And of course one of the biggest Labour financial blunders and waste of taxpayer money was the two Scotsmen, Darling and Brown, bailing out their precious Royal Bank of Scotland, contributing to the financial mess they left to the Tories. Admitted by Liam Byrne. “ the claim that the government was justified in taking over RBS because of some market failure, and that its doing so would enhance economic efficiency, can be seen with the benefit of hindsight to be as bogus as it obviously was at the time.Another set of recent events that shines a light upon the bank bailouts has rather slipped under the radar. One of the other big claims about the bank bailouts was that they were necessary in order to avoid economic disaster. The chutzpah of the self-interest of that claim somehow passed most comment by at the time.From the mid-1970s to 1990s economists told us that when shipbuilders, car companies, steel works, coal mines and the like shut down, that was necessary for economic efficiency, even when it resulted in systemic damage to whole regions, with other connected firms and industries shutting down across large parts of the North-East, South Wales, Scotland and the Midlands and unemployment elevated for decades.In those cases, that was the market, and in the long-term the economy and society as a whole would benefit. Quite so – they were right then.But in 2008, it wasn’t folk with regional accents in dirty overalls and young people’s future employment hopes that would be affected, far away from the Metropolis. Instead, London bankers in suits and rich elderly depositors in failed banks were the ones who might lose money. Suddenly, the economists who — by a total coincidence — worked for the banks concerned, miraculously discovered that systemic risk was impossible for society to tolerate and allowing market forces to work would be an economic and social catastrophe.Well, as we know, this nakedly self-interested tale carried the day. Did bailing out the banks avoid a huge recession? No. In the UK we had the worst recession since the 1920s. In Spain and Greece unemployment went above 25 per cent and the West has seen its first sovereign default in generations. The bank bailouts failed that economic test.”
Steve Taylor ● 57d