No one has sought to examine the blame politicians across the world deserve for the 2008 Recession as they are too busy bashing our bankers.

Bankers have played their part in causing the global crash and the media have rightly exposed them for the role they all played. Since 2008, we have heard stories about Lehman Brothers filing for bankruptcy in 2008 and Fred Goodwin being stripped of his knighthood due to taxpayers having to fork out £45 billion to rescue the failing RBS group. But there has been little discussion about the policies politicians created which caused this financial meltdown that we are still reeling from to this day.

In America, financial journalists and professional economists constantly blame ‘greed, Wall Street and free market capitalism’ as the triggers of the 2008 Recession. That’s not entirely fair. Free market capitalism has brought consistent wealth to countries such as Britain and America since the ’80s. Despite Obama’s rhetoric about ‘changing America’, neither he nor his Republican predecessor, George W. Bush, eradicated the root cause of what came to be known as the worst recession since the Second World War; government intervention. It seemed that in an age where neo-liberal economics triumphed after the Cold War, governments across the world could not resist the urge to intervene in the markets in later years.

Richard M. Salsman has provided an authoritative account in response to the 2008 Recession. American policymakers were motivated by a desire to fulfill human needs as opposed to greed. Policy priority was directed towards those who needed homes they would never be able to afford and loans they would eventually fail to pay back. In the words of Finely Dunne: prior to 2008, we were too busy trying to ‘comfort the afflicted while afflicting the comfortable’. Reckless borrowing was subsidised and everyone across the globe was affected by the need to bail out the poorest members of society.

Lest we forget that our very own RBS dabbled in ‘afflicting the comfortable’ by allowing people to borrow money via sub-prime mortgages, much like Lehman Brothers did too. The intention behind sub-prime mortgages was noble; allowing the poorest families to borrow money to pay for a house. As we learnt, these families could not afford to pay them back and the 2008 Recession emerged. To this day, we are still suffering as a result of these reckless mistakes. RBS is still owned by British taxpayers don’t forget.

This crisis was encouraged by government agencies, not free markets, particularly in America. Subsidising recklessness was encouraged by bodies such as the Federal Reserve, FDIC, FHA, Fannie Mae and Freddie Mac. These careless organisations still exist to this day, showing politicians have learnt nothing from this disaster. Under Obama, they have been provided with more powers than what they had prior to 2008.

The Dodd-Frank Act (2010), legislation co-sponsored by politicians who helped trigger the 2008-09 crisis and who were in the pay of Fannie and Freddie, is an example of a poor law that has expanded the role of these government agencies. No respectable politician, or banker, ever went to jail or lost their job in Britain and America. Instead, they were kindly bailed out by both countries’ taxpayers. In regards to America, it is certain that a similar recession will happen in the future if these bodies are not dismantled sooner rather than later.

When Adair Turner took over as head of the former Financial Services Authority in 2008, he attributed the blame of the 2008 Recession at the door of credit expansion tailored towards the real-estate sector. Between 2000-07, credit-fuelled lending caused mortgage credit in America to increase by 134% and house prices by 90%. This caused the bubble to burst.

Considering Gordon Brown promised that ‘house prices will not get out of control’, the average house price in Britain increased from £62,800 in 1997 to £164,000 in 2010; that’s a 162% increase in prices in 13 years. Brown allowed Britons to participate in a huge credit binge causing them to get caught in the hangover of toxically high levels of mortgage debt. Yet until our current Government starts to deregulate the housing market to allow more houses to be built (and they need to be built rapidly if those in Generation Y want to own a home), we will also see another recession in Britain at this rate.

So before you indulge in blaming the bankers for the 2008 Recession, just don’t; it’s not entirely their fault. Politicians were, and still are, responsible for allowing the world to accumulate alarming levels of debt. Until they stop intervening in the markets, the poorest members of society will never, ever benefit from neo-liberalism. It’s true what they say; the freer the market, the freer the people.


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