Chris Dillow, over at Stumbling and Mumbling, writes:
At risk of sounding like an ultra-leftist, the problem with the part-nationalization of the banks is that it doesn’t go far enough. It doesn’t address the flaw in the system that got us into this mess. Darling says:
We want to return these banks to the private sector because I don’t think governments can run banks in the long-run.
But the lesson of the last few weeks is that the private sector cannot run banks either, at least when its ownership comprises dispersed shareholders none of whom exercise adequate control over chief executives.
And Darling is doing little to change this. Granted, he’s attaching some strings to his deal, such as ensuring the supply of mortgage and small business lending at 2007 levels - which is absurd given that demand won’t be at 2007 levels.
But these strings don’t change the basic structure of the control of banks. Darling is promising to run RBS “at arm’s length” - which just replaces one form of passive ownership with another.
Chris is right (although I do disagree with his later assertion that 'everyone knows that centrally planned economies are a stinkingly bad idea'). The government’s measures don’t go far enough. But at least the Rubicon has been crossed. Nationalisation is back on the political agenda after twenty-nine years and it’s our job to make sure it stays there.