Extreme cause for concern

10:24am Tuesday 25th March 2008

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"TRUST the markets" was a key phrase of Mrs Thatcher's era, though I don't recall whether she used it herself.

It meant instead of trying to run all aspects of the economy, governments should let "wealth creators" get on with it, with the minimum of interference.

This was pretty controversial stuff, what with the collapse of old industries and mass unemployment. But free market exponents could point to the abject failure of "command economies", with all enterprises directed by the State. The biggest disaster, arguably, was the implosion of the Soviet Union, bringing a catalogue of woes for its inhabitants.

And there's no doubt that many in this country have enjoyed unprecedented levels of prosperity since the free marketers kicked the post-war political consensus into touch - whether this meant buying their council house, borrowing to finance a business, or simply enjoying greater spending power.

But I suspect some aspects of the good times have never sat comfortably with many British people, particularly when it comes to those who have done best out of the booms. You only have to consider phrases like "Yuppies", "fat cats" and "sleaze" to gain a popular view of those thought to have their snouts too firmly in the trough.

Despite this, and the occasional indiscretions of "rogue traders", the debate hasn't really swung against the free marketers - largely because they could still claim that most people had never had things so good. But right now the City boys are pushing their luck. With the background of the credit crunch and potential recession around the corner, it almost beggared belief to learn that someone within the system had apparently sought to pull off a scam which would earn them a cool £100 million, while seriously undermining one of the country's most important banks, HBOS.

This comes when it must now be obvious to most people that if the economy is to survive without major trauma, confidence in the banking system must be maintained. This isn't a matter of high finance any more, as anyone who has tried to borrow money recently will confirm.

The HBOS "sting" was a bit like a horseracing insider betting against a favourite - except the insider set out to ensure his winnings by nobbling the said favourite, despite the danger this could ruin countless people who relied on it, and possibly even wreck the sport itself. The HBOS scam endangered thousands of employees and millions of mortgage-holders, so was hardly a victimless crime.

I was going to call it monumentally selfish and stupid, but then bethought myself that many people wouldn't regard acquiring £100 million as stupid. After all, it's a dog-eat-dog world, and that sort of nest egg would keep the recession at bay for the lucky punter involved. But it suggests very strongly that there is neither honour nor much communal feeling among some City workers.

Perhaps it also reflects arrogance, a belief that, to quote Mrs Thatcher slightly out of context, "there is no alternative" to the free market.

Trouble is, history suggests otherwise. About a century ago, global trade appeared so advanced one expert confidently predicted war between the major powers was impossible. What followed was the carnage of the First World War.

When it ended, governments tried to return to economic "normalcy", but when that failed people exposed to the ravages of the 1930s Depression lost faith in free markets and turned to leaders who promised to interfere in all sorts of spheres of life. These "command economies" included right-wing and military dictatorships, as well the communist model. Democracies became an endangered species. The ensuing struggle culminated in an even bloodier war.

If that seems rather apocalyptic, the point is that when people are hurt and frightened, they often turn to extremes. That's the ultimate danger posed by people like the HBOS "robbers", and that's why our political and financial leaders must sort them out - and quickly.