Regulate international finance and create a global economy that puts people first

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date: 5 November 2009

embargo: 00.01hrs Friday 6 November 2009

As finance ministers from the world's leading economies prepare to gather in St Andrews at the weekend, TUC General Secretary Brendan Barber will tell an alternative G20 conference today (Friday) that regulation of the international finance system must lead to a new global economy that puts people and the planet first.

Speaking at the TUC event Recovery Towards What? Finance, Justice and Sustainability, Brendan Barber will say: 'A year on from the biggest crash since 1929, there remains an overwhelming case for reform of the global financial system. We've saved the banks from collapse and managed to avert the prospect of an economic nuclear winter, but the underlying causes of last year's crisis remain essentially unresolved. Without real change it could easily happen again.

'With Britain still in recession, we need to build a very different financial system, one more stable, responsible and responsive to the needs of the real economy. I want finance to work for us not for itself, funding investment in productive economic activity, encouraging international development and helping to smooth the transition to low-carbon growth.

'Commitments were made by the G20 at the London and Pittsburgh Summits, but plans to re-regulate global finance still fall far short of what is needed to prevent another catastrophic speculative bubble in the future.

'The TUC believes there are three key priorities:

  • Proper regulation of both the banks and the shadow banking system, including a determined crackdown on obscene - sometimes taxpayer subsidised - bonuses.
  • A fair tax system for taxpayers and workers, focusing on the fair taxation of finance.
  • Reform of international financial institutions, so they help not hinder decent work and public services in the developing world.

'One of the underlying causes of last year's crash was the abject failure of light-touch regulation and the ideology of neo-liberalism that spawned it. For three decades, we were told to set finance free, to liberalise capital flows and worship the 'greed is good' mantra.

'But that free-market fundamentalism took us all to the edge of an abyss. Deregulated financial markets and financial innovation did not led to more efficient economies but spread risk around the world.

'This is not just about effective regulation of the banks themselves but about a proper oversight of the shadow banking system. From hedge funds to the trade in collateralised debt obligations and credit default swaps, huge swathes of the contemporary financial system escaped supervision and were able to get away with risky, debt-fuelled speculation.

'All this activity now needs to be brought within the scope of mainstream regulation. The Financial Stability Board (FSB) represents an important first step but the TUC has grave reservations about its transparency and accountability - especially as some of the FSB's representatives were themselves recently leading players at the financial casino table.

'And despite plenty of fighting talk from the politicians, we have yet to really get to grips with what was another of the main causes of the crash, the close interplay between reckless, risky behaviour and the pursuit of massive bonuses. There remains an overwhelming need for fundamental reform.

'Think for a moment about last year's bonus round on Wall Street. Despite receiving $175 billion in US Government support through the Troubled Asset Relief Programme, the nine largest American banks granted over $32 billion in bonuses to their employees.

'To put that in some kind of global perspective, that sum would have delivered universal primary education, adult literacy and children's healthcare in 68 low-income countries for three years.

'It's simply not fair that bankers are continuing to trouser telephone number bonuses at the same time as so much of our money is propping up the financial system.

'In the UK, with unemployment heading towards three million and the public finances now in their worst state in a generation, it's high time the financial system started paying its way. Just as taxpayers bailed out the banks, so the banks now need to help bail us out.

'As Adair Turner has suggested, a transaction tax could be used to raise revenue and finance the huge public debts that have been incurred fighting the crisis. Alongside proper taxation of global finance, we want to see a determined clamp down on the massive tax avoidance industry that has grown up around it - a £25 billion drain on the British Exchequer alone.

'With the world still reeling from the worst crash in eight decades, the stakes could not be higher. It's up to us to show that finance must be our servant not our master. We've got to shape both public opinion and political discourse and show the movers and shakers in the financial system that the status quo is not an option.'

The need for effective regulation of the international finance system is repeated in a statement published today by the international trade union movement This also calls on the finance ministers attending the weekend meeting in Scotland to continue to protect and create jobs through a co-ordinated global fiscal stimulus and make the funding available to help developing countries respond to the climate change challenge facing the world.


- The conference at which Brendan Barber is speaking today (Friday) is the first of two events supported by the Bretton Woods Project, the TUC, ActionAid, Friends of the Earth, the New Economics Foundation, and Research on Money and Finance to coincide with the G20 Finance Ministers meeting in St Andrews:

Recovery Towards What? Finance, Justice, Sustainability covers global finance and its role in both developed and developing countries. It takes place at Congress House (Great Russell Street, London WC1B 3LS) from 9am-7.30pm, and speakers include: TUC General Secretary Brendan Barber, Former Governor of the Reserve Bank of India YV Reddy, Assistant Secretary General for Economic Development at the United Nations Jomo Kwame Sundaram, and Poul Nyrup Rasmussen, President of the Party of European Socialists and former Prime Minister of Denmark.

The Put People First G20 Counter Conference on Saturday 7 November takes place at Central Hall Westminster from 10am-5.30pm and makes the links between the economy, decent work, the environment and the global fight against poverty. Speakers include: Poul Nyrup Rasmussen (Party of European Socialists), Jon Cruddas MP, Billy Hayes (CWU) and Lidy Nacpil (Jubilee South). For further information on the conferences or to attend either event contact Peter Chowla at Bretton Woods on 0207 561 7547 or 07877 596893.

- The Scottish TUC is one of the organisations behind a series of People's G20 events happening in St Andrews over the weekend. This includes a rally at 11.30am on Saturday on the beach at West Sands to be addressed by STUC Deputy General Secretary Dave Moxham and the Rev Ian Galloway, Convenor of the Church of Scotland's Church and Society Committee. At noon the crowd will march to the University of St Andrews Students' Association for a People's Summit. For further information contact Gary Dunion on 07545 785305.


Media enquiries:
Liz Chinchen T: 020 7467 1248 M: 07778 158175 E: [email protected]
Rob Holdsworth T: 020 7467 1372 M: 07717 531150 E: [email protected]
Elly Brenchley T: 020 7467 1337 M: 07900 910624 E: [email protected]

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