Searching for Socialism by Leo Panitch & Colin Leys

Author:Leo Panitch & Colin Leys
Language: eng
Format: epub
Publisher: Verso Books

The Crash

The global financial crisis of 2007–08, which, along with the attack on Iraq, most decisively registered the failure of the New Labour project, is generally thought of as having originated in the US sub-prime mortgage market. But it makes as much sense, if not more, to see it as in good part caused by New Labour’s embrace of the strategy of making the City of London the world’s leading centre for financial services by undercutting the standards of regulation that existed in New York.34

When New Labour took office in 1997, the financial services sector was still ‘self-regulated’. As chancellor, Gordon Brown inherited powers to regulate the sector, but they were delegated to a variety of industry-based bodies. In 2000, after several banking scandals had shown that the City was losing its reputation for honesty, Brown established an external regulator, the Financial Services Authority (FSA). But the City’s foreign-exchange earnings were critical to keeping the country’s balance-of-payments deficit from becoming unsustainable. Brown saw this as a huge success story, telling an audience of bankers in 2006:

Financial services are now 7 per cent of our economy. Financial and business services as much as 10 per cent. A larger share of our economy than they are in any other major economy, contributing £19 billion of net exports to our balance of payments, a success all the more remarkable because while New York and Tokyo rely for business on their large domestic base, London’s international ranking is founded on a large and expanding global market … London is the favoured location of choice for more international business than ever before, the world’s leading banking centre with more foreign banks than in any other city, the location for 200 foreign law firms – including home for six of the world’s largest ten.35

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