The City versus the people

By Daisy Blacklock of Dress to the Left

Here is some history that may surprise you. In 1191, the City of London – the mysterious stronghold of UK and international finance capitalism – declared itself a commune. Before that, the Norman Conquest took the British Isles with unbridled ferocity, yet William the Conqueror ‘came friendly’ to the City of London, allowing it to keep its freeholders, common law, its imperatives, and its language. And despite many attempts thereafter to rein in the City, none succeeded. Instead, in 1688, the Glorious Revolution consecrated the City’s freedom to lie “explicitly outside of national sovereignty, complete with its own customs, rights, assets, and privileges, from time immemorial.” It has lain outside regulation ever since.

These were just some of the revelations of “the peculiarity of the development of free-trade imperialism” that newly-elected Labour peer Dr Maurice Glasman shared with the economists and activists assembled at Monday night’s New Political Economy Network discussion. Ideology and frustrations ran high as the forum wondered whether the City of London could ever be regulated to work in the best interests of the UK populace, by strengthening the influence of democratic politics over the wielding of capital. But how do we go about this, when there is no faith left in the interventionary power of politics?

The potential for Ed Miliband’s next generation of Labour to show real governance over the City was completely absent from talks. Glasman was certainly sceptical. New Labour has too much to answer for, for accepting the domination of the City of London, and its interests, in the provision of financial services and growth policy. It is New Labour’s “lack of any effective democratic agenda” to rein in neo-liberal enthusiasm that has resulted in the “predatory and usurious nature of economic policy” that bodies such as Citizens UK and Compass have been campaigning against.

The bank bail-out – which by Glasman’s calculation is “the largest single transfer of wealth from poor to rich since the Norman conquest – gave greatest exposure to the overriding interests of capital over the people. “And that’s not including quantitative easing, along with the rest of the loans to and aids and subsidies to the financial sector.” Yet the promise of effective, public-interested banking reform, which was to make this transaction worthwhile, seems to have been all but forgotten. According to Costas Lapavitsas, Eurozone expert and Professor in economics at SOAS, both government and populace have undergone a process of ‘financialisation’ where profit-making from production has been replaced by profit-making through the mediation and circulation of capital, which has become the centre-point of the finance industry, and the key to its free-market instability.

There is much talk of re-regulating the banking sector, said Lapavitsas, and yet it was not the deregulation of the City that led to the economic crisis. On the contrary, “We’ve had regulation up to the eyeballs” in “market-conforming regulation” which assumes that financial institutions will regulate themselves if the emphasis of controls is placed on the “liability side of financial institutions’ balance sheets, particularly on the capital owned by the institution, and capital adequacy in particular.” This is how banks have expanded over the past few decades: by making most of their profits from mediating unstable capital transactions within the open market, unhindered. This has directly allowed for greedy and irresponsible banking practises, such as those regarding the mark-up of interest rates, where banks, able to borrow capital at 0.5%, are free to charge their borrowers up to 350% for crude financial gain.

This kind of regulation has failed, the crisis shows that this has failed dramatically, and yet it is still with us. It has actually been reaffirmed – and this is one of the striking things of the current period,” said Lapavitsas. If this continues, we will only experience further instability, and further crisis.

And yet resistance to the current order is limited. Even the ideological power of the most prolific protests to date, the student marches against tuition fee hikes and loss of EMA, are brushed-off as trivialities by the coalition. The overriding doctrine bleats that There is No Alternative, reinforced by the “We’re All In This Together” clause: the rhetorical implementation of stasis, seeking to leave us dumb-struck while the worst prevails.

Mike Rustin, Professor of Sociology at UEL and co-editor of Soundings, was struck by the public’s resignation. “The surprise for me is that all the damage that has been caused hasn’t produced a stronger sense that there’s something really the matter with the system. What we’ve learned in the last few months is that despite people’s interests having been badly shaken by what’s happened, they have not yet been detached from their underlying belief that in the end, this is the only system we’ve got. The banks and the financial sector have infiltrated themselves to a position where even quite radical people are deterred from backing intervention, which goes to show how the idea that the banks are actually necessary to the function of the system has even penetrated the minds of their deepest enemies. I now feel it will take the next crisis before that will be manifested.”

“That won’t be long”, said Glasman.

That the language surrounding the City is just as predatory as its practises, is extremely worrying for the future of democratic–political economy reform. In his book, Democracy: 1,000 Years in Pursuit of British Liberty, YouGov president Peter Kellner locates the shoots of British democratic thinking around the time of the Norman invasion. The entire lifeline of the democratic process has had the autonomy of the City at the very heart of how democracy itself has been shaped and understood, which is only too clear in its prevalent fear of ‘state intervention’, as if doing so would disrupt the ‘natural’ order of things, when in fact it is the responsibility of the state to ensure that its financial sector can be directed towards the common good.

With this degree of self-interest and resistance to reform at the centre of the country’s operations, this City heart thwarts the potential for top-down strengthening of British democracy. As one audience member pointed out, “Why do you think bankers earn so much money? For the same reason the butcher’s children always eat a lot of meat, because they have direct access to the creation of money…and yet we’ve absorbed this idea that to question that is to bring down the whole house of cards.”

The consensus at NPEN, was that the answer must come from us, the people, through emboldened citizenship. This means individuals with their own economic agency, uniting in a “common good” politics that bodies such as London Citizens, (and its national frontier) Citizens UK, the New Economic Foundation, the False Economy network, and Compass, strive for. Their unity of vision in campaigning goes towards establishing an “institutional body of good that isn’t a money good”, said Glasman, and we need to mobilise this story.

Empowerment has many arrowheads. Last month Boris Johnson, the mayor of London, announced that 115 companies in the capital had signed themselves up to Citizen UK’s “Living Wage” of £7.88 per hour. This is the rate calculated according to the cost of living that would enable families to pay for life’s essentials. Workers receiving the Living Wage stand to earn £78 more for a 40-hour week than their national minimum wage counterparts working at £5.93 an hour. “Poor people have to work very hard to live, and then they don’t have any reserves, said Glasman. “They need to confront power with the fact that they don’t have enough money to feed their children.”

CUK’s Money Mentor scheme also goes some way in pushing for community-based financial literacy, training up volunteers from schools, universities, and places of worship in the concepts of credit, debt, budgeting, and consumer choices, to pass on the knowledge in their community hubs. As a direct response to the economic crisis, it works to build confidence by making use of a familiar knowledge network. Compass’ anti-usury campaign to “End Legal Loan Sharking” entered Westminster debate on 9 November, laying bare the exploitation of society’s poorest through doorstep loans with staggering interest rates (and bailiffs) attached.  

London is the most ancient democratic city in Europe, said Glasman, and yet its citizens were powerless to assert their age-hold right to a politics of democratic citizenship in preventing the economic crisis.

“We need to expose the fact that in the City you have a place with a cathedral, with its own political institutions, and no people, representing only the interests of money, while the rest of us basically live in a shanty town called the Greater London Authority, which has no city status. The City of London should be controlled by the people, the citizens of London.”

The neo-liberalism of the past 30 years has eclipsed what Lapvitsas calls “market-negating regulation”, or “the Keynesian type of regulation which used to prevail in the ‘50s and ‘60s and much of the ‘70s”.

“Here you’ve got state intervention on the balance sheet, but most importantly, the state would also regulate price and quantity in the financial markets. It would set ceilings on interest rates, it would regulate quantities, and therefore it would affect the returns of financial institutions, enabling the state to direct the returns of financial institutions where the state wanted them to be. This would allow the state to direct the financial sector in ways that the state wanted it to be directed. This went out of the window.”

“The UK actually possesses public banks, but it doesn’t treat them in that way, and I think it’s a natural demand that the banks operating under public ownership should start operating like public banks. I’d argue very strongly, that they should operate along lines that make public interest and interest in the benefits for the great majority of people paramount in their activities.

“Credit should be advanced as a public utility; credit for small and medium businesses should be regulated differently from how private banks do it. I’m not talking about credit pro gratis; I’m talking about public principles in the management of credit for households and for others.”

The return of the Post Bank is one real way of achieving this, for localised banking that people understand, said Lindsay Mackie of the New Economics Foundation. Not only will the creation of the Post Bank provide an essential, accessible service for millions of people without bank accounts, says NEF, but it will give new purpose to a threatened Post Office network.

This is the moral economy needed for transformative top-down empowerment. But if we want a state that works for us, we’ve got to fight for it from the streets, and that means getting behind the student protestors in campaigning for a good society that works in our best and universal interests: not for the casino of free-and-easy capitalism. There is always an alternative, and we’ve got to show them that the pro-citizen one is the one we’re after. To quote Neil Lawson of Compass, “This is the thing we have to do relentlessly now to leverage this brilliant analysis and these brilliant ideas, and the moment of crisis.”


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