The “madmen in authority”, as Keynes characterised them, are still in thrall to “the markets” and the rating agencies. The people surrounding messrs Clegg and Cameron, as they struggle to an agreement, are more concerned that what they finally come up with will satisfy the markets, than that they will satisfy the electorate.
But, by definition, nobody understands the markets. That’s why speculative funds, such as hedges and private equity funds, can still make money out of them. Commentators can never predict future market moves, though they always explain in detail reasons for movements which have already occurred. Over the past few days it’s been repeated endlessly in the media, that the markets dislike uncertainty and want stability, but plainly that is the reverse of the truth: market volatility is what presents marketeers with the opportunity to make huge amounts of money, for which the tax payer will in the end pay. The question arises not so much as to why we still take markets seriously, but why markets should still be allowed such freedom to do damage. Surely the electorate should be given some protection.
If markets are free, protection might be expected through the credit rating agencies, Standard and Poor’s and Moody’s. But they contributed in no small way to the massive losses incurred by the electorate as a result of the credit crunch of 2007-8. The agencies gave AAA credit ratings (ie lowest risk) to the riskiest pools of loans, fuelling the sub-prime mortgage fiasco. Among many other cock-ups, they failed to notice the insolvency of the Icelandic banks and gave the Icelandic Government a clean bill of health till its economy imploded. If these were not cock-ups, they were something rather more sinister resulting from vested interests. The rating agencies offer no protection, and don’t deserve to be taken seriously.
What the “madmen in authority” need is a different economic perspective to replace the free market fundamentalism which still rules today. But there can be little expectation of that informing the Conservative / Lib-Dem negotiations.