Policies for the crisis - finance
Centrica’s prediction of a 60% rise in household energy bills over the next two years comes as dire news for the millions already drowning in unaffordable debt. It signals a continuing upward price spiral which is rapidly eroding the value of wages and salaries, just as the International Monetary Fund (IMF) foreshadows the onset of a global recession.
Governments on both sides of the Atlantic are forced into taking desperate measures to stave off financial collapse. The Treasury is busily rewriting Gordon Brown’s rules to allow more government borrowing in the wake of US support for the shareholders in bankrupt housing finance agencies Fannie Mae and Freddie Mac.
Now that the credit-induced boom has reached its limit, there is a reluctance on the part of the authorities to follow the free-market logic of allowing bankrupt companies to fail, and shareholders lose their investments. Instead, responsibility for interest repayments on the debt to keep profits flowing to shareholders will be passed to those least able to pay it – the taxpayers. Some analysts call it socialisation of debt, with the assets remaining in private ownership.
The most radical of alternative proposals designed to get over the credit crunch is for the US government to follow the UK’s action on Northern Rock and nationalise the bankrupt housing agencies. The sums involved make the Rock’s £40+ billion debt pale into insignificance. As the guarantors of half of all US mortgages, Fannie Mae and Freddie Mac hold more than $5 trillion of debt.
The consequences of any of these attempts to rescue the system from the effects of its implosion are too horrible to contemplate. The last crisis on anything like this scale was in 1929. The crash was followed by a global slump, fascism and war. It is time to start on a new path before history repeats itself in the most tragic way.
A World to Win believes it is time to move from a globalised world capitalist system to a concept of local stewardship acting in the interests of global society. New forms of co-ownership of the major production and financial resources, should be enshrined in law in place of the private ownership for profit of the corporations, banks and investment firms.
Many of the component parts of the system of interdependent global corporations and financial markets that have been developed to sustain an increasingly socialised form of global and local production can be reused or recycled. We need to preserve these advances in a new global economy oriented towards the satisfaction of needs. Capitalism can and should be composted.
The distribution of profits to shareholders – the current private owners of capital must cease. Stock, currency and other markets for speculation should be closed. The financial system will be based around mutual funds and credit unions, owned and controlled by investors and borrowers.
The wealth generated by workers realised from sales of their products should be distributed according to the following principles:
- a part will be paid to the workers in the enterprise. An individual's income from employment will be set in relation to the basic living wage, supplemented by skill and performance-related amounts
- a part will be retained for reinvestment in, and further development of the organisation
- the value generated by an organisation, over and above the wages paid to workers, and the amounts retained for reinvestment, will be divided amongst the Social Needs Funds
- these funds will support education and research; health and social care; recreation and the arts; infrastructure development including energy, communications and transport; pensions, and incomes for those unable to work through disability or illness
- the proportion of the social surplus allocated to each of the various Social Needs Funds will be determined through planning rounds controlled by an entirely new democratic process
- International trade transacted through a global currency will eliminate money-market speculation and assist the move to equality.
Many will say that these ideas are fantastic and Utopian and will never be taken up. Well, the present economic and financial system is heading rapidly towards a catastrophe, with all that entails. Our alternative requires revolutionary change, it is true. Its merit, however, is that it provides a unique opportunity to shape our own future rather than having it decided for us by governments acting directly for corporate and financial interests.
18 July 2008