Zombie capitalism

Ever since the crash of 2008, when Lehman Bros. bank went under, politicians in the EU and USA have been battling to restore the status quo, which is often described as 'business as usual'. But it wasn't the collapse of Lehman's which brought the capitalist economy to its knees, it was the accumulation of a huge bubble of toxic debt in the world banking system. Rather than a crash, it has been more of a slow motion collapse, as the house of cards comes down.

The banking bailouts which followed, where governments injected capital into a bust banking system, was supposed to solve the problem, but it hasn't and it never could have done because the debt is still there, it hasn't just disappeared. In the shorter term the debt problem has become a sovereign debt crisis which is threatening to break up the Eurozone. European banks have been propped up by short term loans from the ECB, and this still hasn't solved the problem, but what if it can't, what if there is simply too much debt for the system to pay off?

I have blogged before about how I suspected that there were lots of insolvent banks which were hiding their insolvency with the collusion of governments. For any other kind of business this activity would be illegal, but as we have seen, there is one law for the banks and another for everyone else. Now the Telegraph has revealed the state of hidden debts in the UK banking system. The article, by Liam Halligan, shows that UK banks are sitting on £40 billion of undeclared losses, and that is just what we now know about.

Britain's banking black hole

My guess is that taxpayers patience is exhausted. Are we really going to be expected to bailout a bust system yet again? Not a chance in my view. The reality is that there can be no return to 'business as usual'. Neoliberal capitalism, through privatisation and deregulation, has broken the world economic system. The emperor has no clothes. There isn't going to be a recovery, not in the short to medium term, probably not ever. In a recent post I explained why I thought capitalism had reached the end of the road. In essence falling profits have lead to a class-war attack on the 99%, cannibalisation of the public sector, mass unemployment and an unsustainable property and financial bubble. Now there is nowhere left to go. We urgently need a radical alternative economic strategy which has to involve the state taking responsibility for control of the economy, nationalisation of the banks, a Green New Deal, and a move to a low carbon economy. The alternative could just be a collapse into the kind of barbarism we saw in the 1930s. Oh, and don't forget the fact that we have to deal with climate change, and we saw a graphic illustration of that in the UK this weekend.

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.

A Tory driven ideological class war attack on British workers won't promote growth

It was bound to happen here, as it did in Wisconsin and other American states. First the capitalist class, or 1% if you prefer,  creates a crisis, a crisis of financial capitalism which nearly brings down the world economy. It does so through its ideology, neoliberalism; which means destruction of public services by privatisation; letting the banks and corporations run riot through deregulation; and the looting of natural assets by corporations through globalisation. Then, using their tame politicians in the UK, USA and Europe, it makes the middle and working classes and unemployed, the 99%, pay to bailout the banks and save the skins of the bankers. This is privatising the gains and nationalising the losses. Socialism for the rich, capitalism for the rest of us.

So the banks get saved but there is still a big problem because much of that debt incurred by the banks has now been transferred to governments and taxpayers leading inevitably to a sovereign debt crisis, which is where we are now. The Eurozone crisis has been triggered by the sovereign debt crisis brought about by the banking crisis. Still with me? We are nearly there.

In response to the sovereign debt crisis governments in the UK and Europe implement austerity programmes, ostensibly to bailout government debt, particularly in Greece and Ireland. But its not the poor old Irish and Greek taxpayers who are being bailed out, the money is being used, once again, to bailout French, German, Spanish and Greek banks. So taxpayers have been shafted twice, first in the bank bailout and secondly by austerity - which is just another bank bailout.

To top all this the right wing politicians who are the friends of the bankers and the 1%, are now using the crisis to try and smash workers rights. In the USA, in Wisconsin, the Tea Party backed Governor Scott Walker has used the deficit to not only slash services but to try to deny unions their collective bargaining rights. Now in the UK today we hear that the government is contemplating undermining workers rights by making them easier to sack and limiting further their already limited rights to an Employment Tribunal. This crude, class war attack on workers is being carried out in the pretence that it will encourage growth.

The real irony is that the rising unemployment, increasing poverty and lack of growth in the UK are a direct result of this government's austerity programme. Economically, this government is already a complete failure and its only to be expected that it should dishonestly try to pin the blame for that failure on working people and the unemployed, that, after all, is what class war is all about.

Neoliberalism is threatening to bring down the economies of the USA and the EU

What we are witnessing with the Greek tragedy that is unfolding is something worthy of Euripides, or, in a more contemporary form, Shakespeare. Greece is being torn apart by the Eurocrats, headed by  Sarkozy and Merkel, in their desperate attempts to preserve the Euro-empire. The Greek Prime minister, Georges Papandreou, offered a way out of the situation, by giving the Greeks a chance to vote against the bailout, but the self serving  political class in Greece look like scuppering this appeal to democracy by looking after their own skins and  bending the knee to the Eurocrats and the IMF.

Georges Papandreou

What is so ridiculous about all this is that the EFSF, which is supposed to bailout Greece, and is primarily intended to save French and German banks, is doomed to failure. It cannot work because the more austerity that is imposed upon Greece the less likely it is to be able to repay its debts. The Greek economy has already undergone a 15% contraction, and more austerity can only make this worse. As deficit reduction bites harder, the more it will contract the Greek economy, making the debt ever harder to pay off. The Greek economy is in a death spiral and the actions of the Eurocrats are self-defeating. As the situation gets worse, Greece will become more ungovernable. It may even become a failed state, and the likelihood that other EU members like Italy will begin to slide into the abyss will be increased.

The neoliberal-EU project enshrined in the Lisbon treaty has not only failed, but has seriously damaged the fabric of European societies.  Neoliberalism has wreaked similar havoc in the USA. The result is that once powerful western economies are now going cap in hand to China, which is a totalitarian waged slave-labour state, for financial handouts. The madness is complete, but the Eurocrats are so blinkered and institutionalised that they cannot see they are in danger of destroying the EU altogether.

There is only one solution. Let Greece default and leave the Euro, and then build the reconstruction of Europe through investment in the real economy, in infrastructure, and in jobs, through a Green New Deal. The Icelanders held a referendum which lead to a default, and an exit from debt-slavery, and the Greek people deserve the same chance.  Meanwhile, destructive neoliberalism must be chucked in the dustbin of history - where it belongs.

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.