The bankruptcy of 'politics'

The failure of a second state bail-out to resuscitate the corpse of British banking, as Lib Dem spokesman Vince Cable so eloquently put it, is a dramatic indication that the entire financial system is close to the precipice. With this looms the increasing possibility of state bankruptcy and an end to what now passes for conventional politics.

Britain now faces the distinct prospect that the present financial impasse will precipitate a collapse in day-to-day economic activity, which would produce immediate social anger and fear. If this were to happen, it is impossible to see the political landscape remaining unchanged. 

An authoritarian national government of the major parties is an outcome that cannot be easily ruled out. Such a regime could use existing draconian powers to suppress dissent alongside the declaration of a state of emergency. It would have to rely heavily on the police and the army to maintain order. 

Those of you who think this is simply a fantasy projection of someone who has read too many political thrillers have to answer the following questions: What happens when the state is unable to influence economic and financial events to the extent it can’t prevent the collapse of the banks, even by writing them a blank cheque? What are the consequences if Britain becomes “Iceland-on Thames”, needing a loan from the International Monetary Fund, or goes bankrupt, as economist and writer Will Hutton and others are now suggesting? 

What will be the impact on social order if millions are thrown out of work overnight?  And what are the implications of an unstoppable run on the pound, which gathered pace today, with Jim Rogers, the co-founder of Quantum fund with George Soros, telling Bloomberg News that “I would urge you to sell any sterling you might have”?

The fact is that we have entered a period of the unknown in British and world politics, where conventional or even unconventional policies cannot alter the course of the recession, which is now rapidly turning into a slump. Who could have predicted that the Royal Bank of Scotland’s shares would fall by 65% in one day to 12p each and that its losses for 2008 would total £28 billion? Or that banks which financed loans to British consumers and companies by borrowing on global markets would no longer be able to do so? 

As Anthony Hilton, leading financial commentator for the London Evening Standard, put it: “The fall from grace not just of the banking system but the global economy is unprecedented in its suddenness, its pace and the extent of the decline. There is no bottom in sight yet. In this regard, today's developments, momentous though they are, will not change much. To avoid economic disaster you need solvent banks. But on its own, those are not enough. You also need confidence.”  

Government ministers may rage at the banks for their reckless behaviour but the long and the short of it is that the expansion of the financial system ran alongside the rapid growth of the global economy, where consumers had access to buy goods they could barely otherwise afford. At the same time, the financial sector carried the economy – while producers of commodities struggled to make a profit – rewarding shareholders and providing employment for millions. 

New Labour cheered at every increase in house prices and consumer spending, claiming that capitalism had entered a new golden age. Well, it turned out to be a new iron age. Cheap and easy credit vanished and that exposed almost immediately the unsustainable nature of corporate-driven globalsation and the capitalist economic model. 

Now ordinary are people paying the price, whether they are taxpayers, workers facing the dole, people losing their homes, the retired dependent on interest from savings or pensions, or the school and university leavers without a future at all. The government has given the Bank of England permission to start printing money, the so-called nuclear option, in an attempt to get people spending and revive the economy. When that desperate last throw of the dice fails, as it surely will, the political and economic crisis will merge into one with all that implies.  

Paul Feldman
AWTW communications editor

Too much 'civilisation'

Nothing sums up the insanity of the capitalist system more than unemployment. Just think about it. People want to work; the means of production like offices, shops, factories, plant and equipment all exist; yet all of a sudden, workers are thrown on the dole.

People desperately need affordable housing, for example. Yet tens of thousands of building workers have lost their jobs this year, developments have been abandoned and stockpiles of bricks are growing. And so does homelessness. The causes are not difficult to establish and lie right at the heart of capitalism.

Developers and house builders can’t make a profit because house prices have soared beyond many people’s reach and sales have slumped; the banking system has seized up so there are no mortgages in any case; and levels of personal debt weigh like millstones on the population’s necks. So, no profit equals no building work equals unemployment.

While the bankers are bailed out to the tune of £37 billion – with taxpayers’ commitments possibly rising to £3 trillion – the people who actually do the work and create real wealth as opposed to fantasy finance, are discarded without as so much as a by your leave. No bail-out for them!

Long quotes from 19th century philosopher-revolutionaries can be a bit dry and seem remote from 21st century global capitalism. But when you read what Marx and Engels had to say in 1848 in the Communist Manifesto, you are struck by how fresh their summary of capitalist crisis is:

Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells. For many a decade past the history of industry and commerce is but the history of the revolt of modern productive forces against modern conditions of production, against the property relations that are the conditions for the existence of the bourgeois and of its rule.

It is enough to mention the commercial crises that by their periodical return put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of overproduction. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why?

Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce. The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property. The conditions of bourgeois society are too narrow to comprise the wealth created by them.

Brilliant! The productive forces are too powerful for the system of private ownership of the means of production. So they must be and are destroyed, jobs included. This what bringing “stability” back to the banking system actually means in practice. The case for reorganising society on co-operative, not-for-profit lines has never been stronger. That would give us the control over resources to keep people in work and meet basic needs like housing. Creating the means to turn the old order upside down is the immediate challenge.

Paul Feldman
AWTW communications editor

End of an era

In a talk to black Londoners last night, American-born playwright Bonnie Greer remarked that we are witnessing the end of an era – the age of bling and its associated cultures. She is right. We have reached the end of the age of easy credit and growth-driven consumerism – along with all the illusions that went with it.

The ruling classes hope that the unprecedented £500 billion rescue package and interest rate cut announced by the New Labour government yesterday will stabilise the markets and prevent further gigantic meltdowns. But the biggest banking bail-out ever will certainly not prevent what the International Monetary Fund (IMF) describes as “a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s.” As the IMF’s chief economist has said: “The situation is exceptionally uncertain and subject to considerable downside risks.”

The bail-out may provide temporary relief and give Brown some political credibility. But underneath the hopes, everyone is aware that it is a short-term fix which relies on a confidence trick. In reality, bail-outs simultaneously create the basis for even greater defaults – that of entire governments. It is one thing for Iceland or Ireland to underwrite their banks, it is another for Britain or the US. They will also lead to tax increases, inflation and public spending cuts.

J.K Galbraith, historian of the 1929 Wall Street collapse, speculated in his famous book, The Great Crash, whether it would ever be repeated. He concluded that there was a built-in disconnect between a “regulated” form of capitalism and the reality of the markets. As all speculative bubbles have shown, there are no limits to corporate and individual greed, and the willingness of people to take risks. Events today have proved him right.

A crucial difference between 1929 and today, however, is that the forces of globalisation have made it impossible to localise capital or debt. Globalisation has drawn the world’s population together in an entirely new way. It is not an American, British or even Western crisis. The near-collapse of the US mortgage giants, Fannie Mae and Freddie Mac, meant that a fifth of China’s currency reserves were also endangered. In fact, China stands to lose more than any other country for a US financial collapse.

At least one financial journalist has noted the helplessness of governments around the world. Anthony Hilton of the Evening Standard remarked that “no one has ever seen anything like this before, so they are making it up as they go along. As a result much of what they have done so far has contributed to make things much worse.” Hilton proposes that the IMF should be enabled to deal with the crisis as a kind of “neutral” overseer. Governments unable to face financial meltdown on their own, would be backed up by “a global policeman” (Brown’s words). However, the resources of the IMF are puny in comparison with the estimated black hole of $45 trillion in fantasy finance which is haunting the US financial system alone. It is simply impossible for the IMF to stuff the genie of global debt back into the bottle.

People interviewed yesterday in the streets of London expressed their anger at being held responsible for a mess that they had not created. “Let those who made the mess clean it up”, was the reaction of one young worker. Let’s go a step further. Global capitalism’s seismic disarray can only be “cleaned up” by a democratic ownership and control of the financial and economic system itself. Let’s make this the dawn of a new era in which there is a real future for the majority.

Corinna Lotz
AWTW secretary

One law for the rich...

The global credit crisis provides unparalleled opportunities to expose not just the failure of capitalism as an economic and financial system but also to confront governments like New Labour that are desperately trying to keep the show on the road, whatever it takes.

Ordinary people in financial difficulties as a result of losing their jobs, rising loan charges or lack of credit are left to their own devices. They are at the mercy of the very same banks that are being lined up for a massive hand-out. Increasing numbers of people’s homes are being repossessed while the bankers form a queue for state aid. As the old proverb goes, it’s one law for the rich and another for the poor.

The financial meltdown thus has the merit of clearing the air in a political sense. Who can deny now that the New Labour government is a corporate and bankers’ regime, which is deploying the power and resources of the capitalist state to try and save the system from itself? Where are the differences in outlook between New Labour and other capitalist parties like the Tories or Liberal Democrats? You can use a microscope if you want, but you won’t discover anything significant.

In these circumstances, there is absolutely no point in focusing protest and pressure on the New Labour government in the hope that it may somehow, in some miraculous, semi-religious fashion, undergo a conversion and become anti-capitalist. New Labour is what it is and has been since the Blair/Brown/Mandelson counter-revolution that began in the early 1990s. In fact, the cabinet reshuffle has only strengthened its business orientation.

Of course, this situation throws up its own problems. The conventional political approach on the Left has always been to make demands of government, especially ones elected under a Labour banner. As such an approach is today absolutely unrealistic and may even unwittingly reinforce the fast-disappearing credibility of New Labour, a new line of attack is required.

The labour and trade union movement should therefore seize the chance created by the crisis to campaign against the government, in the spirit that workers fought the Callaghan government in 1978-9, whose policies opened the door for Thatcherism (and later, Blairism).

Such a campaign could easily show how the crash of 2008 arises from a system based on the ruthless pursuit of profit and that alternatives are urgently needed. Policies developed in opposition to a bankers’ bail-out would raise the possibility of reorganising the economy along not-for-profit lines. This could best be done by revisiting some well-established principles in the light of conditions transformed by corpoate-driven globalisation.

They could, for example, incorporate new forms of democratic power in opposition to the authoritarian, capitalist state. Democracy could and should be extended through co-operative forms of ownership and workplace control of major corporations, enterprises and services. Restoring the right to strike and freedom for trade unions along with new social rights would be essential. Those Labour MPs like John McDonnell who are opposed to the government, could seize the initiative and demand that trade union leaders adopt this strategy and mobilise their members.

As to who is to implement such a programme, this extremely important question will need to be raised as part of the building of an independent movement against this government and the other parties waiting in line to either take over or join a coalition. As New Labour is patently not the vehicle for revolutionary (or even reformist) change, new political solutions will be elaborated and discovered in the course of building support for the campaign. The importance of taking the first steps along this path cannot be over-emphasised.

Paul Feldman
Communications editor

Celtic Tiger defanged

With unemployment rising by over a third in the last year as recession bites in and with a national debt of €45 billion, the Irish government is guaranteeing the bank and building society deposits to the tune of a staggering €400 billion. That’s equivalent to €100,000 for each man, woman and child!

Just don’t call it nationalisation for heaven’s sake. it is merely a temporary measure to “restore balance to the economy” amid assertions that the banking system is still fundamentally sound. This aid guarantees the banks for just two years after which time they will have to pay it back and taxpayers will be remunerated, or so they say.

This emergency action by finance minster Brian Lenihan on behalf of the government is not original, it is not sensible and will probably be disastrous in the longer term. But such considerations have never stopped neo-liberal administrations from protecting the interests of profit-generating capitalist concerns in the past and they’re not stopping them now.

The €400 billion seems a vastly disproportionate amount of money, to put it mildly, for a country with a population of just over 4 million that, geographically speaking, would leave barely a ripple if it were to be dropped into Lake Michigan. But after a decade of burgeoning growth with property prices in particular being wildly over-valued, driven largely by lending institutions dishing out mortgages at several time the incomes of putative buyers, and with property developers and speculators given free rein to overheat the whole economic pot to such a degree that when the inevitable boiling point arrived, emergency temperature regulation seemed the only solution.

The Celtic Tiger is being defanged and it hurts. It all began when our old friend “sub prime” crashed the party last year and began to bring the festive house of cards tumbling down. But there’s worse to come because American investment in both the South and the North of Ireland is immense. So large scale withdrawal by U.S. corporations which is now more than likely, will help to send the place reeling back to the bad old days of recession and high unemployment.

Memories of the “bad old days” in Ireland are still fresh despite all the recent glitter, and behind the optimism there was always the niggling anxiety that all the fevered consumption and all the short-termism would somehow, some day have to be paid for. The days of reckoning appear to have arrived. Or maybe not, because after all money is flooding into Irish banks already. Investors large and small in Britain are moving their assets to the six large Irish financial houses now in the process of being shored up. But now Greece, not exactly an economic powerhouse, has joined the bail-out stampede and is also “guaranteeing” deposits!

Back in Ireland meanwhile, as unemployment continues to rise and living standards fall there is nowhere else to go, for that old spectre and saviour, emigration, is now no longer feasible. The ocean of bad debt, economic downturn and subsequent recession washing over the U.K and the U.S. has seen to that.

The mood has been stoical on the whole, but people are getting angry and finally waking up to the possibility that there must be other ways out of the debacle. Minds are being concentrated, so now is a time like no other for the left to rise to the challenge and point out clearly all the ways capitalism has served the many so badly for the benefit of the few, and to demonstrate the numerous alternative and lasting solutions that have been developed.

Fiona Harrington

Meltdown and revolt

The global capitalist financial system is grinding to a halt amid a meltdown of support for bailing out banks and political paralysis in the United States, the most indebted country of all. Without forms of finance/credit, the economy itself cannot function. It’s that serious.

When two-thirds of Bush’s own capitalist, right-wing Republican Party refused to endorse a $700 billion transfer of taxpayers’ money to financiers in return for worthless, toxic “assets”, they were looking nervously over their shoulders at a grassroots revolt. An overwhelming majority of their constituents are opposed to the hand-out while they suffer job losses, repossession and falling living standards. Many have taken to the streets in spontaneous protests on Wall Street and throughout America.

The fact that capitalist politicians baulked at rushing through a bill which was painted by president Bush as necessary to prevent a collapse of the financial system, is just one of many insoluble contradictions:

– In a world drowning in credit there isn’t enough money in the world to prevent the implosion of the global financial markets. Even if a deal were to be made on mortgage debt, much worse money mayhem is on its way.

– The relentless, profit-driven expansion of the global economy over the last 30 years led to and was eventually driven by the array of fantasy finance now unravelling before our very eyes.

– The cost to taxpayers of bailing out the banks is beyond their ability to pay. The credit crisis first erupted when people reached the limits of their ability to service the debts they’d accumulated, so attempts to pass them the [now valueless] buck only wakes a long-dormant opposition, stirring the rage of the working people. Jobs, homes and pensions are melting away as the price of food and energy skyrockets.

– With interest rates rising, attempts to blackmail us with the story that the pain of not stabilising the system will be greater than the cost of attempting to patch it up falls on ears deafened by the ever-louder demands of the debt collector.

– A new consciousness is appearing on the streets because hundreds of millions of people around the globe can’t see why we should have to pay for a crisis that we’ve been seduced into by failed promises of the good life continuing forever, when those who appear to be responsible are walking away with fortunes.

– Attempts which are anyway failing to resuscitate the hardly-regulated capitalist markets take the form of socialisation, (the work of “communists” according to Republicans). This sticks in the throat of those who claimed that “free markets” were the ultimate success of the capitalist system and its victory over socialism.

In the end, there are no capitalist-type “solutions” to this momentous crisis. They would have been discovered by now if there were any. Politicians and financiers are powerless to control and direct events because ultimately capitalism functions in an unplanned, uncontrolled and anarchic way and is prone to catastrophic crises like the one now unfolding.

Capitalist socialisation of the failing banks is a backhanded acknowledgement that private ownership for profit has failed. Now is the time to seize the initiative and finish what the capitalist politicians cannot. Millions mostly new to political action can coalesce into an organised movement to refuse to pay their existing debt. From there we must build a movement that aims to create a new democratic power.

This would take control of both financial institutions and the essential productive side of the economy. Then we could re-establish these resources on sane, rational lines and operate them on a not-for-profit basis for the benefit of the majority. These are without doubt revolutionary proposals that will take some achieving. Yet it would be dishonest to suggest that there are more palatable, less challenging ways forward in these dangerous times.

Gerry Gold
Economics editor

Another way is possible

The increasingly desperate attempts to bail-out the financial system in America and Europe have raised fundamental questions about economics and politics that were considered dead and buried not so long ago.

1. The “C” word is back. Nearly everyone (New Labour is an exception here) is talking about the fact that it is capitalism as a system that is in crisis, although remedies range from regulation to revolution.

2. Financial markets which were viewed as the source of endless wealth and easy money have lost their lustre and invincibility. They stand revealed as casinos and purveyors of fantasy finance.

3. The crisis has thrown into sharp relief the inability of capitalism to sustain itself without political support and intervention. So the markets by themselves cannot operate independently in some apparently weightless state.

4. The duty and role of the state is first and foremost to private banks and financial institutions to the detriment of taxpayers, workers and those threatened with repossession. This demonstrates unequivocaly that we are ruled by a capitalist state.

5. Democracy becomes an unaffordable luxury at times of capitalist crisis and the spectre of national government looms large, especially as all the major parties stand for the same thing.

These developments have undoubtedly produced a change in social consciousness, particularly in the United States . Opposition to the $700 billion buy-out of toxic debt with no known market value is vociferous and increasingly militant. The Bush plan is a massive transfer of wealth from the public sector in the shape of taxpayers to the private sector. The debt is being socialised and the profit privatised. Meanwhile, thousands of Americans lose their homes each day and join the dole queue.

Proving there is no real choice in capitalist politics, the Democrats are riding to the rescue of the beleaguered Bush administration. Obama, the Democratic candidate for the presidency, is lending his support to Bush while some Republicans cavil at the bail-out because their phones are ringing off the hook and they face re-election in November. In Britain, the Tories can hardly bring themselves to criticise New Labour because both parties are responsible for what is taking place.

For more than a decade, Blair and Brown governments followed their Tory predecessors in promoting the everyone-can-get-rich-quick spirit of globalised capitalism. House price inflation was seen as a good thing by governments because it seemed a way for everyone to get wealthy. When teachers and firefighters needed affordable homes, for example, they were encouraged to buy them with state financial support and the building for rent social housing programme was all but wiped out. So when Brown says that the “age of irresponsibility” is over, the hypocrisy meter registers off the dial, driven by the saving of Bradford & Bingley, the bank that funded speculative buy-to-let properties.

As for the bail-outs, hand-outs and pseudo-nationalisations – they won’t work. The global debt mountain has barely started to unravel and the economy is already in recession. What is taking place is unacceptable. Ordinary people are being informed that they have to stump for the bankers and for a crisis not of their making.

Another way is possible, however. Building an independent movement to challenge the capitalist state and its cosy relations with the banks and corporations offers a fresh perspective. This raises the revolutionary question of who should rule society: big business and finance or the people? Creating a new, democratic state to embody people’s power is, like other questions that were off the agenda for a long time, now not such a fanciful thing to consider.

Paul Feldman
Communications editor