The left-leaning are claiming just that — note this piece by Seumas Milne of Britain’s left-wing Guardian. Milne rightly points the finger at financial elites and their political enablers, but then writes:
It could of course have happened only in a private-dominated financial sector, and makes a nonsense of the bankrupt free-market ideology that still holds sway in public life.
This is nonsense, but sounds plausible to the casual observer and so needs to be debunked. Banks may have a passing acquaintance with capitalism to the extent that for a price they facilitate it, but today’s banking and financial behemoths do not operate in a free market. While genuine capitalists risk borrowed money or their own savings, banks gamble with other people’s money, and in recent years when things have gone wrong banks have been bailed out by governments with taxpayer cash.
The growth of too-big-to-fail banks has coincided with the growth of massive, statist government. And while nominally conservative politicians have certainly been guilty of indulging the bankers in the past, Labour in the UK and the U.S. Democrats are the primary culprits harnessing big finance to big government.
Tony Blair’s Labour government famously favored “light-touch” regulation, with one minister from that once proudly socialist party remarking that New Labour was “seriously relaxed about people getting filthy rich”. The reason Labour took such a lax attitude to bankers lining their pockets was that the City of London was providing billions of pounds in tax revenues for the government to pump into the black hole of public services, while at the same time ensuring a plentiful supply of cheap money to create a credit-fueled boom.
In the U.S., similar easy money policies enabled George W. Bush to oversee a decidedly un-conservative expansion of government and helped to fuel the housing bubble that ultimately led to the financial crisis. Many Republicans voted for the bailouts that followed, but it was Democrats, having won power thanks in no small measure to sticking the Republicans with the blame for the crisis, who fully enlisted big finance in their statist, crony capitalist project.
The banks and other financial institutions that helped bankroll Obama’s 2008 election campaign didn’t do so because they expected him to be a swashbuckling free-marketeer. They were rewarded with the Dodd-Frank bill, which effectively enshrined the notion of too big to fail and created a centrally planned banking system that discourages competition and innovation.