Evidence abounds that free enterprise societies are more prosperous and people in them enjoy more freedom than state planned economies. Capitalism should be popular. It brings us jobs, new technologies, great entertainment, good shops.
Today the mood is sour. Good political speeches these days have to include a denunciation of “banking culture” and a demand for more regulation with stronger criminal sanctions. The latest revelations from Barclays do not make good reading, and are likely to be followed by similar bad news from some other leading banks.
The answer to this is simple. It has never been an attractive feature of free enterprise that some organisations can become so large and powerful they are able to rig, damage, or interfere with the market. Monopolies and cartels are against the law – unless they are in the state sector of course. Most people agree that cartels and monopolies, price rigging and fixing, are wrong and should be prevented. I have always supported a strong competition law, designed to prevent just such accumulations of power.
That is why I opposed the Competition authorities allowing RBS to take on ABN Amro, and opposed Lloyds taking over HBOS. That is why I have consistently favoured splitting up large banks that have grown too big and have then needed public money to prop them up. It would have been much better to sell off the bits that worked in 2008 when large banks fell badly, and to save the taxpayer most of the grief by making bondholders as well as shareholders take the strain of their failed banking models.
So what should be done today about the latest banking scandals? They should be properly investigated and appropriate action taken to deal with wrong doing. Where the government is a leading shareholder it must be active in ensuring proper standards of conduct in its banks, and make sure the people leading those banks create the right climate within them. In the case of private sector banks it is the job of the shareholders to appoint and support management that provide the right leadership. Barclays is now doing this by seeking a new CEO.
Above all, this latest revelation about practices in the last decade should move the government to want to break up RBS. The bank is far too large. We need more and new competitors on the High Street capable of giving us a good banking service. We need banks where High Street loan and deposit business is important to them, and where the reward levels of the bankers make it worthwhile to do it well at a cost we can afford.