Statist bankers who think Corbyn in power would be okay are deluded

It was a headline to make the most insouciant reader rub his eyes in disbelief: “Corbyn better than no-deal Brexit, say investment banks as anti-capitalist Labour wins unlikely new City fans.” And it was in the Torygraph this week, too.

To any capitalist, in the true sense of the word, even the headline “Corbyn better than collision with Mars” would lack credibility. Yet two major investment banks, Citibank and Deutsche Bank, have now concluded that a Jeremy Corbyn-led government in Britain would be preferable to the UK leaving the European Union on WTO terms.

Christian Schulz at Citi said: “A year ago, a Labour government would have been a big economic downside risk. These risks to the longer-term outlook have not changed, but Labour has become more decisively pro-EU over the past 12 months.”

Echoing this sentiment, Oliver Harvey, of Deutsche Bank, claimed fears of Corbyn “may be overstated”, adding: “First, any market-unfriendly policies instigated during a Labour government are temporary (until the government is voted out of office), and must be set against the permanent shock caused by a no deal Brexit. Second, we see the magnitude of economic damage caused by a no deal Brexit as much higher than policies proposed in the last Labour manifesto.”

Any intelligent undergraduate would recognize that this analysis is the reverse of the reality. It is not the Marxist policies of a Corbyn government that would be temporary, but the issues arising from a WTO Brexit. Marxists have a knack of entrenching themselves in power, so there is no way of determining how long a Corbyn regime would last. Even if its tenure were restricted to one parliamentary term the damage to the infrastructure of the British economy would be immense.

The “policies proposed in the last Labour manifesto” included renationalisation of the water industry at a cost of more than £60bn, as well as taking the National Grid, Royal Mail, the energy companies and the railways back into “public ownership”. A total additional tax take of £48.6bn was proposed, including lowering the threshold for the 45p income tax rate from £150,000 to £80,000 and an extra £19.4bn a year from raising the headline rate of corporation tax from 21 per cent to 26 per cent.

Apparently Deutsche Bank has no problem with that blueprint for economic meltdown, nor with the manifesto commitment to raise £5.6bn from a tax on dealing in derivatives and similar securities, which banks would have passed on to shareholders in the shape of lower dividends.

But the full measure of these banking analysts’ political naivety lies in the fact that Labour’s 2017 manifesto, with all its fiscal banditry, was a benevolent facade. It was the cuddly, paternalist false prospectus designed to gain access to power. Only later would the full Marxist agenda espoused by Corbyn, Seumas Milne, Andrew Murray et al., red in tooth and claw, have been unleashed on Britain. People who do not recognize such political realities are not only unfit to hold stewardship of investors’ money – they ought not to be allowed out without their mummies.

The canard that Deutsche, Citi and probably other confederacies of dunces have swallowed whole is the mythology of the “catastrophic no-deal crash-out Brexit” concocted by Remainer politicians for their benefit. The notion that withdrawal from the EU on WTO terms, however traumatic its temporary consequences might be, would be worse than the instalment of a Marxist government in Britain is manifestly delusory.

It calls into question the judgement of people running major financial institutions. It re-explains, if any further clarification were necessary, the origins of the 2008 crash. Even as Citi and Deutsche were rehearsing the terrors of no-deal Brexit, the domestic cheerleader for Project Fear, Mark Carney, was rowing back on his gloomy prognostications.

The Bank of England governor has now reduced his forecast that no-deal Brexit would wipe 8 per cent off GDP down to 5.5 per cent. He credits this amelioration to improved preparations for WTO Brexit; cynics, however, will suspect the possible imminence of an actual no-deal experience is causing extravagant prophets of doom to salvage credibility by revising their forecasts downwards.

As for the Corbyn/Brexit equation, how many people would regard Deutsche Bank, with its history of declining revenue, lowered credit ratings and $11bn in fines for misconduct between 2015 and 2017 as a reliable guide to the financial future?

The largely unacknowledged reality is that there has historically been a superficially incongruous but enduring symbiosis between large-scale finance capitalism and socialism. Purist capitalists have long contended that central banks are socialist – even Marxist – institutions. Marx himself in his 1848 Communist Manifesto listed as revolutionary measure number five: “Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.” The introduction of fiat money enhanced the potential powers of central banks. The US Federal Reserve prints money to finance Big Government ambitions.

In Europe the majority of EU member states, through the euro currency, are in hock to the ECB, which no longer has the resources to bail them out at the next crisis. Then there is the sheer convenience enjoyed by Western financial institutions in dealing with communist China, where centralised control means the Henry Kissinger question “Who do I pick up the phone to?” never arises and if the stock market takes a tumble it is closed down.

Large financial institutions like dealing with state capitalism, whether in its undisguised form in Beijing or its more discreet manifestation in Washington. The political implications are considerable.

Recently Bill Dudley, former president of the New York Federal Reserve Bank, provoked outrage by writing: “Trump’s re-election arguably presents a threat to the U.S. and global economy … If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.” Dudley is now desperately disowning support for politically partisan policy-making by the Federal Reserve, but the mask has slipped.

A century ago Armand Hammer, head of Occidental Petroleum, the largest independent oil company in the world, became a multimillionaire largely through his dealings with the Soviet Union. Historically, allegations of collaboration between bankers and Marxists were generally dismissed as conspiracy theories. Today, however, the rise of cultural Marxism which has heavily colonised Western boardrooms and a globalized economy has heavily blurred the lines.

Institutions obsessed with “equality and diversity” virtue signalling are weakening their immune systems’ resistance to economic Marxism: the culture creates the environment for the socio-economic ideology. If equality becomes fetishized, what more egalitarian option is there than socialism/Marxism? Especially with a perception that accommodating socialism may create a climate in which, despite the revolutionary slogans, fat cats may safely graze.

What banks, increasingly, are most uncomfortable with is national sovereignty. Globalization has created a community of interest between crony capitalism and revolutionaries aspiring to world government. Of course, the economic outcome of injecting the toxin of socialism into the bloodstream of capitalism would inevitably be global impoverishment. However, some informed financial commentators may take the view that is a lesser risk than Britain leaving the European Union on WTO terms.