Banks must find new interest

Banks have made us a better country and strengthened our economy beyond measure. Not an opening gambit destined to win one dozens of friends and admirers these days – but certainly true. Our economic system, which has brought us widespread affluence and wellbeing over recent decades, is unthinkable without the motor of usury. The capacity to borrow money at a reasonable interest rate to grow a business has been central to capitalism's enormous capacity to innovate and grow. As a result, banking has played a central role in generating enough surplus wealth for previously unimaginable advances in medical science, universal education and mass cultural endeavour. Maybe this is what Lloyd Blankfein had in mind when he told us that Goldman Sachs was doing "God's work" . So far, so obvious. But it is worth restating because the current debate about banking seems increasingly shaped by the notion that banking is an evil and destructive beast that needs to be forced back into its cage. Of course, banking has shown its monstrous aspect in recent years, and we certainly need policies to restrain that. But all the proposals on the table – living wills, Glass-Steagall type affairs, taxes and curbs on bonuses, higher capital requirements – are largely designed to prevent a repeat of 2008, rather than have a different type of banking in full operation by 2018. We are thinking a great deal about disposing of Mr Hyde and not enough about reviving Dr Jekyll. Part of the problem is that it is hard to rethink banking without a clearer vision of the type of economy we want to create in this post-crash era. The government's recent Going for Growth paper attempted to link a more visionary investment approach to the hope for a growth economy, based on up-and-coming sectors such as life sciences, digital, low-carbon and advanced manufacturing. But something more profound and inspirational is needed. One enormous strength of the UK as we enter a fiercely competitive global market is its celebration of diversity and independent-mindedness. In a world increasingly shaped by highly segmented and fast-moving markets where constant innovation is key to survival and growth, those economies that can release the chaotic creativity of its population will be at a huge advantage. We need to be constantly aware that with the rise of trends such as open source, successful invention is no longer the sole preserve of the lone boffin or the corporate R&D department, but is a population-wide affair. This is where banks can begin to rethink their role. Just as banks were reinvented some years after the Wall Street crash as the solid underpinning of post-war mass markets, perhaps today they need to reposition themselves as the visionary backers of the "app generation" and all they could bring for the UK's future economic success. This can't be just a PR exercise. It really does mean developing new investment approaches, building new networks and markets, and taking on different types of risk. But most fundamentally, it means proving to the British people over coming years that the banking sector is genuinely there to serve the UK in a new economic era and not just the interests of a self-interested elite.