historical precedents.
And when Andrew Haldane, the executive director for Financial Stability at the Bank of England, gave a speech last week at one of these “New Putney Debates”, his use of religious language wasn’t altogether surprising. As well as heaping praise on the Occupy movement for its ethical and analytical achievements, he assured the audience that “we are in the early stages of a reformation in finance”.
We’ll come to the substance of Haldane’s reformation in a moment. But first we need to look at his explanation of the financial crisis, since his story here will have an important bearing on his plans to prevent a sequel. Like many of the shrewder critics of the established way of doing things, Haldane thinks that “at the heart of the global financial crisis, were and are problems of deep and rising inequality”. So far, so familiar. But the details of his account don’t quite square with those of the critics.
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Haldane says that an asset price boom was “the biggest single cause of rising levels of inequality in the US”. Faced with the regressive effects of this boom, policymakers “in the US but elsewhere too” hit on the “simple and, on the face of it, brilliant” response. Low interest rates would be used to make credit much more widely available and this would “make asset-holders and owner-occupiers of us all”.
The trouble with this story is that, as far as Britain is concerned, it makes no sense. The number of owner-occupied households here peaked in 2000 at 71 per cent, but by 2007 it had fallen slightly to 69.8 per cent.
In the same period, average nominal house prices more than doubled and mortgage debt increased massively. Owner occupation didn’t become more widespread in the era of low interest rates. But those who wanted to own the houses where they lived did have to borrow much more to buy them.
Haldane wants us to believe that central banks used low interest rates to allow us all to benefit from an asset price boom that was already happening. But in fact it was low interest rates that drove up asset prices and increased the gap in wealth between those able and willing to borrow large amounts (along with those who already owned assets) and everyone else.
And at any event, there’s little evidence that the Bank of England was focusing on inequality at the time. Its former head, Eddie George, made it clear in 2007 that low interest rates in the preceding years had been intended to prevent a recession. GDP growth, not equality, was the concern. It was doubtless only a happy coincidence that their policies helped the banks make spectacular profits.
Once Haldane had made the case for his claim that experts had been doing the wrong thing for the right reason, he went on to outline his proposed “reformation in finance”. At its heart is an expanded role for the Bank of England. Having stood by while “the world was experiencing the biggest bank bubble, perhaps in its history”, central bankers will be responsible for preventing another crisis on the same gigantic scale.
There are other proposals; a clear dividing line between investment and retail banking, more competition, higher capital reserves and so on. But the thrust of his reformation is clear: the same experts and the same institutions that presided over the crisis will decide how to manage things in future. This is not so much a reformation as a restoration.
Yet, somehow it is appropriate that Haldane set out his plans at the headquarters of Quakerism, one of the last surviving non-conformist sects of the Civil War. The reformation fought for by the radical Protestants of the New Model Army was one in which the claims of individual conscience trumped those of central authority. There were to be no more bishops and no more kings. Where King Charles I insisted that “a subject and a sovereign are clean separate things”, the restive soldiers had been intent on ending the distinction.
Haldane’s reformation is intended to restore the mystique and authority of the Bank of England, to preserve it as a centre of unexamined, technocratic power. When he says that the Bank will take responsibility for “macro-prudential regulation” that’s what he means. Those who must spend their lives in debt and those who govern the banks are to remain “clean separate things”.
Some of us who tried to occupy the London Stock Exchange and ended up on the steps of Saint Paul’s have other ideas. Our aim is to ensure that the superstitions that surround and protect finance go the same way at the divine right of kings. I am sure that Andrew Haldane means well. But the rule of experts, however well-meaning, is coming to an end.
Dan Hind is the author of two books, The Threat to Reason and The Return of the Public. His e-book, Maximum Republic will be published later this month.
Follow him on Twitter: @danhind