It is not long since Prime Minister Brown announced a £400 billion bail-out package including a £37 billion gift to the banks, but the big lie has already been exposed. The story a month ago was that the government and the Bank of England were going to do whatever it takes “to maintain the stability of our system and to make sure that there is stability for families and for businesses right across our country”.
In reality, capitalist governments in the UK and in the rest of the world are unable to anything effective to stop or even offset the impact of the global slump. Sales by leading retailer John Lewis dropped 9.8% on the year. Shares in Asia and Europe fell on Friday, heading for their worst month ever, anticipating a deep and long lasting downturn. In a renewed desperate attempt to stave off the worst effects, Japan cut interest rates for the first time in seven years on Friday, expecting severe stress in the global economy to persist, while banking giant Barclays said it was raising £7.3 billion in capital.
The failure of the package of taxpayer-funded public sector debt to deliver the credit needed by small companies and individuals reveals the governments’ total subservience to the privately-owned finance sector. In keeping with their requirement to make profits, as economic conditions deteriorate lenders are tightening terms, making borrowing less available and more expensive.
Despite the shouts of glee from the supporters of state intervention and delight from some over what they dubbed “nationalisation” of the failing banks, including Northern Rock, Royal Bank of Scotland, Lloyds TSB and HBOS, there were no constraints or requirements of any kind placed on how the money should be spent.
Even Vince Cable, the Liberal Democrat Treasury spokesman, has been able to denounce the government’s “utterly pathetic” position, saying: “The whole point about this deal with the lenders was that there was supposed to be a tough quid pro quo. It’s perfectly obvious now that the banks got the quids and there’s no quo.”
As events unfold, Brown and Chancellor Darling are reduced to begging at the rich men’s table. On Thursday, Darling admitted that the government’s requirement that the banks make lending available at 2007 levels simply means “the pool of money is there”. Decisions on whether to lend that money, and at what cost, remained with the banks. “In any banking operation, whether it is lending to individuals or to businesses, there must be discretion,” he said. And Brown added “I urge banks not to change the terms and charges for existing lending to small and medium-sized enterprises.”
In operating the real, brutal laws of the busted capitalist market, the bankers have a far better grasp of what is required than Brown or Darling. “We don’t sense any purpose in providing small businesses with loans that they cannot afford to repay,” said Eric Leenders, executive director retail, at the British Bankers’ Association.
What better reason than this could there be to end the operation of a system of fantasy finance that exists solely to extract value produced by workers in the real, productive economy in order to distribute it as profits to shareholders and dreamland bonuses to City traders? The profit-serving banks should be turned into mutually-owned, democratically controlled not-for-profit institutions. Then decisions can be taken and implemented on how to best provide the essential financial services needed to build an equitable and environmentally sustainable economy.