Keynes famously called for the socialisation of investment at the end of his General Theory, and many critics of the British financial system have echoed that call. But the task is a more subtle one, if the object of the exercise is to keep the merits of private ownership while reshaping the way it works. Thus the great challenge of the twentieth century, after the experience of both state socialism and of unfettered free markets, is to create a new financial architecture in which private decisions produce a less degenerate capitalism. The triple requirement is to broaden the area of stake-holding in companies and institutions, so creating a greater bias to longterm commitment from owners; to extend the supply of cheap, longterm debt; and to decentralise decision-making. The financial system, in short, needs to be comprehensively republicanised.
The first breach would be made by establishing a republican-style central bank which understood that its role was to recast the financial system as a servant of business rather than as its master. Financial freedom would no longer be taken as axiomatically good but as a privilege which has to be earned, and which carries obligations. As matters stand the current Bank of England is a permanent obstacle to financial reform: a precondition for any wider reconstruction of the financial system is a transformation of its constitution, mission and values.
The Bank's structure would match the new federal structure ...