Banker-hatred expresses a longer, deeper crisis

Financiers' immunity from justice mirrors their insulation from recession.

Why are we so outraged by the Barclays-Libor affair? Silly question really. It is scandalous that traders appear to have manipulated a fundamental market-making interest rate in pursuit of a quick profit. It is emblematic of habits and ethics that steered the British economy onto the rocks in 2007-08. The detail of the story – the brazen emails that lay bare the scam – exude the arrogant sense of entitlement that presents the protagonists in a repulsive light. And it reminds us, when we see Bob Diamond, conspicuously unburdened by judicial investigation or conscience, that the caste of people with the strongest claim to have caused the financial crisis are the same ones who seem least afflicted by its consequences. That provokes our natural sense of injustice.

But there is another layer to public feeling about this issue. It was the subject of an event I attended this morning at the Resolution Foundation, the consistently excellent think tank that dedicates a lot of thought to the problems facing low-to-middle income households. They are famously squeezed (the low-to-middle income households, that is; Resolution are hardly even cramped in their lovely spacious West End office and, outside of Westminster, are not all that famous).

The key observation contained in Resolution analysis – available on their website – is that wages and earnings for most people in Britain stopped growing some time in the middle of the last decade. As the cost of basic goods and services has risen, a process accelerated by some painful bursts of inflation in the last couple of years, people are struggling to keep their heads above the water. Crucially, this process started before the crash and before the recession. It is also a phenomenon recorded in many other developed economies and is especially pronounced and protracted in the US. (For a brilliant account of how wage stagnation is hollowing out the American middle class, read this essay by Ed Luce in the Financial Times. Behind a paywall, sadly.)

In the UK, the trend for decline in wages and the attendant slide in living standards was held back by the growth of tax credits. Shadow Chief Secretary Rachel Reeves spoke at this morning’s event and mounted a vigorous defence of tax credits – generally scorned by the coalition as a tool of deranged Brownian micro-management and first in line for cuts. The other way Britons topped up stagnant wages was private sector borrowing: credit cards, store cards, re-mortgaging, high street lending etc. That, needless to say, was not a terribly sustainable route to prosperity.

An important point that Resolution make (and that Reeves touched on but with characteristic caution) is that, when growth returns to the UK economy, there is no reason why it should do so in a way that solves the longer term structural squeeze on incomes. This is not some abstract question of economic balances. It is probably the issue that will decide the next election. On current trajectories, the overwhelming portion of British voters will reach 2015 feeling poorer, less secure in their jobs - if they have one - and less hopeful for the future than they did in 2010. And that is true even if the economy is growing.

Downing Street are alert to the problem. One reason why fuel duty rises were scrapped this week is that David Cameron and George Osborne badly need to find ways to signal that they have noticed how hard many people are finding it to make ends meet.

One Number 10 advisor told me recently of his conviction that politics for the next decade will come to be dominated by the decline in living standards for ordinary households and the question “so what are you going to about it?” I think he is probably right.

And it is against that backdrop that the Barclays scandal has to be seen. It is not just offensive in some abstract judicial way. It isn’t just scandalous as a case of bad regulation and wickedness unpunished. Seeing what bankers have been up to and suspecting that they might get away with it, when they have escaped the financial consequences of their actions and preserved their rising incomes, is a vicious, sneering affront to the British people. Politics itself will be devalued - more than it already is - if it fails to offer an effective response to their anger.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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Leader: Trump and an age of disorder

Mr Trump’s disregard for domestic and international norms represents an unprecedented challenge to established institutions.

The US presidency has not always been held by men of distinction and honour, but Donald Trump is by some distance its least qualified occupant. The leader of the world’s sole superpower has no record of political or military service and is ignorant of foreign affairs. Throughout his campaign, he repeatedly showed himself to be a racist, a misogynist, a braggart and a narcissist.

The naive hope that Mr Trump’s victory would herald a great moderation was dispelled by his conduct during the transition. He compared his country’s intelligence services to those of Nazi Germany and repeatedly denied Russian interference in the election. He derided Nato as “obsolete” and predicted the demise of the European Union. He reaffirmed his commitment to dismantling Obamacare and to overturning Roe v Wade. He doled out jobs to white nationalists, protectionists and family members. He denounced US citizens for demonstrating against him. Asked whether he regretted any part of his vulgar campaign, he replied: “No, I won.”

Of all his predilections, Mr Trump’s affection for Vladimir Putin is perhaps the most troubling. When the 2012 Republican presidential nominee, Mitt Romney, warned that Russia was the “number one geopolitical foe” of the US, he was mocked by Barack Obama. Yet his remark proved prescient. Rather than regarding Mr Putin as a foe, however, Mr Trump fetes him as a friend. The Russian president aims to use the US president’s goodwill to secure the removal of American sanctions, recognition of Russia’s annexation of Crimea and respect for the murderous reign of the Syrian president, Bashar al-Assad. He has a worryingly high chance of success.

Whether or not Mr Trump has personal motives for his fealty (as a lurid security dossier alleges), he and Mr Putin share a political outlook. Both men desire a world in which “strongmen” are free to abuse their citizens’ human rights without fear of external rebuke. Mr Trump’s refusal to commit to Nato’s principle of collective defence provides Mr Putin with every incentive to pursue his expansionist desires. The historic achievement of peace and stability in eastern Europe is in danger.

As he seeks reconciliation with Russia, Mr Trump is simultaneously pursuing conflict with China. He broke with precedent by speaking on the telephone with the Taiwanese president, Tsai Ing-wen, and used Twitter to berate the Chinese government. Rex Tillerson, Mr Trump’s secretary of state nominee, has threatened an American blockade of the South China Sea islands.

Mr Trump’s disregard for domestic and international norms represents an unprecedented challenge to established institutions. The US constitution, with its separation of powers, was designed to restrain autocrats such as the new president. Yet, in addition to the White House, the Republicans also control Congress and two-thirds of governorships and state houses. Mr Trump’s first Supreme Court appointment will ensure a conservative judicial majority. The decline of established print titles and the growth of “fake news” weaken another source of accountability.

In these circumstances, there is a heightened responsibility on the US’s allies to challenge, rather than to indulge, Mr Trump. Angela Merkel’s warning that co-operation was conditional on his respect for liberal and democratic values was a model of the former. Michael Gove’s obsequious interview with Mr Trump was a dismal example of the latter.

Theresa May has rightly rebuked the president for his treatment of women and has toughened Britain’s stance against Russian revanchism. Yet, although the UK must maintain working relations with the US, she should not allow the prospect of a future trade deal to skew her attitude towards Mr Trump. Any agreement is years away and the president’s protectionist proclivities could yet thwart British hopes of a beneficial outcome.

The diplomatic and political conventions embodied by the “special relationship” have endured for more than seven decades. However, Mr Trump’s election may necessitate their demise. It was the belief that the UK must stand “shoulder to shoulder” with the US that led Tony Blair into the ruinous Iraq War. In this new age of disorder, Western leaders must avoid being willing accomplices to Mr Trump’s agenda. Intense scepticism, rather than sycophancy, should define their response.

This article first appeared in the 19 January 2016 issue of the New Statesman, The Trump era