Almost seven years after the financial cataclysm of 2007-08 and subsequently, leading figures in the banking world are talking of the need for change. Their tone even resembles a collective mea culpa. The occasion was a conference in London on 27 May - entitled Inclusive Capitalism: Building Value, Renewing Trust - attended by leading political and state as well as commercial figures from the western world.
Mark Carney, governor of the Bank of England, argued that bankers had to promote a culture of ethical business: “Financial capitalism is not an end in itself, but a means to promote investment, innovation, growth and prosperity”. He saw the need to redress the increasing imbalances of wealth distribution that has become a feature of the past thirty years.
These views sound vaguely benign, yet the conference itself was a graphic example of those very inequalities; the Telegraph reported that its attendees were responsible for managing over $30 trillion (£18 trillion) of assets, around one-third of those investable around the world.
Christine Lagarde, director of the International Monetary Fund, argued that banks had learned little from the crises since 2008. They still took excessive risks and engaged in highly dubious practices, she said.
Carney and Lagarde were expressing a fear that stems largely from the widening global socio-economic divide, so vast that it even forced itself onto the agenda of the World Economic Forum in Davos in January 2014. It has taken the financial community a long time to catch up with a reality long presented by many contributors to openDemocracy, and more recently elaborated by Thomas Piketty in his work Capital in the Twenty-First Century.
A great evasion
How far, though, does this apparent change of heart among the elite go? A clue is the extent of the fear of great social unrest in the wealthier states of the western world. Senior players in the IMF, World Bank, central banks and elsewhere may be concerned at the possibility of such unrest and potentially violent challenges to authority, but there is little evidence that they think the risk is very high.
The elections to the European parliament on 22-25 May would seem to support that judgment. The results, in Spain and Greece especially, showed support for leftist anti-austerity parties in southern Europe; but much of the protest elsewhere was an anti-European Union one, which can be interpreted as a safety-valve expression of wider distrust of the existing major parties.
In turn this raises a hard question. Given the depth of the crisis affecting many millions, the extent of the austerity measures in Europe, the contrast between the impact on poorer communities and the obscene scale of bankers’ bonuses reach - given all this, why have richer countries so far avoided wholesale public disturbances? Where is the outrage, apart from movement such as Occupy which have so far proved short-lived?
The most probable reason is that though the cuts in living standards were great enough to justify outrage, there has remained a benefits system providing just enough support to prevent out-and-out marginalisation.
The political implication is that any changes proposed by the likes of Carney and Lagrande will be very moderate: of the kind sufficient to curb reduce excessive wealth without really affecting the world’s elites, and to ensure only the provision of basic necessities. There may be talk of modest increases in taxation for the super-rich, including even inheritance tax, but if they do come to pass they will be decorative only.
At the very best, then, the maximum is likely to to be very modest taxation reforms plus a limited degree of transnational financial regulation. Talk of a “Tobin tax” will remain just that, talk - and fundamental reforms will not happen.
After all, if the leaderships of financial institutions - international and national - were truly worried about fundamental problems of the capitalist system and the tools of radical reform, they would be investing seriously in some of the radical analyses of the existing system (for example, those of the New Economics Foundation and similar groups). In practice these groups get virtually no support; genuine interest simply isn’t there.
A fundamental reform
So, will anything change or will poverty increase and marginalisation worsen? Two elements suggest that other factors will intervene.
First, there is a risk of another major financial meltdown. This arises primarily because too many elements of the international banking system lack independent scrutiny and regulation even now, and remain prone to greed and fatal dysfunction. How and when such a meltdown might happen is impossible to predict, but the risk most definitely still exists (see "The global crisis: seeing it whole", 1 May 2014)
Second, there is a global trend that is almost never factored into the workings of the global financial system - climate disruption. This is the "fox in the henhut" and very much an increasing danger. Climate disruption is happening now, and its impact is accelerating. There will most likely be weather events that are even more severe than the extraordinary events of recent years, of which the Philippines typhoon, the Pakistani floods, and the Russian wildfires are but a few (see "2014, a climate emergency", 10 January 2014).
In essence, the financial crisis of 2007-09 was a wake-up call that has been ignored. Those responsibly for reacting either never woke up, have gone back to sleep - or may be willing to engage in just sufficient reform to stave off serious dissent.
That is not enough in any sense. A deeply unethical and amoral economic system needs fundamental reform. That is not in sight at present - but it will have to come at some stage The recent evidence of severe environmental limits on human activity, especially climate disruption, may be the combination that forces such reform, even against those who most determinedly seek to maintain a failing status quo.
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