Opinion – Why are the Conservatives so incompetent at running the economy? – Mainly Macro: Simon Wren-Lewis – John Gelmini

English: Banks Furious As Shares Tumble, Eveni...

English: Banks Furious As Shares Tumble, Evening Standard, London, UK, 7 October 2008 (Photo credit: Wikipedia)

Rarely do I disagree with Dr Alf but on this occasion I cannot see that the last Labour Government handled the 2008 financial crisis effectively.

The narrative we were fed at the time was to the effect that the banks had made toxic loans, did not trust each other and that all the money had disappeared.

Then we were told that WE had to bail out the banks.

We did this twice and then several years later, we learn that the banks have been manipulating LIBOR, the currency and the prices of other commodities.

We know that a tiny minority of people doubled their wealth literally overnight and that their were huge capital flows through hedge funds and then through 40 different tax havens before transmutation into gold, gems, real property and art.

The bankers and those who gave them their instructions walked away scott free and are still at large. The Coalition have also done nothing about this situation but have manufactured a temporary housing boom.

Not one of our politicians is up to the task of reforming the UK’s finances or competitiveness, so Simon Wren Lewis needs to level his criticisms more widely.

John Gelmini

Bank of America Merrill Lynch intern Moritz Erhardt died after overworking – Case for EU regulation?

My earlier blog and John Gelmini’s response have triggered a massive amount of interest. I have analyzed our articles carefully and looked at the statistical data. It seems that a particularly large number of people ran a Google Search on Moritz Erhardt, especially from Germany.

I agree with John Gelmini that there is an urgent need for greater legal safeguards  to protect young people from being exploited in internships. Let’s look at the likelihood of this happening in the UK.

Sadly, despite the damage done from the 2008 sub-prime crisis, David Cameron’s UK Government has been slow to bring greater regulation to the banks and call those executives responsible for the collapse to account. The financial services sector in the UK is by far the UK’s most important industrial sector; unfortunately it also has a powerful lobby. The UK Government, with high debt levels, is apparently fearful of challenging the banks because of their tax revenue and importance to the UK’s exports. Also since 2008, the banking sector in the UK has not been functioning effectively, so rather than sanctioning the banks, the Government has offered guarantees; for example, on the back of Government guarantees for home loans to new buyers, the Government has triggered a rebound of the UK economy – although leading economists have questioned the wisdom of this action, the Government has created a feel-good factor with both existing and aspiring property owners which they hope will propel them to re-election in two years.

Secondly, the according to independent evidence, cited by the Labour Party, the UK Government has triggered the highest fall in earnings per hour in Europe.

As a consequence, by and large in the UK, investment banks are free to operate in a neoliberal environment [open this link for a history of neoliberalism]. Since WWII, Germany’s economic miracle has been built on the back of a German form of neoliberalism called  ordoliberalism; the German model places strong focus on effective regulation – indeed the Federal Constitutional Court of Germany protects the interests of the German citizen. Against this highly regulated environment in Germany, many highly talented German youngsters are desperate to pick up internships in the UK and the most highly prized internships are with the major investment banks in London. Unfortunately, as the tragic death of the German 21 year old,  Moritz Erhardt,  has so vividly demonstrated, there are extreme risks from these  seemingly unregulated internships in the UK.

No doubt there are many German parents with talented children who are deeply worried about children that have talked about getting valuable work experience in the UK on internship programs.

David Cameron’s Government because of its political sponsors has not given priority to the rights of workers, including ambitious youngsters arriving from other European countries to take up internships in the UK.

Accordingly, I believe that there is a strong case for young people to receive EU protection when entering interships programs. For me, this is a case for  the European Commission’s intervention, especially given the record levels of youth unemployment in Europe.

Any thoughts?

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