Salma Yaqoob

It does not take much political courage these days to lay into the banks. Even children know many of our bankers are lucky not to find themselves in jail for their irresponsibility so it is easy for politicians to crank up the indignation. Vince Cable's speech is a case in point. It was high on rhetoric but short on content. As Michael White commented, there was not much in the speech that the Financial Times would have disagreed with. And on the banks, after you take out some name calling, there is very little left.

Yet two years after the collapse of Lehman's Bank, the event that triggered the global financial crisis, all the factors inherent in the banking system responsible for the crisis are still very much in place. The banks have shamelessly taken public money while resisting regulation. The appointment of Bob Diamond, the 'poster boy for casino capitalism' as the new chief executive of Barclays is evidence, if more was needed, that they really don't give a damn what the public think because they feel that no matter what, they are indispensable. Well, they are not, as the New Political Economy Network point out in their excellent e-book.

Banking in Britain delivers very little social benefit for the economy. Between 1996 and 2008, while all those profits were being made, productive business investment remained at a steady 10 per cent of GDP, and lending to manufacturing was flat. In other words, banks – as they currently operate – do not allocate capital usefully in our economy…Banking has become an industry that makes money only for itself. Ever expanding, and entangling banks in a state of mutually assured destruction, it concentrates wealth in a few hands. It is a kind of transaction-generating machine that operates in its own interests….Market fundamentalism has created a crisis of economic coordination, and this is an important aspect of the financial crisis. Too much capital is allocated to leveraged and unsustainable asset- price growth.Too little is channelled into productive, socially useful investment that might generate sustainable economic growth.

It is a myth to believe our current model of banking is the only model of banking. Canada has avoided the worst of the global recession, and the austerity packages that have come with it, exactly because their financial system was more tightly regulated to avoid casino banking. Their economy did not lose out. Since 2004 Canadian average income has grown at 11 per cent a year compared, with 5 per cent in the U.S.

Fundamental root and branch reform of our financial system is essential. Central to that is the greater transparency, accountability and public control. To do so will require taking on a very small but very powerful vested interest. For all his fighting talk, Vince Cable will not do this. His government is far happier and committed to putting the boot into teachers, nurses and rolling back the public sector, than it is to reigning in their friends in the City.