In a talk to black Londoners last night, American-born playwright Bonnie Greer remarked that we are witnessing the end of an era – the age of bling and its associated cultures. She is right. We have reached the end of the age of easy credit and growth-driven consumerism – along with all the illusions that went with it.
The ruling classes hope that the unprecedented £500 billion rescue package and interest rate cut announced by the New Labour government yesterday will stabilise the markets and prevent further gigantic meltdowns. But the biggest banking bail-out ever will certainly not prevent what the International Monetary Fund (IMF) describes as “a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s.” As the IMF’s chief economist has said: “The situation is exceptionally uncertain and subject to considerable downside risks.”
The bail-out may provide temporary relief and give Brown some political credibility. But underneath the hopes, everyone is aware that it is a short-term fix which relies on a confidence trick. In reality, bail-outs simultaneously create the basis for even greater defaults – that of entire governments. It is one thing for Iceland or Ireland to underwrite their banks, it is another for Britain or the US. They will also lead to tax increases, inflation and public spending cuts.
J.K Galbraith, historian of the 1929 Wall Street collapse, speculated in his famous book, The Great Crash, whether it would ever be repeated. He concluded that there was a built-in disconnect between a “regulated” form of capitalism and the reality of the markets. As all speculative bubbles have shown, there are no limits to corporate and individual greed, and the willingness of people to take risks. Events today have proved him right.
A crucial difference between 1929 and today, however, is that the forces of globalisation have made it impossible to localise capital or debt. Globalisation has drawn the world’s population together in an entirely new way. It is not an American, British or even Western crisis. The near-collapse of the US mortgage giants, Fannie Mae and Freddie Mac, meant that a fifth of China’s currency reserves were also endangered. In fact, China stands to lose more than any other country for a US financial collapse.
At least one financial journalist has noted the helplessness of governments around the world. Anthony Hilton of the Evening Standard remarked that “no one has ever seen anything like this before, so they are making it up as they go along. As a result much of what they have done so far has contributed to make things much worse.” Hilton proposes that the IMF should be enabled to deal with the crisis as a kind of “neutral” overseer. Governments unable to face financial meltdown on their own, would be backed up by “a global policeman” (Brown’s words). However, the resources of the IMF are puny in comparison with the estimated black hole of $45 trillion in fantasy finance which is haunting the US financial system alone. It is simply impossible for the IMF to stuff the genie of global debt back into the bottle.
People interviewed yesterday in the streets of London expressed their anger at being held responsible for a mess that they had not created. “Let those who made the mess clean it up”, was the reaction of one young worker. Let’s go a step further. Global capitalism’s seismic disarray can only be “cleaned up” by a democratic ownership and control of the financial and economic system itself. Let’s make this the dawn of a new era in which there is a real future for the majority.