The genie's out. Now they've shown what can be done

For once, Gordon Brown's soundbite undeniably matched the occasion yesterday. The £500bn breakfast bail-out of Britain's banking sector really was "bold and far-reaching" by any measure. With its announcement of the part-nationalisation of the heart of the country's financial system, the government delivered the funeral rites on the corpse of high Thatcherism - strangled to death by the very monsters it brought forth from the deep in the reckless frenzy of Big Bang deregulation more than two decades ago.

Both the scale and the speed of the intervention were an object lesson in the power of government to shape and change the rules of the economic game. After a generation during which any suggestion of interference in the magic garden of City finance has been treated as destructive heresy, the rescue plan is a telling demonstration of the vast potential of public action - as well as that, in the words of the celebrated former British industrialist Arnold Weinstock, "there is no such thing as a free market".

By taking a major public stake in the most strategically decisive sector of the economy, the government has finally broken the spell of private prerogative and the primacy of the market realm. Unlike the already-failing US Paulson plan, this rescue is based on the principle of cash for public equity. For all its weaknesses, the new package has brought the need for greater democratic control of economic life into sharp relief, as the catastrophic cost of the private sector's stewardship of finance for the rest of the economy makes the case for the social ownership of the banking system more powerfully every day.

But the chorus of approval from the very people who have brought the banking system to the edge of collapse - along with the CBI and the Conservative party, which enthusiastically promoted its disastrous deregulation in the first place - should be a warning. Despite the £50bn worth of minority ownership stakes Brown and Alistair Darling are planning to take in the country's biggest banks, these are non-voting preference shares with no formal say in the running of the institutions or the appointment of their managements.

http://www.guardian.co.uk/commentisfree/2008/oct/09/banking.banks