Diamonds are Forever?

Myself and Luke Boizer have been having something of a discussion on Twitter about Peter Mandelson’s comments criticising  Barclay’s Capital president Bob Diamond as ‘socially useless’ and as the ‘unacceptable face of banking’ after it emerged that Diamond had profited from the sale of shares he owned in one of Barclays’ investment banking arms. Let’s be quite clear that I agree with Luke that Mandelson’s comments are pure politicking and coming from the architect of New Labour they have more than a little whiff of hypocrisy about them.

However, whatever you feel about this particular case there is an underlying issue about Labour and what its relationship to the City should be.  In my mind there is no doubt that Mandelson’s comments which are popularist in nature are a desperate attempt to distract attention from Labour and the leaderships lack of structural courage on this issue. These issues were not just caused by a collapse of the international markets but also by the very structure and fabric of the financial sector and until that is addressed the likelihood of it happening again is not only possible but probable.

Luke tells the story of New Labour thus:

One of the main tenets of the New Labour movement in the mid-late 1990s was to encourage business and enterprise, and end the populist tradition on the left of attacking business and wealth.

In doing so, New Labour joined Thatcherism in sowing the seeds of the current crisis because it never did anything to encourage that growth to be sustainable. Luke makes much play of the capital that the Treasury gains from tax and this is made-out to be a contribution we should be grateful for; as if taxation was some kind of freely given benevolence. While it’s true that Barclay’s did benefit directly from taxpayers money it did reap the benefits that came for the massive pump-prime given to the entire sector. What we have seen in return is precious little committment to the wider economy, an attempt to continue to bleed people in debt and no money poured back into coffers. Meanwhile, the bonuses still get paid and people are angry; one day there will be a reckoning and the financial sector will have to pay both in terms of a much more overbearing state and financially in terms of money’s returned.

Luke thinks we need to rebuild our relationship with the City. I think it’s time for us to redefine that one-sided relationship back in favour of the government and of the people.  I think we need to insist on the City serving not its own interests and that Labour put itself at the vanguard of making the City serve the people not its own enrichment. People will understand us and support us in that because they are rightly disgusted with what has happened; even those who support liberal capitalism, like Will Hutton writing in The Guardian, deplore the moral ‘dead end’ that the City has become. This is a fundamental debate we need to have within the Party whatever is felt about one specific case.


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