Violent delights have violent ends

Ten years ago the world was in overdrive. Markets were soaring and wealth was being created. Big countries, such as Brazil and India, were being deemed economic miracles. Jobs were aplenty and the world of yore, of tariffs, government subsidies and heavy regulation, was a different planet. 

Then it all fell apart with the bankruptcy of the fifth largest investment bank in the US, Lehman Brothers. It seemed America realised that giving mortgages to people with no income and no assets and then shifting the risk to unsuspecting private investors was not a good thing and could have big consequences, for  the ‘investors’ at least. Most bankers who dealt with the products and knew their contents shifted the risk faster than you could say ‘annual bonus’. The bill, ultimately, was paid by taxpayers, from Athens to Burbank and from Reykjavik to Detroit. 

Almost 10 years on, we still are fighting the repercussions. A number of European countries, such as Greece and Italy, are still facing huge difficulties. There have been some improvements, but we are still far off where we were then.

What the financial crisis showed is the interconnectivity of the global financial and economic systems. The rules have changed because the housing market in Florida affects the textile industry in China. A bad day for Germany affects the rest of Europe. Everything is intertwined and the strings are on top of each other.

The lessons of the 2008 crisis have still not been learnt. In the US, the embedding of commercial and investment banks continues to flourish, in spite of the disasters. Crucial parts of the Glass-Steagall Act, which were important pieces of legislation which ring-fenced banks from their own greed but were repealed and whose repeal led to the crisis, are still shelved despite everything.

There is no doubt that free-market capitalism has produced a lot of wealth. Some of the poorest nations have become economic engines in a few decades. It has served us well, but there is a constant feeling that policy-making, from elected legislators in countries around the world, has become impotent due to the interconnectedness of it all. We are now questioning what we believed to be the home truth a decade ago. A system that seemed invulnerable until 20 years ago, is not serving well huge chunks of society. And it shows. From Washington to London, the strong arm of a disillusioned voter is reigning supreme. 

“We reject the cult of selfish individualism. We do not believe in untrammelled free markets,” read the manifesto. This is not from a Socialist manifesto from the 70s, but straight from Theresa May’s Tory manifesto from this year’s election in Britain. With statements such as these from the Tories, what do we question next, the law of gravity? Jeremy Corbyn’s Labour Party manifesto was, needless to say, equally dramatic.

So where do we go from here? The free-market system is not going to be overthrown anytime soon. This is a good thing. What ought to happen though, is recalibrating. It’s much like the medicine your doctor prescribes to you when you’re sick. Have just enough of it, and you’re better off. Have it all at once, and you’re going to be sicker. 

Recalibration is important because policy-makers need to do what they’re paid to do: create policies for the common good. It’s about aligning goals, creating checks and balances and sensible policies. Regulation, when just enough, is beneficial and badly-needed.

Zero-hour contracts, for example, are just another by-word for abuse and slave labour. So policies need to be introduced to differentiate between genuine temporary contracts for service, and others where employers are just trying to exploit their  workers. 

People who have no valued skills in today’s economy can’t just be the sacrificial lambs of a modern world; we must help them through re-training and employment programmes. Bankers who like to gamble with other people’s money should be allowed to gamble – with their own money. Rather than strictly focus on GDP, which can be misguided, more focus should be on wage growth and active labour.

People in many countries are sluggishly embracing populism but that is not the answer. The answer lies in good-old policy-making. Policies that, for once, put people first. Of course, the interconnected economic layout across the globe is complicated. It’s got its perks – war is difficult to play out when everything is so inter-dependent. 

But politicians need to pull up their socks and come up with solutions. Regulation, people-first policies and a checks-and-balances structure has been wrongly, and misleadingly, packaged as needless bureaucracy in today’s global discourse. But without them we run the risk of more populism, more inequality and more hot air from so-called world leaders. God knows we’ve had enough of that.

Evarist Bartolo is minister for education and employment