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LONDON—One of the cornerstones of Marxist-Leninist thinking is that the state should control the “commanding heights” of an economy—industry, agriculture, infrastructure, and, perhaps above all, money and banking. That vision has largely perished, with one gaping exception. Government remains omnipotent in the financial system, not only on Wall Street or Threadneedle Street, but far beyond. Across the world, the state weighs in on all sides of the ledger, insuring both a bank’s assets (mortgages and loans) and its liabilities (deposits). State intervention in banking ranges from muscular day-to-day regulation through to crisis-time bailouts, and is an entirely accepted feature of the financial system. Financiers complain about excessive red tape, because that is what all businessmen do. But absent the state’s involvement in their sector, it is a safe guess far fewer would still be gainfully employed following the carnage of...

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