These are the ideas that have sustained the economic and political debate since the crisis blew up in 2007. Those tied to the for-profit economic model, which includes most parliamentarians, took their cue from rafts of self-styled “economists”, analysts, commentators. They had in various ways blamed the removal of regulation during the Thatcher/Reagan years for the gaseous, balloons of dodgy credit that enveloped the world during the globalisation decades.
Of course, the chorus of disapproval only started when the burden of mortgage and credit card debt became unsustainable and the payment defaults detonated the balloons’ volatile contents. Until then, the world was in thrall to New Labour’s friends in the City, and the Blair/Brown triumphalism that trumpeted “the end of boom and bust”.
Diamond is pretty much the apotheosis of spokespersons for the capitalist class and he wasn’t pulling any punches when he said that the time for “remorse and apology” was over. In asserting that banks should be allowed to fail, he issued a sharp slap in the face for the whole process of bailing them in the first place.
This led governments and central banks around the world to massively expand their debt and pass the responsibility for repaying it on to their unwilling and increasingly unruly populations, their children and their children’s children, if the system is allowed to continue.
And if banks should be allowed to fail, so, it seems, should the countries who’ve tried to bail them out, or have been caught up the global debt tsunami. Portugal is in line to follow Greece and Ireland.
Philip Augar, author of The Greed Merchants: How the Investment Banks Played the Free Market Game puts it as clearly as you could want
High bonus payments are a symptom of a problem, not its cause. The banking settlement was deficient because it did little to address the asymmetries in the universal banking business model. This model causes investment banks to jeopardise global financial stability in bad times whilst allowing bankers to cream off film star compensation in the good times. The global reforms have done a bit to improve financial stability but almost nothing to constrain the profitability that produces the bonuses. That profitability arises from a business model that gives banks in general and investment banks in particular the best possible view of global economies and markets. They are able to use this information advantage to load the dice and generate super-profits. This is where the bonuses come from and this is why the banking lobby worked so hard and so successfully to defend the model.
The “business model” Augar is talking about is profitability. So now is the time to ask the question of questions: why do we need to organise the whole of society around the for-profit business model? The spectacular failures of the last three years are signs of a system at the end of its days.
Rather than trying to prop it up, at an unbearable cost to billions of ordinary people, we must put it behind us, setting our minds to the future of a society that produces for the needs of everyone, not the bonus-yielding super-profits for a few. That is the agenda for a global network of People’s Assemblies.
Gerry Gold
Economics editor
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