Banker's bonuses: why we are being screwed

In September 2008 after the collapse of Lehman Bros bank it became obvious to economists and senior government officials that the world financial system was in danger of collapse, and that banks would be wiped out in the process. In the UK Gordon Brown's Labour government took action and bailed out Royal Bank of Scotland (RBS) and Halifax Bank of Scotland and pushed through a merger between HBoS and Lloyds TSB. In the process the taxpayer acquired 84% of RBS and 47% of Lloyds TSB. The full cost of the UK bailout taking into account Northern Rock and other banks was a whopping £1.2 trillion. The bailout was repeated in other countries, with the TARP, for example, in the USA, and lead to the stabilisation of the global banking system.

What is critical about this is that if the bailout hadn't happened all the banks would have gone bust - not just those who were directly bailed out by the taxpayer. Since 2008 'free' market apologists have tried to claim that banks such as Barclays and HSBC were always OK, as if they would not have crashed, but this is not the case, the fact is that the global banking system was saved by taxpayers.

Lehman Bros HQ

Up to the collapse of Lehmans a culture of huge bonus payouts had become the norm in banking, and in fact when Lehman's collapsed they were still trying to pay out $6 billion in bonuses. After the bailout the culture of huge bonuses continued even at taxpayer 'owned' banks, much to the dismay of the taxpayers themselves. The banking collapse lead directly to an economic collapse which in turn has lead to a sovereign debt crisis.In the process, the UK economy has contracted by 7%. Having paid for the bailout we are now paying for the crisis with the Coalition government's austerity programme. The cost is increasing unemployment, pay freezes, pension cuts  and an attack on the living standards of all but the wealthiest. Bad as things are in the UK, they are far worse in countries like Greece and Ireland, and the Eurozone is itself in danger of collapse.

What does all this tell us? It shows the power of financial capitalism and that our democracies are dominated not just by financial capitalism but also the other big corporations. In the West, which has been hardest hit, politicians have put the interests of financial capitalism above the rights and interests of their own people. The aim has been to preserve the capitalist system and to continue 'business as usual' at all costs, even though it is obvious that the austerity programme in the UK and elsewhere isn't working, at that it will probably make things worse rather than better.

The latest manifestation of the row about bankers bonuses centres around Stephen Hester who is the CEO of taxpayer 'owned' RBS. He was awarded £963,000 in shares as a bonus this year, despite the fact that RBS is still struggling and 33,000 employees have lost their jobs. David Cameron claims there is nothing the government can do about this but that is clearly not true. The Independent revealed that there is nothing in Hester's contract that would prevent the government denying him a bonus. There have been claims that the RBS board would have resigned but so what? They are not the only people who can run a bank. The fact is that the government is taking sides and its not our side, its the bankers side. They are putting the interests of capitalists above our interests. RBS is clearly not being run in the national interest. The bank should be fully nationalised and turned into a green national investment bank to make the loans that  businesses need to help create jobs. That is something that RBS and the other private sector banks are failing to do.

Yes to a referendum on the EU!

According to Paul Cotterill on the Liberal Conspiracy blog Caroline Lucas, the leader of the Green Party,  has outflanked Labour on the issue of a referendum on the EU. He is right. Outflanking a gauche and leaden-footed Labour leadership isn't difficult these days. Labour is completely hamstrung by its New Labour legacy, and because of its complicity in privatisation and austerity it is incapable of challenging the most dangerously reactionary government in a century.

Caroline said: "I support a referendum on our membership of the EU because I am pro-democracy, not because I'm anti-EU - and because I want to see a radical reform of the way Europe operates. The EU has the potential to spread peace and make our economies more sustainable, and to promote democracy and human rights, at home and throughout the world. But it must urgently change direction, away from an obsessive focus on competition and free trade and towards placing genuine co-operation and environmental sustainability at its heart."

Caroline has called this exactly right. We need to challenge the lack of democratic accountability and neoliberalism of the EU. Most people don't want us to leave, but this is a Europe of austerity, dominated by the ECB. The way the Greeks and Irish have been humiliated is appalling, and all to bail out French and German banks. That is unacceptable. We need start a movement to liberate the EU from the dead hand of neoliberal failure, and make sure that the Green Party is at the forefront of that movement.

The phone hacking scandal exposes our sham democracy

I blogged a while ago about our sham democracy, the cosy carve up which means that whoever gets elected, the policies pursued by governments are always the same. The economic crisis caused by the collapse of the banks illustrated this really well, because that crisis lead directly to the sovereign debt crisis, and we have seen that successive governments in countries like Greece and Ireland have toed the party line, and swallowed the neoliberal medicine, to the detriment of the people who elected them. How ironic it is that the electorate in Greece should boot out an incredibly unpopular conservative government, only to replace it with a 'socialist' government which then proves to be even more unpopular, by kow-towing to the IMF and the ECB and introducing yet greater austerity.

So that's how it goes. You have an incredibly unpopular government, you boot it out and elect another government which then goes on to do exactly the same thing. There is only one way to break this cycle - vote for a party which is not neoliberal and has different policies. If that means voting socialist or green - do it!

So what has this all got to do with phone hacking? The essence is that the problems with the banks and Murdoch's media empire are the same - capitalist corporations which have too much power and are out of democratic control. Just as our politicians have ceded power to the banks, they have also ceded it to moguls like Murdoch. News International should never have been allowed to control 40% of the UK press. Sky should never have been allowed to build up a monopoly of satellite TV through exclusive rights to Premier League football. But it was allowed to happen, and in the process our democracy has been undermined and our body politic corrupted. This is what happens when you have unregulated capitalism and 'free' market fanatics in government. The sad reality is that there is no change in sight. Murdoch may have his wings clipped for a while, but the neoliberal juggernaut moves on, crushing decency, democracy and freedom in its path.

I'd just like to finish this post with two pertinent quotes from an article in today's Telegraph (my italics):

"There were those who believed that Murdoch had debased and debauched British public life, and there is indeed great evidence that this was the case. For example, the News of the World was a respectable – if racy – family newspaper before Murdoch brought it under his ownership. As we now know, it converted into a flourishing criminal concern that took an evil pleasure in destroying people’s lives."

"The bitter truth is that no major figure in British public life was prepared to take on and expose the Murdoch newspaper empire. Rival proprietors were silent. Senior public figures did not dare to speak out for fear of exposure and attack in the Murdoch newspapers. This is why, for more than a generation, Rupert Murdoch’s empire has been a spider at the heart of an intricate web that has poisoned British public life. "

Strange it is though that a paper which can see the shortcomings of Cameron and speak with loathing about Rupert Murdoch will be trumpeting the wonders of the 'free' market which is the real engine of inequality, poverty and the corruption it so rightly condemns.