Monday, September 29, 2008
The Fix Is [Not] In [Yet] posted by Richard Seymour
They got the $700bn bailout, with one or two 'provisions' that, in fact, don't really deviate that much from the Paulson plan, contrary to some of the analysis. A few things to note when looking at the summary: they still get their $700bn, phased and with a bit more oversight than was planned (ie, more than zero) - but remember that the $700bn figure was just pulled out of thin air, a large enough number to allow maximum latitude to the Goldman Sachs wonderboy in helping out Wall Street; they won't cap executive remuneration, but they will tax it a bit more if it's above $500,000, so the inevitable bragging about zero tolerance for executive pay is unwarranted; there will be some taxes on golden parachutes, but the "era of golden parachutes" is far from "over", as Nancy Pelosi has been bragging. Finally, the government supposedly expects to make a small profit on the enterprise once it's returned to the private sector, which is how previous bailouts have worked. This will be the selling point. They will say that they have no intention of draining the public purse, and that every penny will be restored in due course. But this assumes that the bailout will have the effect of restoring these institutions as profit-making enterprises. There is no guarantee whatsoever that any of this money will be seen again. In fact, the markets are plummeting, supposedly because of doubts about the efficacy of the bailout. And it also raises the question of why the public shouldn't just own it, and keep all the profit. After all, private ownership and markets don't seem to have been particularly advantageous in the past.
This is not about economic competence, moral hazard, perverse incentive, or any of the other cynosures of neoliberal policy wonkery. And preserve us from the absurd claim that this is some kind of socialism. It is about class power. If they wanted to resuscitate the economy, here are some possibile uses for that $700bn. Think of households and public sector institutions that are failing largely because the system is failing them: they couldn't put $700bn to better use? How about just nationalising the healthcare system? All of that would certainly stimulate the economy, provide jobs and help people who really are in need, but it would also risk revivifying the exiguous social democratic constraints on the operations of capital. You give people the idea that the tax base should be used in their interests, to give them secure jobs with decent pay, public services, well-funded inner city schools, any of that, they might never be away from the till with their hands out. Greedy taxpayers have to learn that this money is earmarked for conscientious wealth creators and their warriors, not for sloths with their heads stuck in the bargain bucket.
Meanwhile, the Brown administration didn't waste any time this time in nationalising most of Bradford and Bingley, much to the chagrin of the Tories, who are just frantic - frantic, don't you know? - about the costs to lower income taxpayers. The Conservatives want the Bank of England to take over the company and run it down. The trouble is, of course, that the government are not nationalising to protect jobs, and therefore probably will run it down in muchy the same way as they have run down Northern Rock. The Tories know this. It's being done to protect liquidity, to keep the banks lending to one another. This is why even right-wingers like Vince Cable approve of the nationalisation. But the Tories, aside from once more positioning themselves to the left of the government, are being disinguous: this particular nationalisation cost millions rather than billions, and it isn't going to drain the public purse. It is almost as if the three main parties are playing a game of 'chicken', each urging the other to do least to ward off the crisis. What I suspect is actually happening is that the rules of the game are changing far too rapidly for them to assimilate it. The language of economic liberalism will survive the practise for a long while, for what is emerging is an increasingly interventionist state. Even the Tories, while talking about the virtues open markets, are pleding tough regulatory regimes. This is by no means a reversion to a less predatory form of capitalism, although resistance by workers can make it so in the short term, but it does open up the argument somewhat: put briefly, if the state can protect profits and stock exchanges, it can protect jobs and public services.