Jeremy Corbyn and John McDonnell have often attacked bankers in the City of London for inequality, tax avoidance and the speculative, risk-taking behaviour that led to the 2008 crash – but they have never gone as far as former American presidential candidate Bernie Sanders.
Sanders called for the break-up of all US banks ‘too big to fail’, and for fraudsters and executives of said banks to be jailed. While British people have a reputation for being reserved, and Americans direct and forthright, cultural differences alone can’t explain the gap in transatlantic rhetoric on banking reform.
During a recent Prime Minister’s Questions (PMQs), Jeremy Corbyn quoted the British Bankers’ Association, saying its members’ “hands are quivering over the relocate button”.
Sky News Political Editor Faisal Islam noted via Twitter:
— Faisal Islam (@faisalislam) October 26, 2016
Amidst a “shambolic Tory Brexit”, Corbyn is suggesting the need for certainty for the City of London regarding single market access and the continuation of ‘EU passporting’, where banks headquartered in Britain can sell financial products into European markets without restrictions.
The media response
Political journalists, having recently slammed Corbyn for criticising “extractive banks” which treat customers “like cash cows”, would normally be licking their lips at the prospect of headlines slamming Corbyn’s ‘undemocratic protectionism’ of the City of London and its many taxpayer-subsidised privileges.
But while they’re happy to bash Corbyn, no UK business journalist serious about furthering their own career would openly bash the City.
Things were very different when John McDonnell spoke about a “Bankers’ Brexit”:
Already, Tory cabinet ministers are looking to cook up special deals for their friends in the City of London, while Tory backbenchers want to attack hard-won workplace rights. They’ll cut a deal for finance, but ignore our small businesses and manufacturers.
When that happened, The Telegraph’s Tom Harris crowed:
John McDonnell still hates bankers and Heathrow. That’s all Labour has to offer on Brexit
Harris said that McDonnell:
still can’t resist having a go at the financial institutions who create so much of the wealth that any future Labour government (sic) will need in order to implement its spending programme.
The City has captured our media
The coded message from the media to politicians is clear: speak up for finance and we will protect you, promote you, or quietly ignore you. But attack the City, and you’re fair game.
After the 2008 crash, politicians began to recognise the need to tackle the consolidated power within the City of London. Even renowned City stooge George Osborne spoke of the “march of the makers” and the need to diversify the UK economy away from financial services.
The elephant in the room is that financial fraud takes place in the UK on a scale that would be simply unimaginable in the US. Yet the British media, political and regulatory capture by financial services is so bad that rather than confront this corruption head on, even progressive figures like Corbyn and McDonnell are forced to self-censor.
The constant refrain from the right-wing press is that Corbyn and McDonnell’s policies are ‘hard-left,’ making them “enemies of capitalism” and therefore “unelectable”. But that’s not quite right.
So let’s take a look at what McDonnell and Corbyn have actually said about the City of London and compare it with US Democrat nominee Bernie Sanders, who attacked Wall Street fraud and made the culture of greed the focus of his platform:
“Greed, fraud, dishonesty and arrogance, these are the words that best describe the reality of Wall Street today.”
Whilst the Corbyn/McDonnell platform is undoubtedly radical and would result in direct state control, possible break-up of RBS and Lloyds, it goes nowhere near as far as the full-scale assault by Bernie Sanders, which calls for the reintroduction of the Glass-Steagall Act, for the break-up of ALL ‘too big to fail’ US Banks and for bank executives to be jailed.
Have Jeremy Corbyn and John McDonnell railed against fraud and corruption in the City of London, describing fraud as the business model in the City, as Sanders has?
No, they have focused instead on issues of tax justice, inequality and speculation – even though the scale of bank fraud and corruption in the UK is significantly worse than in the US.
Corbyn states that rather than the global economic crisis of 2007/8 being caused by Labour spending too much money, it was really the result of an “unregulated banking system and a relaxed attitude to inequality”.
Why the different focus?
The real reasons for the differences in transatlantic attitudes to tackling financial sector corruption and the fact that some US politicians take banking reform more seriously than those in Britain are:
1) The USA has a history of radical action against criminal Wall Street activity dating back to the Pecora Commission investigation into the 1929 Wall Street crash, and implementation of the 1932 Glass Steagal Act. The UK, where finance is shielded by the City of London, does not have a similar history.
2) The UK has the City of London Corporation – a secretive, medieval body outside the control of parliament – to lobby for and shield City financial firms from regulation and control. It even imposes its own figure, the Remembrancer, onto the House of Commons to review regulation that might threaten finance.
3) Despite Wall Street and City of London financial centres being roughly the same size, the US economy is significantly larger – roughly the size of the Eurozone. The City of London employs 300,000 people, and Wall Street employs around 200,000. US banks hold total assets of 85% of America’s gross domestic product (GDP). UK banks hold almost 400% (4x) of the UK’s GDP.
The fact that the UK is far more reliant on finance and City lobby groups for GDP output than the US is something no amount of rhetoric from McDonnell and Corbyn will change in the short term.
Playing the game
Perhaps when John McDonnell spoke of a “Bankers’ Breakfast”, his Freudian slip revealed a secret plot to overthrow the City and feed the bankers to a baying mob of protesters.
But it’s much more likely that McDonnell and Corbyn privately know the score. With a compliant mainstream media, captured political class, and all-powerful City lobby group hell-bent on the protection of UK financial services, McDonnell and co are likely to have more luck reforming the undemocratic Labour Party than confronting the City of London.
Brexit or no Brexit, until we radically transform the UK economy away from over-reliance upon financial services, the “Bankers’ Breakfast” will just have to wait…
Featured image via LSE Blogs