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Social justice
8 November 2012

Which of these is larger: The overseas aid budget or public subsidies to the banking system?

Last week, the Deep End suggested that the more rightwing that some rightwingers get, the more they behave like a bunch of lefties.

The theory appears to be confirmed by Dan Hannan, who hasn’t just been reading the Morning Star, but also quotes it with approval on his Telegraph blog. But, don’t worry, there is method in this apparent madness – specifically, in noting agreement between right and left that the Eurozone is bad for ordinary people:

  • “You don’t have to be a Marxist to see that the Marxist critique of the EU – that it’s an intrinsically oppressive system, taking from the many to give to the few – is accurate. Sooner or later, the revolution will come.”

For the avoidance of doubt, the ‘revolution’ that Mr Hannan is hoping for is a referendum on British membership of the EU.

He also finds common cause with the left when it comes to bail-outs for bankers:

  • “When the credit crunch hit in 2008, governments around the world turned to the one set of people who, by definition, couldn’t give them disinterested advice, namely bankers. Predictably enough, the bankers solemnly assured the ministers that, unless they received colossal sums, the entire economy would collapse. I’m sure that if governments contracted out their policy on subsidising bakeries to bakers, they would also be told that handouts were vital. The bakers might even half-believe it themselves. But they would be wrong, just as the bankers were wrong.”

Hannan claims that the example of Iceland is proof of his argument, in that the Icelandic state was far too small to take on the liabilities of the Icelandic banks, but that the Icelandic economy has nevertheless come through the crisis in “healthier shape than many Eurozone economies”.

Even if one doubts whether a general collapse of the banking system in America and Europe would have been as inconsequential as the fall of the Icelandic banks, Hannan is surely right to highlight the injustice of the bail-outs:

  • “Britain, the United States and other Western countries gave unprecedented sums of money to their banks. We know where the money came from but, three years on, we have little notion of where it went, or who has it now.”

Even if, for the sake of stability, we were right to bail-out the banks, one has to ask whether our leaders exacted a sufficient price from the bankers on our behalf. After all, what would the banks have had to pay if they had turned to the private sector for their rescue money?

According to Andrew Haldane of the Bank of England, the public subsidy provided to the banks is gargantuan:

  • “For the global banking system, it may currently amount to as much as several hundreds of billions of dollars each year. By comparison, that is multiples of the global aid budget. For UK banks, the subsidy amounts to tens of billions of pound each year. That too is multiples of the overseas development budget. These are extraordinarily large, and peculiarly-directed, government transfers to one sector.”

Dan Hannan believes that the Eurozone bail-outs are as unjust as the banking bail-outs – yet there is a difference: In regard to Europe there is at least the possibility of a referendum. One day soon we may get to give our verdict on the EU, but will we ever get to give our verdict on the banks?


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