The Tory website, Conservative Home, has hosted an attack on Socialist Economic Bulletin. That the Tories disagree with SEB is scarcely surprising. The way that it is done, however, tells a lot about the weakness of the Tories economic arguments.
One of the most invariable tests of whether an opponent is wrong is whether they are forced to distort the position they are criticising. If an opponent has a powerful and effective argument then the position they are attacking is presented correctly, clearly and coherently – because if you have a serious argument against something that is the most effective way to demolish it. If, however, your opponents is forced to distort your position that reveals that they cannot actually answer your argument – which is why they are forced to distort it.
Conservative Home has therefore decided to criticise SEB for proposing to: ‘Nationalise some of the banks without compensation to shareholders’.
Actually, of course, SEB has proposed no such thing. It has merely pointed out that it is highly likely that the value of certain existing UK banks, when the full extent of their current and future losses is revealed, will turn out to be zero – as it was with Northern Rock and Bradford and Bingley. For example, given that HBOS’s share price has fallen by more than 90 per cent, and the extreme depressive pressure that the proposed merger of HBOS and Lloyds TSB has placed on the latter’s share price, not merely SEB but very many operators in the market strongly suspects that the actual value of HBOS, as shown by the balance between its assets and liabilities, may well eventually turn out to be zero. Royal Bank of Scotland shows similar, if slightly less extreme, weakness. What Ken Livingstone said in SEB is that if the value of shares is zero then the taxpayer should not pay a price for them, but the government should: ‘announce it is ready to take over the functioning of any of the banks that turn out to have no value for shareholders. This means that deposits should be guaranteed but not shareholders.'
Paying no compensation for something which is worthless seems rather appropriate and uncontroversial. Does Conservative Home believe that compensation should be paid to shareholders for shares that are worthless? That would seem to take the general approach of the Conservative Party, that there should be market economics for the unemployed and socialist welfare state protection for shareholders and bankers, to a new extreme!
Is Conservative Home really arguing that taxpayers should pay out money to shareholders for shares that are worthless - it would be interesting to know if it would really defend that.
There are many more fundamental reasons for knowing that Tory economic policies are wrong but the fact that Conservative Home can't even address SEB’s position, but has to distort it because it is incapable of answering it, demonstrates yet again just how weak the Tories economic policies have become.