I am willing to bet the sum of my absurdly large mortgage that the Government will not suffer a tumultuous political crisis over the nationalisation of Northern Rock. But I also bet my paltry savings in a fragile internet bank that British politics will never be quite the same again.
The immediate politics is nowhere near as dramatic as some suggest. The worst that can be said of Gordon Brown and Alistair Darling is that they spent too long seeking an alternative to state ownership. The Liberal Democrats' rightly deified Treasury Spokesman, Vince Cable, is the only national political figure who recognised long ago that nationalisation was the only feasible option. But his onslaught about the costs of the Government's delay is appropriately mild. Cable points out that the Government wasted some cash asking Goldman Sachs to look for a private sale, a futile exercise. In the great scheme of things, this was the equivalent of buying a football rather than a football club.
As for the future, Northern Rock will be incomparably better run. It could hardly be managed more poorly. The shareholders will go to court, but they will not get or deserve public sympathy. There is always an element of risk in buying shares. I doubt if there will be huge crowds of anti-government protests outside the court as the shareholders put their case.
Perhaps some of the bank's employees will lose their jobs, which would be politically awkward for Labour with so many seats in the North-east. But ministers can point out that they have saved the bank. The other options were closure, or a slimmed-down privatisation. The unions warn against cuts, but they know that their members could have been in a much worse position.
Of course the entire drama leaves taxpayers keeping their fingers crossed, but so far no one has lost a penny, and they might not do so. Possibly they will make a profit. This is not the equivalent of Black Wednesday when interest rates soared to silly levels several times on the same day and those with mortgages calculated their repayments with a growing degree of sweaty alarm. Nor is this a moment when Labour strides back to the 1970s with the support of only a few left-wingers, an image that has no doubt led Gordon Brown to chew his finger nails with even more neurotic intensity than usual. The verdict of yesterday's sensible newspapers was that, in nationalising the bank, Brown had taken the right decision, albeit belatedly.
For all these reasons the nationalisation will have at most a marginal impact on the next election. But the move was historic for other reasons well beyond parochial calculations about the next election. The nationalisation was no aberration, but part of a pattern of events. The bank collapsed following the credit squeeze in the United States, a crisis that made many lightly regulated financial institutions suddenly vulnerable.
The combustible sequence turns on its head assumptions that have shaped British politics for at least two decades. For 18 years, the Conservative government looked to the economy of the United States for inspiration. New Labour did the same. Tony Blair and Gordon Brown liked to lecture other Europeans about the virtues of the Anglo-Saxon model, a lightly regulated market with a small state where a thousand flowers would bloom. In his budget speeches, Brown used to mock the growth rates in the Eurozone, but paid homage to the booming economy of the US and suggested Britain alone in Europe was in a similarly healthy position. No such homage will be made in the coming months.
Brown and Darling were part of a British consensus. Such was the political mood before the convulsions of the late summer that the Conservative MP John Redwood advocated an even lighter touch in the regulation of banks as one of many proposals in a report for his party. Some of Redwood's proposals caused controversy, but not this one. The British debate revolved around whether banks should be freer still, a climate which explains but does not justify the complacency of the regulatory bodies in relation to the reckless activities of Northern Rock.
Suddenly, a different set of questions is being asked. Why were Northern Rock's activities not regulated more intensively? Why did Brown not act earlier to nationalise the bank? How serious is the economic situation in the US? Is the British economy more vulnerable compared with its European counterparts because it functions in similar ways to the US? The US economy is no longer the obvious model for us to follow. The debate moves on to one in which tougher regulation is called for rather than less. Brown is criticised for failing to nationalise earlier rather than for not doing so at all.
In spite of themselves, political leaders are being forced to move on from the 1980s. This will be challenging for both New Labour and the Conservatives, who travel together with the old orthodoxy. As I wrote yesterday, the Shadow Chancellor, George Osborne, is in a minority of right-wingers in arguing that nationalisation was the worst option rather than the least bad. Like Brown, he is trapped by the past, unable to see what is happening in front of our eyes – that an era of markets being allowed to run wildly out of control is coming to an end.Reuse content