Anthony Painter

Ever since the powerlessness of the government to secure bankable undertakings in the Kraft takeover of Cadbury, the balance of the state and the market has been causing me increasing concern.

Political economic history from the IMF bail-out in 1976 to the credit crunch was about the slow retreat of the state from intervention in market forces. New Labour was about providing security and new opportunities to individuals in the market place without actually contending market forces themselves. It was a vast improvement on Thatcherism but accepted as a natural force the existing state-market divide (and in some respects, the line was withdrawn further.)

Now, let me be clear about what I’m not arguing. I am absolutely not arguing for the state picking winners, widespread nationalisation, subsidising failure, or attempting to re-erect the protective controls around our economy that existed post-war. However, while I think the ‘strategic state’ concept elucidated by Lord Mandelson is a start, I still feel we have not yet properly broken out of the state of mind that de-legitimises certain state interventions. This is what is holding us back in properly confronting financial markets. I found John Varley’s cock-sure appearance before the Treasury Select Committee the other day grating. Nothing has changed if his demeanor is anything to go by. His argument that big banks diversify risk better is, frankly, laughable given the Government has had to takeover in major part two big banks and one medium sized one.* Enough.

We need to reintroduce a notion of public interest into our regulatory actions and interventions. Such actions could include, for example, undertakings in the context of a hostile takeover that certain community and workforce interests will be safeguarded. The agreement could be with trade unions or local communities themselves and enforced by the state.

There is a lot of thinking to be done. I do not think we should accept anything as given. But nor do I think we should be naive either.

Ali Moussavi, who is working alongside me at Demos Open Left, and I have laid out some thoughts on these issues in a piece for LabourList.

*As an aside, the issue is not necessarily the use of deposits to gamble as Varley states (though that *is* an issue.) The issue is what happens when gambles go wrong. That’s when deposits become under threat and the economy and the taxpayer is under threat.