Is the reliance on the financial sector an inherent weakness of the UK’s liberal market economy?
The United Kingdom’s City is an internationally recognised financial centre. Given the predominance of the City, the UK’s economy finds itself accommodating to this active and volatile industry. Before discussing whether or not this reliance on the financial sector is an inherent weakness of the UK’s liberal market economy, two questions need to be explored: firstly, how liberal is the UK’s liberal market and; secondly, how reliant is it on its financial sector? This will be the focus of the first part of this essay and it concludes that with increasingly liberal policies becoming conventional wisdom in British politics, the continuing
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Banking activity was limited mainly to payment services, deposit and lending, funded for the most part by customer deposits. 35% of London’s clearing banks’ assets were held in cash and Treasury bills, a further 28% held in gilt-edged securities and customer loans only represented 30% of total assets (Davies et al 2010:322-3). However, a booming post-war economy with high levels of employment and rising levels of living standards, paved the way for a powerful banking system. It was fuelling a consumer-driven growth entirely funded by credit. ‘London’s financial sector would show both agility and inventiveness that would make its industrial counterparts look positively leaden-footed’ (Konzelmann et al 2014:83-4). This meant that, already in the 1950s, politicians were prioritising the City over other sectors and encouraging London to become an international centre for financial opportunities. Although the aim of the Bretton Woods agreement was to control international finance, the City found many ways to sidestep these requirements. As a result, Konzelmann et al argue convincingly that the spirit of deregulation was established in the UK long before the arrival of Margaret Thatcher.
The UK’s growth significantly reduces in the 1960s through to the 1970s. Post-war demands diminishes and the industrial sector, as a whole, becomes less competitive. Britain joins the European Economic Community (EEC) in 1973 exposing the