” The U.S. banking system is close to being insolvent, and unless we want to become like Japan in the 1990s — or the United States in the 1930s — the only way to save it is to nationalize it.”
Good God, it’s really falling apart, isn’t it?
That little vignette comes not from the middle of whatever Trot paper is being sold on your street-corner, but from two professors at the Stern Business School, Matthew Richardson and Nouriel Roubini, writing in the Washington Post . Under the heading ” We are all Swedes now“, the good professors advocate a pretty total nationalisation of the banking system, arguing that there’s simply no alternative. The plan is a copy of the Swedish response to a 1992 crisis (caused by the last non-left Swedish government before the current mob), who nationalised the lot and then reprivatised them.
Sweden used to be used as the great negative example in the US, based on some spurious statistics about suicide rates, and the fact that everyone is a death-obsessed introvert, with occasional bursts of satyromania. But the whole of the Anglo-American West is so broken down and pathetic that they’re not in the mood to laugh at anyone — and so panicked that any solution is going to be looked at with interest. The good professors now have people like Republican Senator Lindsay Graham on board. Of course, middle-of-the-road Republicans have the latitude to agree to such a scheme — Democrats are reluctant to go anywhere near ssssssocialism, and the Republican right still think — or pretend they do — that one more tax cut would miraculously make the whole thing global economy spring back into life.
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Man, there are times when I wish Christian Kerr still worked for this publication. I’d love to see his spin on all of this…
The roof, the roof, the roof is on fire … As Martin Jacques notes in a recent issue of the New Statesman, the global elite don’t have a clue what to do about this crisis. The right have always refused to admit the internal contradictions of capitalism, and the section of the centre-left that took power were so jaundiced in their view of left-wing analyses that they willfully deprived themselves of a more critical and sceptical view of the global economic whole.
Michael Costa’s (* READER WARNING: DRIVE-BY AHEAD* ) a great example of that in Australia — a man who, according to a recent profile, and as readers of his blustery Oz column might expect, has a picture of Hayek on his wall. It’s probably on the same rubbed-bright space where the picture of Trotsky used to be, when he was a young socialist, and after that, God knows, John Ducker or something, when he was a Labor heavy.
Having spent 20 years in one of the most clubbish, thuglite union outfits around, he’s a sudden convert to the man who thought that trade unions were pretty much the worst thing you could do to a “free” market. Of course he is — the man’s a self-labelled manic depressive who goes out of his way to look like Dr Evil. He simply moves from one brainstorming obsession to another, ending, as all these people do, in that gully trap of human despair, The Australian ‘s op-ed pages.
Gordon Brown may well end up there sooner rather than later. He’s a particularly pathetic case, a Scottish socialist who wrote a Master’s thesis on James Maxton, the head of the interwar Independent Labour Party, a left of Labour socialist outfit (it was Maxton who, when Ramsay MacDonald rose to speak in the Commons for the last time, felled him by muttering, “sit down man sit down you’re a bloody tragedy”). Labour took their socialism seriously in the ’70s and ’80s, and Brown was tied up in the vicious, despairing and unreal fights about the path forward for socialism, just as Thatcher was changing the whole political-cultural framework.
Like many, I suspect that Brown experienced his conversion to capitalism as a personal release of energy, as much as it was a theoretical conversion. British socialism by the ’70s was a kludgy heavy sort of thing, the opposite of the release of human potential that socialism should be, involving endless trade-offs between parties — and later with an overlay of identity politics to make even the simplest task a shrieking match of victim claims.
As the information era superseded the industrial one, the atomised worldview of a Hayek seemed a natural fit (even though the information society is the most collective enterprise in the history of humanity), together with Smith’s invisible hand etc. etc. as the thing giving history its biggest goose-up. Brown was a prime mover in getting Smith’s visage (a fellow Kircaldy boy) on the new 20 pound note, a very big two fingers to his former comrades.
Now — well it had to be about the worst possible time to identify yourself with capital, as Brown has done over the last decade. This was more than merely a matter of image — Gordon’s starry-eyed enthusiasm for bankers led him to not only shower them with knighthoods, but also to appoint working bankers to the regulatory FSA. That’s the real smoking gun, and his connection to James Crosby who was both at startup bank HBOS and the FSA, while the former was dying on its arse and ruining Lloyds through a shotgunned marriage, may be what kills any faint last hope of winning the next election. In conjunction with proposals for the US nationalisation, a proposal for the full nationalsiation of Lloyds and another bunch of UK banks is on the cards.
You couldn’t really call this socialism — in fact it’s a late stage of the state acting as the board of directors for bourgeois enterprises, and socialising the losses. The idea is that the bad assets will be writtnen off -– i.e. you pay for the bank’s mistakes — and the cleaned-up institutions can then be sold back to the market at a profit.
Well, maybe. That was the Swedish approach — but it relied on Sweden being a small nation sitting within a larger pool of European capital. What’s being nationalised for resale now is western finance capital. Who’s going to buy it back? Would the East, presuming it has the liquidity? And would the West accept Chinese etc. ownership of their banking system? Or will a permanent socialisation of the economy have come to pass as the only way Western economies can avoid being swamped by the East?
Certainly at the moment, the market cannot reboot itself. There is no interest rate so low — even negative ones — that will restore confidence or incentive. Only the backing of the state will convince people to borrow and institutions to lend in the near future.
And should the system be restored and the banks reprivatised, what then? Simply another bubble — the next S and L, dot.coms, subprimes, derivatices mess. Abstract, global markets, borne on instantaneous communications are unregulatable, for reasons that our good friend Hayek can help explain (it’s related to the “problem of the millions”).
Bubbles and ponzi schemes are not aberrations, they are its true product — and what hollowed-out Western capital relies on to generate value in the first place.
Cleaning up this mess will simply be preparation for the next big dumper, in 2018 (they come about every decade), and that may well be the big one.
Whatever comes out of this crisis, people now understand that the financial system is collective property on which their lives depend, and that is a pretty big step towards some distinctly other way of arranging things, at which point you might want to turn Friedrich Von’s face to the wall. We are all Swayed now.