This week Europe has been on the brink, with a financial crisis that threatened to take a turn for the worse. Surely it illustrates the power of financial markets as they pass judgement not only on individual companies or banks, but on countries as well.

Yet markets themselves don't really exercise this power; it comes via the ideas held and decisions taken by many thousands of people who trade regularly. While hysteria is often observed in markets, changes in the prices of bonds (in this case) often reflect a sober and conservative assessment of how sustainable a country's debt position is. In the case of Greece the conclusion has been: not very sustainable at all. Hence the crisis talks this week, as political leaders attempted to take control of events and deal with fundamental problems.

The exercise of power in the UK has been under much scrutiny this week. The scrutiny of the media by politicians, previously a relatively untouchable sector of our society, has revealed some unpleasant facts and called into question our national reputation abroad and the way we view ourselves. As Ed Miliband noted in a speech on Monday, the scandal has exposed the ‘irresponsibility of the powerful'.

The Labour leader saw in the behaviour of the powerful a link between the banking crisis, the exposure of MP expenses, and the current NewsCorp scandal. We might say that where an institution is unchallenged or allowed to operate with limited transparency its members' worldview risks becoming detached from the values held by the wider society in which it sits. We are seeing this as we learn more about how some journalists have operated. We learnt this when the expense claims of some MPs were revealed. And we certainly experienced the impact of this danger when the banking crisis struck.

Earlier this week the Commons Treasury committee published its report on the Independent Commission on Banking. The Treasury committee looked into the ICB's interim report and made some suggestions for the ICB as it prepares its final report for publication in September. The financial crisis saw our banking system head for near collapse as its exposure to high-risk securities and its excessive borrowing risked plunging world economies into depression. The UK, with its large financial sector, saw taxpayers bail out the banks, exercising the implicit guarantee by which we (taxpayers) had been supporting a sector which had long since become detached from those on whom it relied when faced with a financial abyss. The Labour government of the time took the right actions, against opposition from the Conservative party of course. For the UK it could have been worse; we could have faced the same debt burden Ireland is struggling with.

The ICB was established to find new ways to promote financial stability (and reduce the need for a taxpayer guarantee in future). Regrettably, its interim report gave little attention to major structural reform ie separating banking activities. It preferred instead ringfenced capital structures within large banks. The Treasury committee asked it to look again at fundamental structural reform.

Unfortunately even now much of the banking sector ‘doesn't get it'. Some in the sector still cannot understand why the public remains so angry and critical of the excessive pay awards bank executives continue to award each other. This is why structural reform is required; better regulation or halfway measures will not suffice for a sector which has proved too many times that it cannot control the way it exercises the immense power it wields.

There is of course a parallel here with the way we should approach the media. Better regulation is essential, but not sufficient. Internal structural changes to media groups designed to limit the exercise of power are of limited use. It is better to look again at structural reform to improve transparency and accountability, and to disperse power.

Curiously, no political party is listed among those who submitted responses to the ICB's interim report, which seems strange given that the role of banks is fundamental to the future of our economy. I wrote a submission for the Christian Socialist Movement, which is published on the ICB site. CSM continues to stand in the tradition of RH Tawney, who argued for economic power to be more fairly distributed in society. Will Labour's policy reviews take a position on bank reform or simply roll with whatever solution is proposed in September? And as the debate about the future shape and role of the media continues, Labour needs to build on its good work here and ensure we have answers for the future as well as questions about the past. 

This article was first published by Progress on 22 July 2011.