A bank by any other name

Nationalising Northern Rock
A bank by any other name

Feb 21st 2008From The Economist print edition
Bad enough for Labour, but no Black Wednesday

WHEN the once-unthinkable finally happened, there was a weary inevitability about it. In the six months since Northern Rock's cash dried up and it turned to the central bank for help, would-be rescuers of the stricken mortgage lender had fallen one by one by the wayside. By the time Alistair Darling, the chancellor, announced on February 17th that Northern Rock was to be nationalised, only the Sunday timing was unexpected. And for all the party-political outcry that erupted on the news, there was little doubt that Parliament would pass a law bringing the bank into public ownership.
The truth is that there was never much chance a private-sector buyer could be found willing and able to get the bank on an even keel and to repay the government promptly its £55 billion ($108 billion) in loans and guarantees. So two things are interesting now. The first is what sort of fist the bank's new managers will make of things (see article). The second is how much damage his reluctant decision to nationalise it will do to Gordon Brown, the prime minister.

For nationalisation is, in the New Labour lexicon, the economic policy that dares not speak its name. The very word summons up the dark days of the 1970s, when Labour presided over failing state-owned firms and bitter strikes, and was then voted out of office for 18 years. The party's right wing fought for decades to expunge nationalisation from the movement's creed, but not until Tony Blair was leader did they manage to ditch the commitment to “common ownership of the means of production”. Labour politicians of Mr Brown's generation particularly are scarred by the experience; economic policy during his time as chancellor was resolutely market-oriented. .................However ominous the symbolism, Britain's first nationalisation for a generation has not killed Mr Brown's government in the way that Black Wednesday finished the Tories. But it could prove one of the thousand cuts that do.

This article is from The Economist Feb 21st 2008