The scale and spread of the historically unprecedented disintegration of the world’s financial system, and its impact on global markets is beyond the control of any one government. And now it is equally clear that no co-ordinated action is possible either.
Events of the last few days reveal how the financial and economic emergency is immediately being reflected in political turbulence. Iceland is set to become the first of many failed states to be added to the lengthening list of failed banks while the European Union’s “joint response” agreed on Saturday lasted less than 24 hours as Germany took unilateral action to guarantee 100% of all deposits.
This was chancellor Merkel’s panic reaction to the collapse of Hypo Real Estate, one of the country’s biggest mortgage and public sector lender. Germany and Austria joined Ireland and Greece in their attempts to prevent a proliferation of the queues that formed last year outside Northern Rock as people withdrew their savings.
In Britain, an embryo national government is taking shape, with all the major parties close to agreeing to hand over taxpayers’ money directly to bankers in return for not very much at all.
As the value of its currency melted away, Geir Haarde, Iceland’s prime minister, was trying to put together at least a partial rescue package for his country’s shattered banking sector. He asked the trade unions to bring back their pensions investments from overseas and to accept a wage freeze. Meanwhile, the Belgian government confirmed on Sunday it would sell the parts of Fortis which were not nationalised last week by the Dutch government to BNP Paribas, the French bank. Also on Sunday, the Italian bank UniCredit approved the raising of €6bn in new capital as it moved to shore up its defences against a sliding share price.
On Friday, the US administration scraped a yes vote for its wholly inadequate $700 billion bail-out plan for the banks only by privately threatening martial law as the likely alternative as the popular revolt grew. Stock markets continued to fall, because the traders know that there’s no way out of a deep recession. The richest state of all, California, is warning that it will run out of funds by the end of the month, unless the federal government comes up with some cash.
In Britain, Gordon Brown has handed responsibility for the economy to an emergency National Economic Council – which includes unelected executives of leading corporations. Among them is Sir John Bond, the former HSBC boss, who led the bank into billions of pounds of debt in America's sub-prime housing meltdown. Just the man you need. Also present will be Paul Myners, the new minister for the City. He is on the board of GLG Partners, which made huge profits by "short selling" shares in Bradford & Bingley, which collapsed last week.
The council meets today for the first time under the direction of the equally unaccountable and ennobled Peter Mandelson. Mandelson’s return to government is part of New Labour’s attempt to show that it is committed to saving capitalism at all costs. As fellow cabinet minister Ed Miliband put it on hearing the news: “I think British business will be thinking, actually, Peter Mandelson's a good person to be in charge of our interests in government."
Hundreds of millions of people are suddenly discovering that their lives are being turned upside down by the crisis. Anger is rising as they see governments trying to rescue the bankers, financiers, speculators and gamblers, doing “whatever it takes” to stabilise a failing system while jobs are lost, homes repossessed and standards of living plummet.
Rather than allowing New Labour to hand the economy to the capitalist corporations, the challenge is to create a new democratic politics, a movement that can replace the anarchic crisis-prone profit system with one based on planned production for need. AWTW’s Stand Up for Your Rights festival on October 18 is an important step in that direction.