The trouble is that Corbyn has a point. Suppose it is conceded that a bank, any bank, can have claims on the state, even in a free-market capitalist economy under the rule of law which respects (at least theoretically) the right to private property. Then where is the line to be drawn? Why should the UK’s banks not have claims on the state equal to over 80 per cent of assets, as they had in 1950, instead of less than 2 per cent of assets, as was found in early 2007? Why should the state not prohibit the banks from lending to the private sector altogether, so that all bank assets — and not just the central bank’s assets — are to pursue the desirable goals of social justice and ever-higher public investment?
The answer is that an overwhelming body of evidence — from scores of countries over long periods of time — shows that publicly-owned banks bossed around by politicians do a terrible job. Adam Smith explained almost 240 years ago that “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” A healthier debate on these matters might be held in modern Britain if it were noticed that “It is not from the benevolence of the banker, the stockbroker or the fund manager that we expect a decent return on our savings, but from regard to their own interests.”
Of course, the Bank of England must retain its independence from political interference, and the banking system must remain as far as possible in private hands and seek to maximise profits. But Corbyn’s notion of a “People’s QE” does fulfil a useful purpose, of alerting the commentariat to the role of certain financial structures and institutions in maintaining long-run economic success. Regrettably, the intellectual Right has been in a muddle on QE. Far too many pundits have been confused about “money printing”, claiming that QE would lead to rapid inflation. Nothing of the sort has happened. If the Right had spoken with greater understanding about QE, it would not now be necessary to man the intellectual barricades against the latest example of left-wing idiocy.
The answer is that an overwhelming body of evidence — from scores of countries over long periods of time — shows that publicly-owned banks bossed around by politicians do a terrible job. Adam Smith explained almost 240 years ago that “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” A healthier debate on these matters might be held in modern Britain if it were noticed that “It is not from the benevolence of the banker, the stockbroker or the fund manager that we expect a decent return on our savings, but from regard to their own interests.”
Of course, the Bank of England must retain its independence from political interference, and the banking system must remain as far as possible in private hands and seek to maximise profits. But Corbyn’s notion of a “People’s QE” does fulfil a useful purpose, of alerting the commentariat to the role of certain financial structures and institutions in maintaining long-run economic success. Regrettably, the intellectual Right has been in a muddle on QE. Far too many pundits have been confused about “money printing”, claiming that QE would lead to rapid inflation. Nothing of the sort has happened. If the Right had spoken with greater understanding about QE, it would not now be necessary to man the intellectual barricades against the latest example of left-wing idiocy.
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11:10 PM
11:10 PM