It’s about Democracy, not Diamond

If the Ed Miliband camp cites the resignation of Bob Diamond this morning as a victory and the culmination of a weekend spent campaigning and lecturing, they will have completely misunderstood how high the stakes are.

Bob Diamond now has plenty of time to reconsider his belief that “the time for remorse and apology… needs to be over”. But beyond that, now is the time to re-articulate the case for a Leveson style inquiry into the financial industry. The very idea that a few heads rolling will alter the ‘culture’ of Barclay’s and the financial industry as a whole, is laughable. Only a Leveson for the banks can challenge an institutional mindset where obligations to society do not apply.

The lending rate scandal points to a deeper issue of an industry unbound by the processes of democratic accountability. The idea that clever individuals alone generate great value and owe nothing to the social and institutional networks that support them is what has to be put before public inquiry. Indeed, the ‘wealth’ that was generated over the years of light-touch regulation, administered by Labour and strongly supported by a Conservative opposition, now looks fictitious.

A Leveson for the banks would have the opportunity to not only interrogate the institutional structures and cultures by which malpractice such as rigging of the interbank rate occurred; it is also an opportunity to stimulate a public conversation as to what it means to create value in industries such as finance in a post-Diamond, post-Murdoch world.

In a time of increasing voter apathy and a belief that politics is no longer the process by which we tackle social and economic problems, there is an urgent need for the practices of the financial sector to be put to public scrutiny. Cameron states that he isn’t sure what this will achieve. The process itself will be an important achievement of democracy.

There is still a sense of injustice at the manner in which the risks associated with private sector activity resulted in the massive costs of failure being underwritten by the public purse. The very least we deserve is an independent inquiry into the practices that made this happen and the culture that made it acceptable.