By Dr Matthew Ashton
Both the Conservatives and Labour struggled in their response to the banking scandal this week. The Conservatives because they're now forced to do something about it, and are the natural supporters of the finance industry, and Labour because they were instrumental in allowing it to happen in the first place.
There have been the usual calls for an inquiry into banking culture, but it could be argued that we need a wider one into the very institutions of our society that allowed this scandal, and countless others, to happen. Part of the problem lies in the fact that these outrages occur so often, and in so many walks of life, we've become almost immune to them; a sort of scandal fatigue.
Here are four things that are systematic of our approach to our institutions, and capitalism in general, that the public should be genuinely angry about - yet I'm willing to bet will still be happening in ten years' time.
The first is government subsidies to the private sector when it gets into trouble. The free market capitalists who run big industries often talk about the importance of risk-taking and allowing unprofitable businesses to fail. Yet when it happens to them, they're the first to demand government money. Take for example the bank bailouts and quantitative easing, which the Bank of England is attempting again this week. So far all it seems to have done is pump vast amount of money into the banking system, which they've then promptly sat on rather than risk lending to anyone. It now appears that they're not even prepared to take risks with other people's money.
Second is short-termism. PFI is without doubt one of the greatest cons ever inflicted on the British public. This week it was revealed that in return for less than £100 billions worth of investment from the private sector, the British public will have to pay over £300 billion back over the next few years. Our political rulers as usual have been mortgaging tomorrow to pay for today. The same happens with banking bonuses. We've created a banking culture that disproportionately rewards risky short-term decisions rather than good-long term ones.
Thirdly is the way governments have repeatedly tried to edge away from the idea of enforcing greater competition and choice. Generally corporations view free market capitalism in the same way casinos view gambling; it's fine as long as the deck is heavily stacked in their favour. Businesses only like the elements of competition that benefit them; for instance using it as an excuse to 'downsize' workers in the name of efficiency while avoiding lowering prices whenever possible. At the same time they've swallowed up all their smaller rivals while making it harder for us to use competition to our advantage.
Making it significantly easier to move banks, or phone companies, or energy suppliers would put the fear of God into them. At the moment most of these industries rely on a threefold strategy to avert this. One is making it as complicated as possible to switch, with endless forms to fill in to so most people are intimidated from even trying. Secondly they make it as difficult as possible to compare prices and services. The final strategy is consolidation. The amount of choice on the high street is being radically reduced. By and large governments over the last 30 years have stood by and allowed this to happen, and while they've taken some small steps in the right direction recently, it's mostly too little too late.
Finally is the fact that these large businesses often seem to have an almost total contempt for the rule of law and don't even play by the rather flimsy rules they're constrained by. Barclays and Libor is just one example amongst thousands. If you look back through the newspaper cuttings you can find numerous cases of dodgy dealing amongst some of Britain's most respected companies, like the BA price fixing scandal. Often governments look the other way or create regulatory frameworks that almost encourage this behaviour by only handing out relatively small fines.
In short, then, governments have either allowed or encouraged a culture of capitalism to develop that is reliant on public money, fixated on short-term goals and profits, dislikes genuine competition and choice, and bends or breaks the rules whenever possible. I'm not suggesting Marxism as an alternative, let's be clear. It's just that all the problems I've outlined are fairly clear and obvious ones. Most could be fixed by a government willing to take a strong lead and risk upsetting those who hold the purse strings. Who knows - it might even be popular.
Dr Matthew Ashton is a politics lecturer at Nottingham Trent University. Visit his blog.
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