Newsletter autumn 2008
Reclaiming free trade from the übermensch
Perhaps it isn't surprising that, as the world financial markets slipped out of control, the debate around the edges should be about free trade. Like a brontosaurus, the markets have been making a hefty meal of their own tail, most politicians have been talking about more regulation to shore up the excesses, with a muttering in the background from the cheerleaders of the world of Big Bang finance.
The truth is that it is all over. There are no investment banks left on Wall Street, many of the great American financial institutions – and some of the British ones – are on the equivalent of welfare hand-outs from the taxpayer.
The axis of the argument has shifted in the most bizarre way. George Bush is about the leave office as the biggest nationalising socialist in the history of the world. The fat salaries of Wall Street are supported by public finances. Those who believed that the financial markets were symbols of free trade, as opposed to a corrosive failed experiment, were backing massive bail-outs. There may also be more to come.
There are still voices in the UK claiming that regulation of the markets was somehow a 'socialist' idea. That would mean calling the pioneer hedge funder George Soros a socialist or condemning the pioneer investor Warren Buffett for his socialistic warning – widely ignored – that derivatives were "financial weapons of mass destruction".
We will no doubt get regulation, but we are waiting for a political force that realises that is not in itself the solution. We must not leave in place a system which is so destructive of genuine free trade – the ground-level business of innovation and enterprise – that actually keeps the economy rolling.
We dare not resuscitate a system that now dwarfs the economy it is meant to serve (only five per cent of the $3 trillion a day that changes hands has anything to do with goods or services). Nor is it just the tail wagging the dog: the system makes a handful obscenely rich while corroding productive finance.
But more to the point, the Americans will not leave in place a system which, in ten years time, could see Chinese hedge funds driving the dollar to extinction. Or which, even now, could overwhelm the resources of all the central banks in the world in eight hours of normal trading.
That has nothing to do with the free market, and it is time we rescued the concept before we throw the baby out with the bathwater.
We have become used to the idea that free trade was about the rich and powerful riding roughshod over the powerless. Or that somehow driving out every other productive enterprise apart from financial services (look at Jersey if you want to see the future) was somehow what free trade was all about.
It is time we re-discovered the roots of the idea, in the campaign against slavery two centuries ago, and developed a system that can actually do what financial services were supposed to – invest our money sustainably in productive business at local level. Not provide us with an occasional handful of crumbs from a passing ubermensch.
Whatever happens in the next few weeks, whether we return to some delicate balance or whether we face a series of currency crises at the hands of the disaffected hedge funds, that is the dividing lines that seem to be opening up in British politics at least. A Labour party committed to ill-defined tweaks of the regulations, a Conservative party run by people whose main funders, colleagues and friends are hedge funders, and a broad group who want a different system.
I hope that the Liberal Democrats will seize their opportunity, speak for the free trade tradition, and reclaim it from the ubermensch. Am I being hopelessly optimistic?
What is co-production?
The word is gargled with all over the policy world; it really was time to tie down its meaning at its most radical, and set out how it could be the key for a genuine reform of public services. And this time, to make them work rather than tackling symptoms. That's why we wrote a Co-production Manifesto.
Beyond community politics
My book Communities, actually has been published by the LGA Lib Dem group, a sequel to Power, actually. Both were experiments in writing about politics in a narrative style, more like an American business magazine than a tradition political brochure. This one tells some real stories, as objectively as I can manage, of Lib Dem councillors putting community politics into action.
I launched the first debate at the Liberal Democrat Bournemouth conference, with a rather unsuccessful plea for the party to back the idea of People's Vetos over parliamentary bills. These would force a referendum on a parliamentary bill if a million people signed their names within a short period of time. I still think it would help re-connect people to the political process; pity... This is what I said.
Green New Deal
The real challenge is to stitch together a programme, as bold as Roosevelt's New Deal, which can tackle the credit crunch, climate crunch and food crunch all together. A small group of green economists have hammered together an outline proposal. Now we have to build political backing for something along similar lines.
Toward the setting sun
It is good to be noticed, especially in such an eminently liberal organ as the Washington Post. This was their review of my book about Columbus, Cabot and Vespucci – a timely moment to be talking about why America is the way that it is.