Here comes the cavalry

8 08 2013

It has become a bit of a mantra, a favourite one of mine if I’m honest, to assert that the banks and the bankers are responsible for the current economic downturn, as it is euphemistically called. But even though it is certainly true, it isn’t the whole truth.

Consider the facts, simply expressed. The banks had accrued too much debt. They had so much debt that lenders stopped lending to them. Under this pressure the banks themselves stopped lending any money. The economy got into trouble and the banks got into even more trouble. So bad was their situation that the government (using our money collected by taxation) had to bail them out.  And why did the banks have so much debt? Because they had taken out loans, ie borrowed lots of money, in order that they themselves could lend money to people who wanted to borrow it from them in order that they could buy stuff, particularly property.

So there is a case for saying that the economic crisis wasn’t created by reckless lending but by reckless borrowing. The banks, as any other business dedicated to creating value for shareholders, was simply responding to the marketplace they found themselves in in the late 20th and early 21st centuries. A global economy fueled by conspicuous consumption.

And neither is it good enough to say that the banks were too big to fail in a way that implies that it is a fact that not only cannot be disputed but one that  is nothing to do with us.  In the 1980’s British banking laws were changed to allow building societies to demutualise if more than 75% of their members voted to do so. In practice the societies transformed into banks not just with the consent of their memberships but with the enthusiastic support of their members. There was a rush to open accounts so that individuals could benefit from demutualisation, so called carpet-bagging. But while this practice did occur, most of the pressure to demutualise came from members looking to cash in on a quick windfall.

So it is partly our own faults that we now have a banking system which, unlike the vast majority of other developed nations, is dominated by a very few banks that were deemed to be too big to fail.

A side-effect of the model of capitalism we have created is the hero entrepreneur, lauded for creating multi-billion dollar businesses, many of which have been shown to be socially irresponsible in their determination to avoid their fair share of taxation.

So this crisis has proved beyond all reasonable doubt, that a world economy fuelled by ever growing consumption is not a viable option, that banks as currently structured and regulated cannot continue and that we need alternative models for entrepreneurs. We need to rethink capitalism to move away from the idea that if we all keep buying stuff everything will work out alright in the end.

So here comes the cavalry.

The era of self-congratulatory entrepreneurs, of businesses focused only on shareholder value, if not quite over completely, is certainly coming to an end. We are on the brink of what Tony Bradley writing in the3rdimagazine, has termed societal entrepreneurship.  This is different to social enterprise, I think, as this sector has up to now tended to create social entrepreneurs in the same mould as the hero entrepreneur. Individuals striving to create value for themselves and just a few others.  Societal entrepreneurship, or co-operative enterprise as I’d prefer to call it, focuses on creating value for all stakeholders; those within the enterprise, clients, suppliers and the wider community.  A co-operative, societal enterprise takes the hero entrepreneur out of the picture, or at least places them amongst a crowd.

Banks are leaving poorer communities which leaves room in the market for pay day lenders. Ironically, reforms to the banking system here in the UK, which mean that banks have to have larger cash reserves to protect themselves against the level of debt that they faced in 2008, will make it more difficult for competitors to enter this market place. So how are we to create the diverse banking systems found in, for example, countries like Germany? Well, ideas are coming from the most unlikely places. The Church of England has committed itself to forcing pay day lender Wonga out of business by encouraging the greater acceptance and utilisation of credit unions.  A credit union is a member-owned financial co-operative democratically controlled by it’s members and operating to encourage saving and to provide credit at affordable rates. Many credit unions also support community development. By employing this model of financial institution stakeholder, rather than shareholder value is improved. The role of the credit union goes beyond finance into societal, community enterprise, as with the micro-finance of the Grameen Bank system developed by Muhammad Yunus.

There is a growing desire from investors to have at least some of their capital generate a social as well as a financial return; to have social impact.  Social impact is a way of evaluating just how the organization’s actions affect the surrounding community.  The creation of tangible, measurable social impact is increasingly important in the development of business models, public policy and finance.

And large corporations can no longer simply pay lip service to their corporate social responsibility (CSR) policy. It was once acceptable for big business to send out their staff once a year to clear some wasteland in the name of team-building and CSR or to sponsor a charity.  Corporate businesses must start to consider all of their stakeholders and to make sure that their actions have a positive impact, not solely in terms of job creation, in the communities in which they are based. If they don’t move this way themselves then investors will increasing push for them to do so. Some companies, like Unilever, are starting to take this seriously with a commitment, set out in a sustainable living plan,  to double the size of their business while simultaneously reducing their environmental impact.

While capitalism may well outlive the current turbulent economic climate there is at least a movement towards sustainable capitalism. Adoption of co-operative enterprise, encompassing community development and community based finance is a powerful first step.





This just doesn’t FEEL right

18 05 2010

Anyone who knows me even a little will tell you that I am Spock like in my application of logic and intellectual rigour to problem solving.

But this just doesn’t feel right.

For the past 30 years I have been a supporter of the Liberal Party and, more recently, the Liberal Democrats. For all of that time my politics have been to the left of centre and for most of the last 20 years I have found myself to the left of New Labour as it strove to occupy the centre of Britsh politics. I cannot bring to mind anytime that I have found myself agreeing with any policy put forward by the Conservative Party.

Yet I now find the Liberal Democrats in a formal coalition with the Conservative party, one which seeks to keep a Tory Prime Minister in Downing Street for the next 5 years.

It just doesn’t feel right,  so I’ll revert to type. Let’s  bring some intellectual rigour to bear. Let’s look at the evidence.

A YouGov poll asked people whether they would consider themselves to be left, centre or to the right of the British political spectrum. 54% of Labour supporters put themselves firmly on the left, as did 43% of LibDem supporters. By contrast, 57% of Tory supporters put themselves out on the right. So it would appear that most British voters would, like me, put themselves to the left of centre.

This is confirmed by the actual voting figures, around 60% of voters putting their cross next to parties of the progressive left. So while Nick Clegg had said that he would talk to the party with the most seats/greatest individual share of the vote,  there does seem to have been plenty of scope for him to have sought to form a coalition of the left, with Labour and parties such as the SNP, with whom they have worked successfully in Scotland for a number of years, and Plaid Cymru.

So what made Nick Clegg decide to throw in his lot with David Cameron?

What has he agreed to? Trident stays, there will be huge cuts in public spending this year, Tory immigration policy remains untouched, Teresa May and George Osborne have posts of influence in the cabinet.

What has he gained? A referendum on voting reform, ID cards scrapped, a voice in cabinet for Vence Cable et al and a fabby new job for himself (but lest we get carried away, John Prescott was deputy PM!).

For any Liberal voting reform is a hugely important issue but will a referendum actually result in a change tio the voting system? The different types of voting system that might be adopted all offer a degree of proportionality but all are notoriously difficult to explain. Might the electorate, when faced with a complex array of options, simply revert to ” I don’t understand it, so I don’t trust it, better leave things as they are.” This past election seems to suggest that while the electorate may express a desire for change, Cleggmania, when it comes down to it many lose their nerve. Some 1m people who said that they were going to vote LibDem actually reverted to the Labour or Tory tribalism on the day of the election.

But even if electoral reform is delivered will it be at a price worth paying? Trident will remain, public services will have been slashed and foreign policy will remain in the hands of the xenophobic right.

I’m not sure…but it doesn’t FEEL right to me.





Confessions of a politics addict

11 05 2010

Politics has formed the backbone of my life.

Some of my earliest memories are of my father, grandfather and fiesty grandmother discussing politics and religion.

My grandparents had been involved in the early trade union movement in the north west of England. They are/were lifelong labour supporters. Old Labour that is. I cannot imagine that my nana would have approved of Blair, Campbell and Mandelson, though she probably would have voted for them as she believed that the working man had been given the vote so that they could vote Labour.

For my part I won the 1974 election on behalf of the Liberal Party. It was held in my school and I was swept to power…not bad as, at that time, you could fit the whole parliamentary Liberal Party  in a very small minibus.

During my teens, when my parents moved from Liverpool to Cheshire, a move my nana saw as a defection until her dying day, I was marooned in the Winterton fiefdom of Congleton. As a student my boyfriend and I consoled ourselves by selling copies of the Socialist Worker on the streets of Oxford and to campaigning for Gwyneth Dunwoody in the nearby constituency of Crewe.

The eighties were a disaster with Margaret Thatcher snatching free school milk and anything else she could get her hands on. When I moved to Scotland the spectre of the poll tax haunted Scotland and still makes the Tories unelectable north of the border.

I have always stayed up on election night, even before I could vote. Partly this is my interest in politics but mainly it is due to my love of competition. It is like watching the cup final! I sit there with wine in hand, plenty of snacks and a comfy chair and settle in for the long haul. I was up for Portillo and I was up to see Jaquie Smith lose her seat this time; both falls from grace that were thoroughly deserved.

This is the only benefit of the first past the post system; that the voters can get rid of individuals that they dislike – as shown by the voters of Montgomery.  Unfortunately this is the major drawback too, as most MPs occupy seats that have such huge majorities that they cannot, in practice, ever be removed – like the Wintertons when they squatted in Cheshire.  No matter how many excesses were exposed and how seldom Nicholas actually visited the Houses of Parliament (his lack of attendence even became a standing joke in the Tory friendly Daily Telegraph), he remained as the local MP. I had a twitter exchange with someone recently who felt that public sector workers were lazy, overpaid and had jobs for life. I begged to differ but certainly a lot of MPs, public sector workers, do fit this description.

I was glued to the TV until about 4am on Friday morning when it became obvious that the position was actually no clearer than when I sat down at 10pm. In fact it was exactly as was predicted before the campaign had even started! But since Friday morning it has been compulsive viewing and listening for election addicts like myself.

Will Nick Clegg take the Tory shilling?

Will Gordon stay or will he go?

Will the Tory grandees suffer any compromise?

And for a lifelong Liberal these are heady times! The Lib-Lab pact was an interesting time. The formation of the SDP brought huge hopes for a progressive coalition. Power sharing in Scotland under Jim Wallace offered the glimpse of what might be. And here we are – the prospect of change to an outdated electoral system, of fair taxation,  a zero carbon economy, the removal of trident and the scrapping of the surveillance society, as exemplified in Labours ID card system, are all within grasp.

If Nick Clegg hasn’t seen Braveheart then he should…..hold, hold, hold

Hold your nerve for all our sakes.