[Image: Counterfire.]

Financialisation – the ballooning of finance and its intrusion into every part of life – led to the calamity of 2008. Since then, as Cuthbert demonstrates, remarkably little has been done to even restrain the process… With the return to growth starting to pile on the debt once more, we’re simply adding to future risks.

It is worth stressing, once more, that little of this is dependent on public sector debt. Government debt rose sharply as a direct result of the crash, having remained very stable for the decade or so beforehand. On Cuthbert’s figures it’s now around 105% of GDP: substantial – and certainly more than its historic average – but utterly inconsequential relative to the 1,364% of GDP that are the total liabilities of the UK’s financial sector.

These are (largely) private sector liabilities, held by (largely) private sector institutions – the twist being, of course, the semi-public ownership of two major UK banks. But 2008 revealed that the location of ownership need not matter: in the event of a major crash, it is the whole of society that can be forced to carry the costs of a privately-owned financial system.

Without a fundamental rewriting of the rules for our economy, and a sharp change in direction, we are all stuck straight back on the railway lines the led us to 2008: of house price bubbles, growth driven by debt not earnings, and growing dependence on borrowing from the rest of the world.

Read the full article on Counterfire.

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