They were all in it together, not just Goodwin

At last! Something we can agree with Labour’s former chancellor, Alistair Darling, on. Fred Goodwin (formerly Sir) should not be singled out by the establishment.

Goodwin certainly had a big hand in the virtual destruction of the three-century old Royal Bank of Scotland, but he was far from alone in his responsibility for the causal chain of events that brought the global financial system to the brink in 2008.

There’s an entire class of people whose positions should be on the line for allowing and encouraging the massive expansion of the system of credit and debt.

The Financial Services Authority, the toothless body created by the previous government, cheered from the sidelines as balance sheets more and more resembled a house of cards.

Darling’s New Labour government was at the forefront of ensuring London’s role as the base for the world’s banks and other gambling houses.

But can any of them be blamed for doing their jobs? Surely they were just doing what was necessary to keep the economy on the growth path? Yes indeed.

Having thrown in their lot with capitalism - the social and economic system that distributes profits extracted from the value-generating activities of those employed in the production of commodities to otherwise disinterested shareholders - they also became its playthings.

But it was their choice, and they are collectively responsible. And as the crisis intensifies it exposes more of those who constitute that collective web of responsibility.

Now the inner logic of the system has brought 25 of the 27 governments of the European Union together in a most terrible Faustian pact.

What they are calling a “fiscal union” is a drawing together of the otherwise helpless in an unprecedented assault on their populations. Their intention is to ensure that the entire population of Europe gets to experience the austerity conditions already wrecking the lives of the 50% of young people without jobs in Greece and Spain.

And all with the objective of a “return to growth” at some time in the distant future.

So what are the prospects?

Fresh from chairing the global economy session at the World Economic Forum in Davos, eminent Financial Times commentator Martin Wolf has this to say about the fiscal union:

“The IMF now forecasts a recession in the eurozone this year, with a decline of 0.5 per cent in overall gross domestic product. GDP is forecast to fall sharply in Italy and Spain, and stagnate in France and Germany. This is a terrible environment for countries seeking to cut fiscal deficits. Forecasts are far from satisfactory for other high-income countries. But the eurozone is the most dangerous part of the world economy: only there do we see important governments – Italy and Spain – menaced by a loss of creditworthiness.”

And in a chilling forecast, Wolf looks back to guess at the future:

“Just as it was not the dominant cause of the collapse, but rather sloppy lending and improvident private borrowing, so fiscal discipline is not the cure. This attempt to vindicate the catastrophic austerity of Heinrich Brüning, German chancellor in 1930-1932, is horrifying.”

A repeat of the ensuing events in Germany is indeed horrifying to contemplate. There can’t be such a repeat. The debt-fuelled growth that produced global corporations more powerful than any single country means that today’s crisis affects all countries simultaneously.

The capitalist system of production and its inseparable financial twin have been on life-support since 2008. It’s time to pull the plug.

Young, workers, the unemployed, students and older people must now draw together in a global network of People’s Assemblies. They can establish the power not only to settle accounts with those responsible for the crisis but build a society motivated by meeting human needs in place of the narrow interests of shareholders.

Gerry Gold
Economics editor