Turner: Workers need "a greater voice" in banking

Mr Turner, who worked for several Japanese banks in the '90s before founding Mile End-based GFC Economics in 1999, believes that "more effective participation of workers" is key to restoring balance in the world economy.

He believes governments should have taken advantage of the nationalisation of the banks by breaking up the shareholder-oriented model and imposing a "worker veto".

He said: "It was an opportunity missed really to change the perception that people can't have a say in the way that the economy is run.

"It's about exerting sufficient oversight, not just through government but by giving the people a greater voice. Increased regulation just gives the banking lobby something to aim at.

"What you need is an effective counterweight within the workforce so decisions, such as where to place a factory, are not based exclusively on how they benefit the shareholders.

"I don't believe increased regulation deals with that. It can be bent, distorted and undermined by corporate power. We need more effective participation of the workers within the decision-making structure of companies to create a more effective balance."

Mr Turner recommended aggressive measures such as quantitative easing to combat the financial slide in his 2008 book, The Credit Crunch.

Talking to The Wharf following the release of his second book, entitled No Way To Run An Economy, he re-states this as one of the two main pillars of his strategy to haul the world out of the downturn.

He said: "I would have taken a twin approach. I would have introduced more aggressive quantitative easing from a much earlier stage, and I would have made a more direct intervention into the private sector.

"The one thing that could mitigate this current bubble is aggressive quantitative easing because that's what was used in the '30s.

"By 1932 they started aggressive quantitative easing and they put a floor in the economy. By comparison to what we have now it was a swifter recovery.

"Governments haven't really been committed to quantitative easing in the manner that we saw in the '30s."

Mr Turner is convinced that the US remains the "epicentre" of the crisis, and criticises the Obama administration for its slow reaction.

He said: "[Obama is] trying to do too much and he's out of his depth. He's trying to fix healthcare, climate change, the wars in Iraq and Afghanistan and the housing problem.

"The world economy will rise or fall based on how the US fares in the next 12 months. I believe the US gave Obama a mandate with his landslide election victory and he hasn't used that mandate to be radical.

"The GDP numbers don't do justice to the problems in the States. All the data says repossessions are accelerating, despite the money that's being thrown at banks and the incentives that are in place. It's the mortgage problems that caused the crisis, and they're spreading to commercial property as well.

"One in four mortgages is behind in Florida and the foreclosure crisis is spreading away form the traditional sub-prime areas into states such as New Jersey, Utah, Idaho and Rhode Island. Banks are either unwilling or unable to put the people who are in arrears on a more sustainable mortgage scheme.

"Banks are not charities and they're throwing people out of their homes in record numbers. Every time someone forecloses it depresses prices in that entire neighbourhood significantly.

"The banking lobby have been very strong. It's a perfectly legitimate point to make that the Obama administration is too close to Wall Street.

"The Bush administration were very close as well, but the new administration has not distanced itself anywhere near as far as it should have done. Too much money has gone in without getting the result that was promised.

"There's a systematic breakdown that can't be addressed by monetary and fiscal policy anymore."

Mr Turner also highlights climate change as a sign of how globalisation has damaged the environment and communities, but believes it has been unfairly "marginalised and radicalised" as an economic issue.

He said: "It goes to the heart of the way we structure the economy.

"Burberry shut down its factories in Wales and Rotherham and now make their goods in Turkey and China and bring them back into this country with a mark up.

"It's destructive for the environment and communities in this country. But capitalism can't deal with climate change because of competition pressures. If your rival ships to China so it can undercut you, you don't have a choice but to do the same under the shareholder model. If companies had a worker veto, they could break this vicious cycle."

While many commentators see the recession as the result of greed, Mr Turner believes that much of the debt was created through need rather than luxury.

He said: "We had a boom and it was still a struggle for people. Debt was a substitute for decent income gains. For many people the cost of buying a home and doing basic things in life was an uphill battle and debt became the way to achieve things.

"There's an critique of debt now, in which everyone got greedy and we all need to pay. It's rubbish. The Bank of England showed the people with the biggest debt problem were the poorest people and they're the ones getting most shafted by the credit crunch.

"The squeeze in public spending being discussed is going to exacerbate the current divide. That's what globalisation has done. It's failed the west, and probably the emerging markets too.

"Corporate power is hollowing out industry and has been doing so since the 1980s. We now work in bubble jobs sustained by taking on increasing amounts of debt. There's a ridiculous logic to capitalism and it's been exposed by all this, not that anyone would admit it."

No Way To Run An Economy by Graham Turner is available for £12.99 from Pluto Press.

Graham Turner has worked as an economist in the financial sector for 20 years. He began his career at W Greenwells and spent the '90s working for Japanese banks. In 1999 Graham founded GFC Economics, an independent economic consultancy based in London which provides forecasting services for financial institutions. GFC Economics provides macroeconomic research on US, Japan, UK, Eurozone, China and emerging markets and has more than 60 clients.