We must make sure that market diversity is not thrown away. Stay Liberal!
Sharon Bowles, Liberal Democrat MEP for the South East of England
At the ELDR Rally, I said the Liberal response to the crisis is Stay Liberal!
This is not the end of the Liberal market economy. The problem is we have had a so-called liberal market economy, but run by pretenders, calling themselves neo-liberals.
They thought it was easy to be Liberal - so they failed to understand a basic morality that is an essential part of liberalism - do no harm to others - and therefore they failed to integrate that morality into their version of the market economy. That is why the Tories and New Labour are both flummoxed.
Liberals have never been in favour of unbridled markets. Do no harm means we insist on boundaries. Indeed as liberals we rather like due process, enforcing fair rules, transparency and acting with intelligence. These are all things missing in the neo-liberal version. In the reformed markets they must come fully into play.
I called for greater capacity and skill in financial supervision before the crisis started, and have now inserted it in legislation on insurance, credit rating agencies and bank capital requirements. Likewise I criticised assumptions and correlations underpinning risk assessments. The Turner and de Larosière Reports agree. Pointing out the dangers of non banks doing bank like activity, our theme was regulate by function, not by what you are called. If aspects of short selling are wrong, they are wrong for everyone - for hedge funds and for Porsche!
Competition policy ensures diversity and fair play. Early in the crisis we called for rules for the developing emergency situations. Now we insist the emergency flexibility in State Aid rules must be temporary and exit strategies from State ownership a priority.
Liberals champion internationalism, seeking inclusion rather than exclusion. So the reformed financial markets must look wider as well as think deeper. We must embrace greater information sharing and cooperation with other jurisdictions, not regulatory protectionism.
Markets, business and consumers are suffering a crisis of confidence - much of it irrational but real in its effect. Part of restoring confidence is making regulation fit for the future. It is the urgency of restoring confidence that drives the rush to regulate - and of course haste brings risks of its own.
So, finally, in that rush we must make sure that market diversity is not thrown away. That’s called staying Liberal.
Sharon Bowles is an MEP for the South East of England and has led for the ALDE group on risk and supervision aspects of markets.
Tags: being a liberal, crisis, Economy