OPO
Again, I agree with your economic analysis but not with the political one; agreeing with economic cause and effect but not about at whom to point the finger.
Of course the banks were under-regulated and poorly regulated. From my perspective, all British governments over the last fifty years have done far too little to control capitalism. In doing so we have allowed the development of a fairly extreme form of capitalism that, whilst not identical to that of the USA, is sufficiently like it to justify the term Anglo-American capitalism. There are different ways of doing things. The economies of Germany and France, for example, follow rather different models of capitalism and many people in those societies see the banking collapse as a failure of precisely this Anglo-American capitalism. Under-regulation of the finance sector in the UK runs directly from Thatcherism, through the Major lacuna, and on through the New Labour years. Brown is as reprehensible as all the other chancellors in this. (A caller to a phone-in radio programme this morning reminded the audience that when profitability was high, and the country was enjoying "the good times" the government disastrously allowed businesses to take a "pension holiday" to avoid paying employer's contribution. I remembered this happening but I couldn't remember which government was involved. It could have any of them). Brown may have been worse than most due to the pathological fear of New Labour that they might be thought of as hostile to business, and thus be seen as just like old Labour, and hence unelectable. This is one of the main reasons why I have never voted New Labour.
On the question of bringing down the debt. Of course this needs to be reduced, in fact one of the notable things about Brown's early years as Chancellor was his bringing down of the National Debt; a policy for which he was attacked by people who couldn't see what the problem was as long as the UK could pay off the interest. I haven't heard anyone seriously arguing against debt reduction. Only the most naive would assume this could happen without hardship. The issues for disagreement are what should be speed and depth of debt reduction, and what the balance should be between this and economic growth. For eighteen months Ed Balls has been saying that the Coalition policy has got both issues wrong - and I agree with that. It is interesting that now even that orthodox neo-liberal institution the IMF is urging governments to put more emphasis on growth. The phrase "double dip recession" is appearing more frequently in discussions of market analysts.
You also use the analogy of individual/household economic action being like government/country action. I am very suspicious of any such analogies - but perhaps that's for a separate post.
