crisis

Just when you think the credit crunch may be past the worse, along comes another bank, or two, or three, going bust and the financial system is thrown yet again into crisis. And as each crisis hits, governments rush in with our billions, to keep the whole financial sector from collapse.

So much for all that crap preached for years about the need for market discipline under which uneconomic companies are allowed to go to the wall. It would seem that the iron laws of the free market only apply to coal mines. The banks are allowed to play by another set of free market rules, in which the well connected are allowed to make billions from corrupt deals, then when it all starts to fall apart, we pay the price with rising unemployment, falling living standards and repossessions. In the words of the old song, it’s the rich who get the pleasure and the poor who get the blame.

Dear DA,

I just wanted to thank your reviewer in DA43 for turning me on to Naomi Klein’s Shock Doctrine. I couldn’t agree more with the comment that “the sheer scale of abuses detailed…is simply jaw-dropping”. For one who felt hardened to the ways of the capitalist world, this account of sheer cynicism, corruption, double standards and outright lies was still something of an eye opener.

I’d also like to leave your readers with one thought for the current climate. If the Shock Doctrine thesis holds water then maybe the recent financial meltdown is only the latest shock that will provide yet more massive pickings for the free market vultures. Emergency bail outs of banking systems need massive borrowing on the international money markets. The IMF for one, as Klein so clearly shows, will demand something back on top of the years of debt repayment. If the past is anything to go by, then we’re going to see more sell offs of state owned assets.

Free market theory argues that hedge funds,…currency speculation, private equity firms and the other obscene money making machines are somehow vital to…the economy…. [This] is a joke. They contribute nothing…and are merely a means by which the super-rich get even richer. Real economic wealth is created by the working class who…create the goods and services that are vital to society…

(from Hedging their Bets, DA39 summer 2007)

Almost totally lacking in regulation – that is, until the recent “stable door bolting” emergency restrictions against “short selling” and betting on declines in financial markets – hedge funds and their ilk have constantly moved trillions of dollars around the globe searching for ever higher returns and leaving economic chaos in their wake. And so it has proven yet again.

As the global economy plunges deeper into crisis, people everywhere are facing home repossessions, unemployment, pay cuts and rising prices. The very same governments that for decades extolled the virtues of unfettered market forces, have committed the ultimate U-turn by promising billions of taxpayers’ money for bailing out ailing financial institutions. This, they argued, was necessary to avert a complete economic meltdown on the scale of the 1930s. But before the full horror of crisis unfolded, some speculators and hedge fund managers, who gambled on the chaos big style, have pocketed the cash and disappeared merrily off into the sunset.

We are told that this latest financial crisis was caused by a combination of mounting unserviceable debt, greedy bankers and the collapse of the American sub-prime mortgage market. But this is only half the story. As many are coming to realise, cycles of boom and bust are part and parcel of capitalism itself.

The world’s political elites are looking just a little jaundiced now that the free market god is proving to be a touch fallible. The days of free market triumphalism are long gone as our shell shocked leaders try to prevent the world economy sliding into prolonged depression. With free market solutions now dead, the big question is whether or not massive government action will be enough to avoid an economic meltdown.

My, my…how times have changed. For thirty years the free market could do no wrong, then suddenly all change and it’s state intervention that’s now the one true faith. Even our own steadfast leader, Mr Brown, has undergone a St Paul-like conversion. Now Mr Prudence is to be found strutting his Keynesian stuff all over the world stage, championing the idea of state intervention on a grand scale. How easy our politicians glide from one set of principles to another, hardly pausing to adjust their moral compasses.

As for the social democratic left, they truly feel their time has come. The Guardian is now stuffed with articles paying homage to the new god that is Keynesian economics. The new social democratic dawn is upon us and a land of egalitarian milk and honey beckons. The dark days of New Labour have now passed and the next election will see the state interventionist forces of good do battle against the dwindling power of the evil free market Tories.