I think we now see a similar major window of opportunity emerging. The ongoing financial crisis is trashing both a lot of reputations and some fundamental assumptions about markets and regulation. Cases like Northern Rock and plenty of otthers from the US show that extremely well-paid financial professionals a) can get things badly wrong and b) can cause a great deal of damage when they do so.
Just to give you a very quick taste of some of the re-evaluating going on, have a read of Martin Wolf's piece in the FT today:
The lobbies of Wall Street will, it is true, resist onerous regulation of capital requirements or liquidity, after this crisis is over. They may succeed. But, intellectually, their position is now untenable. Systemically important institutions must pay for any official protection they receive. Their ability to enjoy the upside on the risks they run, while shifting parts of the downside on to society at large, must be restricted. This is not just a matter of simple justice (although it is that, too). It is also a matter of efficiency. An unregulated, but subsidised, casino will not allocate resources well. Moreover, that subsidisation does not now apply only to shareholders, but to all creditors. Its effect is to make the costs of funds unreasonably cheap. These grossly misaligned incentives must be tackled.
I greatly regret the fact that the Fed thought it necessary to take this step. Once upon a time, I had hoped that securitisation would shift a substantial part of the risk-bearing outside the regulated banking system, where governments would no longer need to intervene. That has proved a delusion. A vast amount of risky, if not downright fraudulent, lending, promoted by equally risky finance, has made securitised markets highly risky. This has damaged institutions, notably Bear Stearns, that operated intensively in these markets.
This ought to be an opportunity for the labour movement globally to develop a coherent challenge to financialisation. Unfortunately I don't think we are anywhere close yet. Another bit from the FT today worth reading is Michael Skapinker's column. Though he shares Wolf's view that fundamental assumptions about markets are being challenged by reality, he is also correct in my view in asserting that the Left doesn't know how to respond:
So what sort of change might be we witnessing? If the Thatcher-Reagan era is at an end, what might replace it? Trawling leftwing and far-left websites is instructive, because they clearly have not got a clue either.
They are not demanding the nationalisation of the banking system, perhaps because that has already happened, either explicitly or implicitly. But they do not seem to be calling for anything else.
In The Nation, the leftwing US magazine, Nicholas von Hoffman lays into "our crooked, avaricious, heedless and duplicitous financial system", but admits: "We are in unknown territory facing situations that have never arisen before and taking measures that have never been tried."
Surely Britain's Socialist Workers party can do better than that? Not really. "Now more than ever, we need to present a different vision of how the world could be run - one in which the needs of the many come before the greed of the few." Like what, exactly? Even in crisis, capitalism remains fortunate in its enemies.
It won't do to simply rehash broad critiques of capitalism, we need some concrete ideas about what we think has actually gone wrong (not as straightforward as it sounds), what could realistically have been avoided (as opposed to bad luck) and, most importantly, what we think needs reforming.
I think this is an opportunity to be pretty radical. As a society the UK has showered money over the financial services industry through high salaries and has been very wary of legislative intervention because of a fear of killing the goose that laid the golden egg. Now that some of the very well-paid professionals have done so much damage a fundamental re-evaluation is surely in order. But who is going to start the ball rolling with some practical ideas?
Headline hat-tip: Jello Biafra and Nomeansno