The increasingly desperate attempts to bail-out the financial system in America and Europe have raised fundamental questions about economics and politics that were considered dead and buried not so long ago.
1. The “C” word is back. Nearly everyone (New Labour is an exception here) is talking about the fact that it is capitalism as a system that is in crisis, although remedies range from regulation to revolution.
2. Financial markets which were viewed as the source of endless wealth and easy money have lost their lustre and invincibility. They stand revealed as casinos and purveyors of fantasy finance.
3. The crisis has thrown into sharp relief the inability of capitalism to sustain itself without political support and intervention. So the markets by themselves cannot operate independently in some apparently weightless state.
4. The duty and role of the state is first and foremost to private banks and financial institutions to the detriment of taxpayers, workers and those threatened with repossession. This demonstrates unequivocaly that we are ruled by a capitalist state.
5. Democracy becomes an unaffordable luxury at times of capitalist crisis and the spectre of national government looms large, especially as all the major parties stand for the same thing.
These developments have undoubtedly produced a change in social consciousness, particularly in the United States . Opposition to the $700 billion buy-out of toxic debt with no known market value is vociferous and increasingly militant. The Bush plan is a massive transfer of wealth from the public sector in the shape of taxpayers to the private sector. The debt is being socialised and the profit privatised. Meanwhile, thousands of Americans lose their homes each day and join the dole queue.
Proving there is no real choice in capitalist politics, the Democrats are riding to the rescue of the beleaguered Bush administration. Obama, the Democratic candidate for the presidency, is lending his support to Bush while some Republicans cavil at the bail-out because their phones are ringing off the hook and they face re-election in November. In Britain, the Tories can hardly bring themselves to criticise New Labour because both parties are responsible for what is taking place.
For more than a decade, Blair and Brown governments followed their Tory predecessors in promoting the everyone-can-get-rich-quick spirit of globalised capitalism. House price inflation was seen as a good thing by governments because it seemed a way for everyone to get wealthy. When teachers and firefighters needed affordable homes, for example, they were encouraged to buy them with state financial support and the building for rent social housing programme was all but wiped out. So when Brown says that the “age of irresponsibility” is over, the hypocrisy meter registers off the dial, driven by the saving of Bradford & Bingley, the bank that funded speculative buy-to-let properties.
As for the bail-outs, hand-outs and pseudo-nationalisations – they won’t work. The global debt mountain has barely started to unravel and the economy is already in recession. What is taking place is unacceptable. Ordinary people are being informed that they have to stump for the bankers and for a crisis not of their making.
Another way is possible, however. Building an independent movement to challenge the capitalist state and its cosy relations with the banks and corporations offers a fresh perspective. This raises the revolutionary question of who should rule society: big business and finance or the people? Creating a new, democratic state to embody people’s power is, like other questions that were off the agenda for a long time, now not such a fanciful thing to consider.