Israel must "flatten Gaza" like the US flattened Japan, says Sharon's son

A chilling article by Gilad Sharon, son of the former Israeli prime minister, in the Jerusalem Post.

If you want some indication of how extreme parts of Israeli political opinion have become, then read the chilling piece by Gilad Sharon, the son of former Israeli prime minister Ariel Sharon, in today's Jerusalem Post.

After writing that the civilians of Gaza "are not innocent" since they elected Hamas, Sharon declares:

We need to flatten entire neighborhoods in Gaza. Flatten all of Gaza. The Americans didn’t stop with Hiroshima – the Japanese weren’t surrendering fast enough, so they hit Nagasaki, too.

While Sharon's invocation of Hiroshima is shocking, he isn't the first prominent figure to make the comparison between Gaza and Japan. Avigdor Lieberman, the Israeli foreign minister and the leader of the ultra-nationalist Yisrael Beiteinu (which recently merged with Binyamin Netanyahu's Likud) said in January 2009, during the last major Israeli assault on Gaza, that Israel

must continue to fight Hamas just like the United States did with the Japanese in World War II. Then, too, the occupation of the country was unnecessary.

His remarks were widely interpreted as a reference to the atomic bombing of Hiroshima and Nagasaki. Would Israel ever consider such a solution? It sounds unthinkable, but Turkish Prime Minister Recep Tayyip Erdogan revealed in October 2009 that Lieberman "had threatened to use nuclear weapons against Gaza" (see the final line of this Guardian report).

Further evidence of the mindset of those currently leading Israel was supplied by Eli Yishai, the country's deputy prime minister, who declared at the weekend: "The goal of the operation is to send Gaza back to the Middle Ages. Only then will Israel be calm for forty years."

Palestinians search the debris of a destroyed home following an Israeli air strike in Gaza City. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation