Can't pay, won't pay!

Who was consulted when Gordon Brown and Alistair Darling decided to put the rescue of the global capitalist system ahead of every other priority? Was there a rash of Blair-style focus groups? Were any opinion polls commissioned? Not that we know of.

But, even as the grip of winter brings activity to a halt across the Northern Hemisphere, something is stirring once again in Iceland.

Yesterday, President Olafur R. Grimsson delivered a major blow to the global financial system when he responded positively to a petition by a quarter of the country’s population of just 320,000. Opinion polls say that two-thirds of the population are with the petitioners in opposing government proposals to raise interest rates to help repay £3.4bn of Icesave deposits owed to the UK and Netherlands.

The bill amounts to £40,000 for every household in Iceland – an eerily similar sum to that New Labour has tied round the neck of UK householders.

Grimsson, who is serving his fourth term as the elected president, said it was in the interests of democracy to put the plan to a referendum, given the importance of the issue to Iceland’s future.

“It has steadily become more apparent that the people must be convinced that they themselves determine the future course,” he said. “The involvement of the whole nation in the final decision is therefore the prerequisite for a successful solution, reconciliation and recovery.”

The idea that people might have a say in their future sent shock waves around the world. There’s a real fear that a vote by Iceland’s people against repayment could trigger a similar revolt in countries with much deeper debt – like Spain, the US, and the UK.

Capital’s advanced guard struck back as Iceland’s credit rating was reduced to junk status by global agency Fitch. Further help from the International Monetary Fund has been thrown into doubt. New Labour minister Lord Myners was wheeled out to warn Iceland that it wouldn’t be able to join the European Union if the money wasn’t repaid.

What happens if the referendum takes place and the people vote “No” is anyone’s guess. Countries have defaulted on their debts before, but never has the world of finance been so interconnected and so interdependent. You’ll remember that New Labour used anti-terrorist legislation late in 2008 freezing all Icelandic assets on UK soil.

Iceland is small, but the impact could be world-changing. Even Premier League football club West Ham United is caught up in the net. It is currently up for sale by its current owner CB Holdings whose biggest shareholder is Icelandic bank Straumur. This went bust last year in the wake of the global crisis which saw off the three largest banks Glitnir, Landsbanki and Kaupthing. Before the crash their combined debt exceeded approximately six times the value of the nation's annual output.

It’s just less than a year since the “Saucepan Revolution" – so called because of the pots and pans protesters had with them - that made Geir Hilmar Haarde the first leader to resign as a result of the global economic crisis.

President Grimsson, clearly senses the potential for a repeat performance on an even more dramatic scale. A few months ago he told the Global Creative Leadership Summit that during the global financial meltdown “the political system was tested to its limit,” adding: “Even in the most stable and secure democracies, it almost resembled the revolutionary situations we read about in history books.”

Grimmson was quick to add: “But we have the capability and the mandate to solve these problems.” Yesterday, by refusing to sign the legislation agreeing to punitive repayments to Britain and the Netherlands, Grimmson himself discovered that this “mandate” is more imaginary than real. The Icelandic people themselves have spoken: Can’t pay, won’t pay! It should become the rallying call around the world.

Gerry Gold
Economics editor

Green shoots in Finaghy

Governments and central banks throughout the world have been struggling with a myriad of unco-ordinated measures to deal with the global financial crisis that has triggered a precipitate fall in output and rising unemployment.

They are trying to lubricate seized-up markets while pouring trillions of their various currencies into the banks to prevent a systemic collapse.

New bursts of credit have been issued to stimulate demand for consumer goods which has all but collapsed. Every announcement of a new rescue package places the price to be paid by future generations further beyond calculation.

The spin is that this is beginning to work and that if you examine the economy for signs of life, you will see “green shoots of recovery”.

But reality has a disturbing habit of disappointing the hopeful. Yesterday, on the same day as Barack Obama’s headlining claim that US government action on the economy was starting to bear fruit, figures were released on consumer spending for March.

Retail sales in the US were much weaker than forecast, falling 1.1%per cent, rather than rising the predicted 0.3 per cent. This takes the decline to 9.4 per cent in a year. Not much sign of an improvement there.

Obama understands, or at least acts as though he understands, that without continuous increases in the volume of credit relative to the value of production, the social system built to service the inbuilt self-expansion of capital would have seized up decades ago.

With a pattern of thought informed by pragmatism, the American version of English empiricism, the argument goes: it - new and expanded forms of credit - worked before to dig us out of the, albeit accelerating reoccurrence of crises towards and after the end of the 20th century, and it’ll work again.

It has to, they say. It always has, always will.

Anticipating the self-created dream of capital’s recovery to profitability, and in the wake of the empty rhetoric from the G20, Willem Buiter, one of the Financial Times’ more forthright, upfront writers had already put it like this a week ago: “The green shoots are weeds growing through the rubble in the ruins of the global economy.”

But even this is hope built upon hope. The potential is for greater damage than the state bankruptcy in the US and the UK that Buiter considers possible. It happened for both countries during the Great Depression of the 1930s, he says, and it could happen again.

Buiter’s analysis too is based on historical precedent, but the last 30 years of credit-led capitalist exploitation of people and the planet have created a deeper and more profoundly damaging, global impasse.

There are a set of inter-related, self-feeding and mutually conditioning crises that are eating away at the ecological, social, political, economic and financial systems and processes of the world.

For example, at the same time as the world’s major banks have actually become insolvent, without the assets to meet their obligations, climate change has already reached a tipping point.

The scale of the current planetary emergency is beyond the capacity of existing measures. Totting up the total overhang of accumulated credit, or even the geometrically accelerating causes and effects of climate change get nowhere near it.

So are there grounds for optimism? Yes there are, but not for Obama or Brown, nor for any of the political or executive representatives of unsustainable capital.

The green shoots can be seen in the wave of occupations that will no doubt follow the example set by Visteon car part workers in the former Ford plants in Enfield, Basildon and on the Finaghy Road, in Belfast.

One Belfast trade unionist, commenting on the ordinariness of where things begin, is reported to have said, “Who’d have thought the revolution would begin in Finaghy… !?”

Gerry Gold
Economics editor