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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 people are 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
20 January 2009

Dylan says:

A taxi driver said to me last Friday " I can't believe the Goverment didn't know the financial system was going to burst." Quite. Many of them must have done. AWTW knew at least two years ago as far as I know. So I think many people are NOT so blind, when Brown and his mates blame "greedy bankers."

Dylan says:

Great piece. And truly scary. Strong words. Changing times.

Ray says:

Newspapers of national capitalist power, gloried at their influence when they were desribed with names like 'The Thunderer' - thus was 'The Times' of London so termed. Yesterday its headline read, "The Bank That Sank", nothing new there you might say, when seeing that the Royal Bank of Scotland's shares had fallen from 5 a piece in 2006 to 12pence at close of trading on Monday. In their editorial comment you sense the panic coursing through nervous systems when they write under the banner, "Her Majesty's Big Bank", the government must nationalise RBS outright ... create two new banks - a 'bad bank' named RBS and an ongoing good bank under the banner headline".

Simple, do you follow? What they don't say is this. The bad bank was caused by the ever-increasing necessity of banks to increase their 'trade' by re-writing the laws of capital. But the true law of capital is in the second, good bank. That is, real people (workers) will have to pay forever and aday for the failures of the first. They must be burdened with this for the exalted pleasure of saving the present through doing 'hard times'. Never mind the big banks - Her Majesty's Big Bank is having a big bang and Newton's theory of the apple and the cranium springs to mind. Therein is levity, brevity, gravity and ..... the whisperer!

Fiona says:

The tragedy is that many, if not most, people seem to believe that it is all the fault of "greedy bankers" and cling to the belief that regulation or the reining in of greed will somehow make everything alright again. When it is as the above makes clear a systemic problem of capitalism. However, I think that there are beginning to be signs here and there, that the blindfolds are falling from people's eyes at last.

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