Mark Carney isn’t due to move from being governor of the Bank of Canada to governor of the Bank of England until next July. But the intensity of the global economic crisis is so severe that policy makers can’t wait that long.
Chancellor George Osborne, who tempted him here, and the other beleaguered leaders of the capitalist world are prepared to discuss Carney’s ideas and put them into effect as soon as possible – preferably before the likely effects begin to be appreciated by those who’ll suffer the consequences.
Since the global crash in 2007/8, the top financial and economic brains in the world have tried everything they know to bring about a recovery. The shock of seeing the sudden shutdown of the credit markets bringing world trade to a virtual standstill after the decision to abandon Lehman Brothers prompted emergency action.
Governments encouraged central banks to pour trillions of every currency into the world’s financial institutions and, it must be admitted, the treatment had an effect. The patient’s heart was restarted. But capitalism has been on life-support ever since. The system has drawn its energy from the millions suffering the effects of “austerity” – soaring unemployment, falling incomes, smashed up pensions, wrecked health and social care.
Interest rates offered by central banks have been held at historic lows for years now, hovering just above zero – but below inflation, so negative in real terms. Low rates paid to savers mean the few people lucky enough to have any, have seen the income from their savings decline. The majority with debts to service find above inflation rates charged driving them further into poverty. It’s a deliberate policy called “financial repression”.
So what’s Carney’s big idea, and why is it so attractive? Does it really amount to a revolution as the Financial Times suggests?
Put simply, Carney says that its time to turn the attention from keeping inflation at bay to a more positive focus on promoting growth. The new target should be based on “nominal gross domestic product” – which brings growth and inflation together in a single figure.
It’s a way of convincing themselves that governments and their central banks can turn their attention from just rescuing the financial system to “prioritising growth”, by which they mean furthering the interests of the global corporations. It’s a refrain shared by the newly-elected centre-right government of
led by prime minister Shinzo Abe.
But Carney and friends fail to understand that whatever the subjective intentions of the central bankers, or anyone else wishing for a “return to growth”, the objective conditions of the capitalist economy are what determines their actions. After several decades of growth stretched way beyond its natural limits by the deregulation of the credit system, the crash simply announced that the only way is down.
As the capitalist tide ebbs away, it continues to exposes the desperate measures taken to sustain profits, whilst millions suffer. UBS has joined Barclays in paying fines to the regulators for fixing LIBOR – the world price of financial contracts – so that it favoured them and their clients. As the regulators summed it up: “They manipulated UBS’s submissions in order to benefit their own positions and to protect UBS’s reputation, showing a total disregard for the millions of market participants around the world who were also affected.”
No surprise there.
In its article on Carney, the Financial Times actually quotes Lenin’s famous dictum that “a revolution is impossible without a revolutionary situation” to try to stand up their story. The situation is indeed pregnant with revolutionary possibilities – but not as the FT means.
In December 1917, Lenin drafted a decree for attention of the revolutionary government. It called for joint-stock companies and the banks to be taken into social ownership. Something to consider over the holidays.