Stop the bail-outs and repudiate 'toxic debts'
When the Financial Times of all newspapers launches a series called “The Future of Capitalism”, and the Archbishop of Canterbury attacks growth as the basis of the global economy, it’s fair to conclude that the system is shaking from head to foot.
The patent failure of states and governments to sort out the financial crisis is all too apparent, for example, with the continuing collapse of shares in Lloyds following its shotgun marriage with the bankrupt HBOS bank orchestrated by prime minister Brown.
Now the state owns more than 60% of Lloyds and is guaranteeing no less than £250 billion of toxic (i.e. worthless) “assets” in a desperate bid to revive its fortunes.
On the production/demand front, Japan this morning announced its largest ever balance of trade deficit following the collapse in overseas demand for its cars, electronic goods and other exports. Jobs are disappearing at the rate of over 650,000 a month in the United States, where the dole queue is now more than 12 million long.
While New Labour fails to convince anyone that it will all turn out alright in the end, or to acknowledge any responsibility for events, the Financial Times series is at least honest about the scope of the crisis. Martin Wolf, its most prominent writer, admits :
What will happen now depends on choices unmade and shocks unknown. Yet the combination of a financial collapse with a huge recession, if not something worse, will surely change the world. The legitimacy of the market will weaken. The credibility of the US will be damaged. The authority of China will rise. Globalisation itself may founder. This is a time of upheaval.
While Wolf’s extensive analysis acknowledges that financial deregulation contained the “seeds of its own downfall”, some subversive sub-editor has gone further and headlined the article “Seeds of its own destruction”. This, of course, is a not-so-hidden reference to the famous phrase in the Communist Manifesto of Karl Marx and Frederick Engels published all of 161 years ago, which was the first to popularise the contradictions within the capitalist system. What on earth is going on down at the FT?!
The merit of the lecture in Cardiff given by Rowan Williams, the Archbishop of Canterbury, at the weekend is that he argues that blaming the greed of individual bankers had made people lose sight of the fact that "governments committed to deregulation and to the encouragement of speculation and high personal borrowing were elected repeatedly in Britain and the United States for a crucial couple of decades".
Dr Williams is not in any sense anti-capitalist. In fact, in his lecture he talks about periods when capitalism was apparently more “ethical” and that society should somehow return to this period. Neither is the FT, of course. Its “survival plan for global capitalism” consists of concerted international action to restore demand for consumer goods while propping up the financial system.
But the British state has already committed 20% of the value of its gross domestic output in loans to failed banks. Now it is printing new money, further depressing savings rates and the value of government bonds. If this is allowed to continue, the price will be paid in massive public spending cuts, hyper-inflation and a social breakdown as the government of the day tries to avoid state bankruptcy.
When something is toxic, you don’t add to its poisonous nature by throwing more money at it – you get rid of it in the safest possible way. The same goes for the banking system, therefore. Our aim should be to take the “toxic debts” and bury them somewhere deep in the North Sea. In other words, they should be repudiated, rejected and disowned because we didn’t generate them in the first place. After that we could reconstruct a sane financial system based on mutual ownership and control. A drastic, revolutionary approach for sure, whose logic is common ownership and control of a not-for-profit economy. But far more practical than what either the FT or Dr Williams is advocating.
AWTW communications editor
9 March 2009