Don’t look at the bank behind the curtain
The political impregnability of Rupert Murdoch and NewsCorp has always been one of those facts about the world that seemed regrettable but eternal. By contrast, the ability of the banks to emerge from their near-destruction of the world economy richer and more politically powerful than ever before certainly took me by surprise when it happened (partly motivating my change in title from “Dead Ideas” to “Zombie Economics”). John Emerson pointed out the other day that the head of risk management at Lehman Brothers, arguably the most egregious individual failure among the thousands of examples, was just appointed to a senior position at the World Bank.
But now it seems there is just a chance that the curtain might be swept away from even these wizards. The emerging theme in commentary is the corrupt culture of impunity represented by the press hacking scandal, MP expenses and the banks (here’s UK Labour leader Ed Miliband pulling them all together).
If Labor could tie the Conservative-Liberal austerity package to the protection of the systemically corrupt banking system, they would have the chance to put Nu Labour behind them (I noticed Blair has already credited Brown with killing the brand). Instead of putting all the burden on the public at large, they could force those who benefited from the bubble to pay for the cleanup. The two main groups are the creditors who lent irresponsibly, counting on a bailout and should now take a long-overdue haircut and high-income earners who benefited, either directly or indirectly, from the huge inflation in financial sector income.
I know it seems hopelessly naive to think the banks could ever be brought to heel. But they were, for decades after the Depression. And as impregnable as they look today, Newscorp looked just as impregnable three weeks ago, as did the CPSU and the apartheid regime in South Africa thirty years ago.
Of course this spring moment won’t last long. But perhaps there is enough momentum that it won’t be exhausted by Murdoch alone.
An unrelated note on Murdoch. Looking at the Murdoch empire, it seems clear that, before this scandal, it was much more than the sum of its parts. The scandal sheets both made money and did the dirty work for the political agenda pursued through the more respectable parts of the empire, while the electronic media business profited from the political favors (not bribes, of course!) handed out in pursuit of Murdoch’s goodwill. Now the opposite is true. The link to the tabloids is toxic for papers of record like the Times and the WSJ, which will certainly find owners of some kind. And News International is now a liability for the US and Australian businesses, as well as for Sky. Then there are the complications of potentially massive litigation liabilities.