Hopes of a recovery in the health of the banking sector and the real economy look more like pipe dreams in the wake of worse than expected figures from Lloyds and Northern Rock. Both sets of losses reveal the impact of the deepening recession.
Financial institutions worldwide are now suffering the second wave of destruction of value since the crisis erupted in 2007. The first wave was triggered by the end of the credit-induced boom as consumers reached the limits of their ability to pay the interest on their mortgage debt. The most exposed to the pyramid of fantasy finance built upon sub-prime loans were the first to be hit and the result was the closure of the credit markets.
The vast sums poured into the financial sector by central banks and governments last year in an attempt at a globally co-ordinated programme to restart lending came to nothing. Rather than disappearing into a black hole as some said, the money has found its way into the gambling houses of the world’s soaring stock markets and is once again driving commodity prices up. These are the figures that are used to bolster belief in a recovery.
Lloyds’ losses of £4 billion are worse then the most pessimistic of expectations, partly as a result of its exposure to the sharp and continuing deterioration in the commercial property market. New Labour’s fabled asset protection insurance scheme designed to help banks by nationalising their losses and passing the cost to taxpayers has also come to nothing, as neither RBS nor Lloyds have fulfilled their promises to sign up.
As businesses fail, jobs are lost and unemployment soars no-one should be surprised that Northern Rock is suffering a greater exposure to mortgage payment default than the rest of the industry.
As the crisis deepens, corporate employers and the capitalist state that stands behind them must attempt to rescue their economic system and pursue a return to profitability by intensifying the elimination of excess capacity in the real economy. They will stop at nothing to achieve this aim.
Yesterday, Vestas, the Danish wind-turbine company won a court order for the bailiffs to end the workers’ occupation aimed at preventing closure of their factory on the Isle of Wight in the UK. Earlier in the day, in South Korea, police commandos descended from helicopters onto the roofs of the Ssangyong car assembly plant in Pyeongtaek, about 80 km south of the capital Seoul, to try and break the occupation by workers trying to protect their jobs. The police commandos stopped short of trying to storm the paint shop after fierce resistance from the workers inside, who were armed with metal pipes, firebombs and projectiles launched by catapults.
As the crisis deepens and workers are forced to fight for their livelihoods they will increasingly find themselves confronted by the capitalist state and its forces. In Britain, this takes the form of the courts, the police and bailiffs and the government. All are dedicated to upholding the legal right to private property – the basis of capitalist exploitation.
Now we must move beyond protest, turning our attention to composting the capitalist economic system and the state which defends it. In the end, “their” property has to become ours if we are to tackle the economic crisis in the interests of ordinary people and not the rich and powerful.