Monday, February 18, 2008
Northern Jelly posted by Richard SeymourA friend of mine who works in the City and is knowledgeable about the laws, regulations and internal procedures of investment banking said to me the other day: "Investors are the most pampered people in the world. There are so many laws and regulations designed to protect their rights, it's unbelievable." Laws designed to protect the property rights of the owners. Who would have imagined such a state of affairs? Well, today investors are predictably furious about the temporary nationalisation of Northern Rock. If a neoliberal government like ours undertakes a nationalisation, you know it's serious. But the owners aren't happy. Their shares, their shares! The socialistic government has stolen their money! Somehow they promise to mount a legal challenge, just as the shareholders in Railtrack did when the government allowed the company to go bankrupt rather than bailing it out with yet further billions in public money. The City is also alarmed. The government exists, as far as they are concerned, to defend their interests and as far as they are concerned that means the guarantee of private profits with public money, and private ownership with public risk. This sort of thing gives people ideas.
Nevertheless, there cannot be too much shock. Practically everyone knew that nationalisation was the only option in this case, and it was simply not plausible to continue ploughing in billions - the Bank of England has loaned the company £55bn, which is eleven times its value at its peak last year, and many more times its present value of £380m, while - while the owners floundered and frittered it all away. If anything, it would have been an obvious decision several months ago, long before a single penny of subsidy had been issued. The government has tried desperately to avoid it. And after all, the nationalisation is only a temporary measure designed as much to protect the institution and return to private capital in good condition once the economy gets back into good shape. And it will be run by highly paid individuals from the banking industry, such as Whatever the shareholders say, the rentier class will probably be quite relieved as a whole. Even Martin Wolf of the FT backs the nationalisation and gives a few reasons why the grasping bastards who have run the thing into the ground shouldn't be given any compensation. The Tories are arguing that this decision amounts to a 'humiliation' for Alistair Darling, and are raising the spectre of a return to the 1970s (a much maligned and underestimated decade). On the one hand, it's faintly embarrassing in itself that to change your mind is supposed to be a source of embarrassment, but on the other hand, Darling has sort of brought that on himself by straining so hard to avoid nationalisation. Anatole Kaletsky is predicting catastrophe on the absurd grounds that nationalisation is a form of market 'distortion' and anyway the government is crap at running things. Are there really people who still believe in the free market fairytales? Does he not know how his employer pays the bills?
Nationalization is often a poor substitute for socialisation rather than a synonym for it. It is usually a prophylactic, in fact, against such measures, a manageable half-way house. In this case, it doesn't even go as far as that. It is a temporary stop-gap, without any guarantees as yet for the workers in the bank, which places £100bn of public money on the line, with the company's future co-determined by a small number of experts from the industry, in order to return the business to private ownership as soon as possible. But still, it does give people funny ideas. You know, in a world where Morales is nationalising the gas industry, Chavez nationalised much of the oil industry (and was going to nationalise the whole banking industry), and even the Scottish executive is planning to fully nationalise the railways, the convenient myth that public ownership is 'unrealistic' is starting to look, well, unrealistic. And that raises all sorts of questions. We were told that privatising utilities would bring us more efficient, lower cost services. British Gas has just jacked up the prices and is making record profits, while energy companies like Npower do the same. The privatization of water has been disastrous in many places, and in the UK it has led to exorbitant costs and low maintenance. The privatised airports are uncomfortable and overcrowded because they allot most space to commercial facilities and provide little seating or other amenities. Privatization also led to increased unemployment and diminished bargaining power for labour. In each of the industries privatized by the Tories, employment fell dramatically - in steel by 75%, in railways by two thirds, and in electricity and water by about a half. Right-wing economists complain about over-employment, but the danger was always in the contrary temptation - to cut necessary staff and make the service unsound. And what is the point of having 'competition' in the banking industry when they all provide much the same lousy service and rip you off? Wouldn't a publicly owned and accountable industry be better for customers? And why should we have to pay for their crisis? If a company can't or won't keep its business running to keep people employed, shouldn't the government use its initiative, nationalise, defend jobs and engage in industrial conversion if necessary? Oh, Jesus no, don't start thinking like that! Winter of discontent, remember? You don't want to go back to the bad old days, especially not when everything is so fabulous.
Update: It looks like the unions' fears were right: the government is going to shed thousands of jobs from the bank.