We didn’t reform ...so get ready for another crash
BANK CRISIS TEN YEARS ON
A LEADING economist has warned the UK is on course for another crash, a decade on f rom t he financial crisis.
Professor Robert Skidelsky is highly critical of economists for not predicting the 2008 global collapse and believes not enough has been done to reign in banks and the City of London over the last decade.
Speaking ahead of the publication of his new book, billed as a ‘challenge to mainstream economics’, Lord Skidelsky expressed concern about the current state of the economy, drawing comparisons with events that presaged the last crisis.
He told The Mail on Sunday: ‘When you have a financial system that hasn’t been fully reformed, there are other factors which caused the crisis that haven’t been properly addressed, and a lot of political [uncertainty] going on – huge amounts – you are really set for another financial crash.
‘I think it’s only a matter of time... The economy is obviously not in a particularly healthy state at the moment.’
The economy grew by 0.6 per cent in the first half of this year, according to the Office for National Statistics. It said the UK’s overall economic picture is one of ‘slowing growth’. Meanwhile, Brexit jitters have been blamed for delays to investment and the FTSE 100 has flatlined in recent months, falling 3 per cent in August.
Lord Skidelsky, 79, a cross-bench peer who has been a member of both the Conservative and Labour parties, is considered an authority on the influential economist John Maynard Keynes. Reflecting on the 2008 crisis, which blew up in earnest ten years ago on September 15 when Wall Street investment bank Lehman Brothers collapsed, Lord Skidelsky said economists should shoulder a large part of the blame.
‘It was mishandled in the sense that it wasn’t anticipated, so it did catch everyone by surprise,’ he said. ‘The models which economists used – and also business forecasting models – didn’t anticipate anything on this scale could occur.’
Warwick University professor Lord Skidelsky had stepped back from teaching economics day-today by 2008. He believes others should have seen it coming. ‘I do blame economists who were teaching it every day in their classrooms,’ he said.
The bankruptcy of Lehman Brothers in 2008 rocked global financial markets, sparking a global eco- nomic recession. In the UK, the Government was forced to rescue Royal Bank of Scotland and Lloyds Banking Group.
The crisis has led to a series of banking reforms, with more than 80 pieces of legislation passed, according to the British Bankers’ Association. For instance, lenders now need to hold more capital to better prepare themselves for financial troubles.
But Lord Skidelsky believes the system has not been cleaned up enough, bemoaning the fact any ‘radical’ reforms to ‘break up the banking system’ have not come to pass.
‘I think some of the fundamentals haven’t been addressed. I think there is a general feeling that we’ve done enough to clean up the financial sector so that it’s not going to collapse in the way that it did.
‘But the financial sector hasn’t been tamed and it hasn’t been sufficiently contained.’
If a new global crisis does come to pass, Lord Skidelsky believes the UK will be hit worse than many other countries because of the dominance of the City of London.
Lord Skidelsky’s book, Money And Government: A Challenge To Mainstream Economics, is published on Thursday.