Tax the rich to pay the deficit posted by Richard Seymour

Greg Philo has a solution, and it's been road-tested for popularity:

Labels: capitalism, capitalist crisis, class struggle, deficit, financial sector, recession, rich, ruling class, taxation, working class

Gideon's trumpet posted by Richard Seymour

Labels: capitalism, class, cuts, finance capital, financial sector, neoliberalism, pensions, public spending, ruling class, the meaning of david cameron, tories, welfare, working class

Why neoliberalism persists posted by Richard Seymour

Labels: clameron, cuts, finance capital, financial sector, liberal democrats, neoliberalism, public spending, rent, tories

Gordon Brown bossed around by bankers posted by Richard Seymour

Thus spake our heroic leader:

Gordon Brown has admitted mistakes in regulating the banks, accusing the City of lobbying against greater scrutiny before the financial crisis plunged Britain into recession.

Brown had previously blamed the scale of the recession mainly on the international financial crisis and the refusal of other countries to agree to tighter international surveillance of the banks.

In an ITV interview due to be broadcast tonight, Brown admits he had been influenced by bankers' lobbying.

"In the 1990s, the banks, they all came to us and said, 'Look, we don't want to be regulated, we want to be free of regulation.' ... And all the complaints I was getting from people was, 'Look you're regulating them too much.'

"The truth is that globally and nationally we should have been regulating them more. So I've learnt from that."

So, why did he listen to the bankers in the first place? What possessed him all those years? Has he no independent will of his own? Here's a possible explanation: opting to maintain a low-wage economy with a flexible labour market means you have to rely on debt and speculation to drive consumption and growth. The logic of this meant that all governments felt impelled to take down barriers to further speculation-driven profit, especially as the New York stock exchange was being freed from its Glass-Steagall shackles and threatening to leave the mighty City of London biting its dust. The government actually shows no signs of learning anything substantial from the recession. It remains committed to a modified version of the same growth model, as evidence by its planned spending cuts, refusal to strengthen labour's bargaining power, continued commitment to privatisation where possible, and - notably -efforts to maintain the property market as the major source of speculation-driven income and growth in the economy (hence, no big council house building programme, even if it costs them votes). Regulating the bankers, in this context, means coming up with some rules to protect that model from its immanent weaknesses, not abandoning the financialised neoliberal model that the Labour Party so avidly grasped once it had subdued its own left-wing.

Labels: city of london, finance capital, financial sector, housing, neoliberalism, new labour, tories

Alex Callinicos v Martin Wolf posted by Richard Seymour

Labels: capitalism, financial sector, neoliberalism, rate of profit, socialism

The more things change, the more New Labour stays the same posted by Richard Seymour

Labels: bankers, banks, financial sector, new labour, postal workers, privatisation, royal mail

Weirdo nation posted by Richard Seymour

In this country, we do things differently. We have "show trials" without the requisite executions. We have a bailout with little real stimulus (notwithstanding Tory hysterics). We have the slow nationalization of the banks, even as the manic drive toward privatization and cuts in public services continues. We have a government supposedly determined to fight unemployment, while actively shedding jobs. We have a Prime Minister who apparently feels 'betrayed' by the bankers, but persists in giving them the greatest possible latitude because he is in awe of the rich. We have a Chancellor who thinks the economy is at a 60 year low, and a Treasury chief who thinks that we are faced with the worst recession in 100 years, and a government still basing policy on the preposterous idea that this will all be over by 2011 and that the people and policies that got us into this mess can get us out of it. We have the absurd fringe fetish of 'Red Toryism', which tries but fails to add a suggestion of principle to the constant vacillations of the Cameronites. We have polls showing that people don't believe a word Cameron says, think he's a lightweight, don't trust him with the economy, and yet 43% will give him their votes in 2010 because the alternative is Gordon fucking Brown. This is a weirdo nation.

Labels: bankers, economy, financial sector, neoliberalism, new labour, privatisation, tories, uk

To earth with a crash posted by Richard Seymour

You may have noticed the world's media creaming its collective pants over the Obama inauguration yesterday, with superlatives every bit as hyperbolic as Obama's speech was bland. Gullible liberal columnists couldn't get over the "magic" - it was like being five again, and Santa Claus was coming. Everyone, it seems, got the chance to cry again, and to tell everyone else about how they cried, as well as where they were when they cried. All of that stuff about Obama's disappointing appointments, his bellicose language, the support for TARP and his Wall Street backers, and the silence over Gaza, was forgotten for one spellbound day, sprinkled with fairy dust and dubya pee. Today, it's back to the bad news.

The "trillion dollar crash" is fast becoming the multi-trillion dollar crash. The US economy has continued to slump, despite the immense capital resources injected into the financial system. As Doug Henwood points out, the statistics for December were horrendous. Employment fell by over half a million, and the official unemployment rate is now 7.2% (sure to be a substantial underestimate). Retail sales took a record dive of 10% last year. Almost one in four US banks was unprofitable in the third quarter of 2008 and things can only get worse. The outgoing Bush regime estimated that the US economy would lose close to 3 million jobs over the next year. As incomes plummet, the number of unpaid or 'troubled' loans will increase. TARP will soon have more sequels than Police Academy.

Obama's elite supporters are sanguine about his ability to sort out the crisis. Indeed, Obama would probably not have won had he not benefited from a surge in support after the collapse of Lehman Brothers. Yet,the new Treasury Secretary (and known tax-dodger), Timothy Geithner, collaborated with Hank Paulson's disastrous decision to let Lehman Brothers go bust when he was chair of the New York Federal Reserve. The incoming Obama administration promises a fiscal stimulus, which is vital, but it is not likely to be more interventionist than the Bush administration has been over the last few months. On New Years Day alone, they threw $10bn at the Bank of America. It now seems that the incoming admin is intent on rehabilitating the failed TARP strategy of buying up 'toxic stock', removing it from bank balance sheets and supposedly leaving a healthy, profit-making institution in its place. This policy of socialising the losses while privatising the profits was exactly what made 'TARP I' so unpopular. Paulson actually abandoned the idea of buying toxic assets some time ago in favour of direct capital injections (though with only nebulous commitments from the institutions receiving such funds), but Geithner is now pushing the strategy quite forcefully, while blunting the edge with a promise to help small businesses and 'working families'. No member of the incoming administration shows any signs of wanting to reverse the Bush administration's pattern of buying non-voting stock in failing banks and allowing existing management to stick around with little or no alteration in their generous payments. This means that the same people who helped bring us to this impasse continue to be rewarded, maintain their power, and have no incentive to act in a more accountable way.

More bad news. The UK banking system is close to terminal. Contrary to the insistence of the Treasury that we are better placed than other economies to weather the storm, New Labour have encouraged a disproportionately huge and powerful financial sector while allowing the manufacturing sector to slowly bleed to death. Not only that, but the UK economy is uniquely reliant on overseas investment, which supports a third of all UK lending according to Will Hutton. As the world banking system collapses and neighbouring economies shrink, we are unusually exposed. As a result, unemployment is soaring - hitting just under 2 million by November (earlier than even David Blanchflower predicted). Current predictions are for unemployment to reach 3 million by 2010. Corporate profitability in the non-financial sector is sliding, which means that the resources for new investment are diminishing. Consumers, lacking income and with a tightened credit market, are increasingly forced to rely on pawnbrokers and short-term moneylenders. That will restrict their future spending even more.

Now, even the strongest City institutions, such as HSBC, are the subject of reports suggesting they need urgent recapitalisation. They continue to insist that this isn't so, and that they won't be going crying to the government any time soon, but the stock markets appear not to believe them. And as Lloyds-HBOS and RBS shares slide, the chair of the Treasury select committee is demanding their full nationalisation. If things continue as they are, the result may be a protracted and reluctant take-over of the entire UK banking system. The government's proposed new bank bail-out was received poorly by financial markets, probably because they know it doesn't go anywhere near far enough. Darling, like his new trans-Atlantic colleagues, is committed to buying up 'toxic securities' to help the banks stay afloat as private entities. Now, if we are going to pay for the banks' losses, we should own them and as owners we should protect jobs, and ameliorate conditions for borrowers and home owners. If the government is going to rehabilitate Keynesian demand-side economics, as it noisily announced in November, this would be a very moderate demand at the moment. As it is, we have a situation where banks are being given big rate cuts by the Monetary Policy Committee, but are refusing (with the exception of HSBC and Lloyds) to pass it on to consumers. True, the Chancellor has pledged that he won't let a single bank go down, but he has yet to be open about what this means. Leaving these institutions under private control while accepting the liabilities means that the government budget has to effectively bear trillions of pounds in liabilities. This could literally lead to the UK going bankrupt, Reykjavik-style.

The timidity of the Brown government is odd. It can't be explained by its relationship to big business. British capital is obviously divided over this, but when the Financial Times calls only half-jokingly for the government to shoot the bankers and nationalise the banks, it is obvious that a profound shift is taking place. Nor can it be about the polls. New Labour has never hesitated to impose unpopular policies, and it is right now implementing welfare cuts that are sure to further alienate its voting base. The government's proposed tax increase on higher income earners was popular, but it will raise little toward the costs now being racked up. The Fabian-funded research suggests that most people would support much higher taxes on upper incomes - but polls have often found much stronger public support for wealth redistribution than exists in the parliamentary Labour Party. My vague intuition is that, for all the bravado of the pre-Budget report, and for all the hints that Brown and Darling were dusting off the Keynesian texts, the government's reflex position is decidedly neoliberal. Neither the Labour Party, nor its parliamentary representatives, nor the cabinet, possesses a left-wing force substantial enough to force a different direction. Moreover, I think that both the Blairites and the Brownites, for all the petty wrangling between them, are keen to avoid anything that encourages the Left. Their psephological analysis continues to tell them that to win an election they must build an electoral coalition that includes pro-business, pro-family middle class voters in marginal constituencies, and they are determined to resist anything that looks like burying that New Labour project.

The political fall-out from this, even if we don't go bankrupt, is potentially explosive. Even on the overly optimistic assumptions of the government's last pre-budget statement, the Treasury expects to slash public spending in a disastrous way by 2011. Now, with a new bail-out weighing heavily on the public purse, and more surely to be expected, the only way to balance the budget will be to have serious tax rises, and a sustained and vicious attack on public services and welfare far more extreme than anything we have seen so far. Even before we get to that stage, millions of people are already being pushed to the edge by the job losses and pay cuts. Partly because of the government's weakness in the polls and the threat of a Tory government, most of the trade union bureaucracy is resistant to giving any expression to those grievances. This appears to be what is happening with the Chemilines dispute, for example. Moreover, the fear of losing a struggle in the current climate, where people are frightened of losing mortgages and so on, is likely to countervail against any tendencies toward militancy. If that pessimism and lack of confidence prevailed, then the initial stimulus for any widespread revolt might well originate from outside the institutions of organised labour, in the form of mass protests and riots (Reykjavik-style). Such a combustion has the virtue of gaining momentum rapidly and giving people confidence, but it also has the disadvantage that, unless it feeds into union resistance and lays deep roots in society, it will lose that momentum just as quickly, and hit the earth with a crash.

Labels: economy, financial sector, great depression, rate of profit, recession, uk, us economy

Just how bad can it get? posted by Richard Seymour

There has been nothing like this in the whole history of capitalism: the level of state intervention to shore up the financial markets is astonishing. Equally astonishing is the fact that it has had no effect whatsoever. After a steep fall on the stock markets yesterday, global equities have plunged this morning, with the FTSE 100 losing a tenth of its value in a few hours. And while it has so far been true, as Andrew Kliman points out, that the 'real' economy has contracted a lot slower than in the previous, relatively mild recession of 2001-2, the signs are that it may in fact be much worse. House prices are plummeting far more rapidly than they did in the early 1990s. For those of you who are - like me - in rented accomodation, this is actually very bad news, because it makes buy-to-let mortgages more expensive to obtain as well as driving many homeowners back into the renting market, thus driving up prices. Because the UK has, like the US, rested its economic performance to a great extent on its housing markets, the sudden decline makes the UK worse placed than other EU states to cope with the recession according to the OECD. Like the US, we are up to our eyeballs in debt and have no savings to match, and many people have relied on mortgages as collateral for credit. And like the US, in fact much more than the US, our economic growth has been driven by the financial sector while manufacturing has been allowed to implode. I mention all this because Gordon Brown is still telling anyone who will listen that this is a problem that really swept in from America, without acknowledging that his government deliberately imported the specific structural imbalances of the American economy. And I would be willing to be that the OECD's estimate, made at the beginning of last month, would be on the optimistic end of expectations today.

The coordinated interest rate cut has, reportedly, not been reflected in the Libor rates (the rate of interest on the London interbank money market). In fact, the cost of borrowing in dollars seems to have increased. So, banks are still severely restricting their lending to one another, despite unprecedented funds made available by the government. Even the weaker pound hasn't boosted exports, because global demand is falling. Falling oil prices should boost consumption, but it won't be enough to stop the slide in domestic demand - in fact, the main reason for oil prices falling is the slump in demand. Corporate profitability in the non-financial sector remains relatively high according to the most recently available statistics. But it has been inflated by strong performance in the energy sector. Even the first quarter of this year saw rates in both service and manufacturing fall in the UK. We have yet to see what impact the contracting of lending and thus investment, as well as falling demand, has had in recent months. And while it was easy to pretend for a while that the problem was just in the financial markets, notwithstanding the fact that the financial bubble originated in weaknesses in the 'real economy', one has to ask how leveraged the 'real economy' is? How dependent has consumer spending been on debt? How dependent has investment been on companies being able to get credit? We know the answer to both questions: corporate and consumer debt hit record highs in the last eight years. The 'real economy' has been, to use an irritating term, living beyond its means.

The next question that follows from all this is how bad can it get for the government? The worsening of the crisis has improved Brown's stature in the administration, and even in some of the polls (not by enough to save the government, though). Many people perhaps suspect that, however bad it is with the government, the Tory plan to cut taxes for the rich and slash public spending is no way out of the crisis. To that extent, I would expect the government to benefit in the short-term even if its bail-out plans are likely to become more unpopular as their basic inability to save jobs and prop up the economy becomes obvious. On the other hand, the growing deficit (set to be between 3 and 6% of GDP by 2010) will be used by the Tories to say that the government has overspent. Moreover, the Tories' inheritance tax and council tax plans will galvanise middle and upper income earners in the key marginals. Business will get over the mean things that George Osborne has been saying about money men (they know he's just teasing), and they appear to be moving back to the fold. And while Osborne is likely to have to raise taxes somehow, despite his 'populist' noises about the 10p tax, he will try to find a way of doing it that doesn't offend the Tories core constituencies. (An aside: one hears from some more schematically minded marxists that we shouldn't be too concerned about taxes on lower income earners and particularly services taxes like the VAT, on the grounds that workers, actually, don't pay any tax. For, in the aggregate analysis, the wage rate is set by the market, and the real wage rate is net take-home pay not gross pay - therefore, all taxes are essentially taxes on profits. Leaving aside the fact that many don't receive wages set by the market, but wages and deferred wages paid by the government, this assumes that wages in the private sector are paid at their actual market value - if this automatically took place, there would be no need for unions. Class struggle would have no bearing on wages - a preposterous idea. Tax increases on lower income earners at a time when the rhythms of class struggle are contained by an unfriendly political climate and the absence of a serious antisystemic movement are not necessarily transferred to the rich.)

The Tory lead was halved when the crisis started to get worse in mid-September, but they remain in the lead in part because as Yougov [pdf] finds, enough people think the party has changed and aren't as wary of them as they ought to be. The most recent polls [pdf] suggest that the Tory lead has risen by 4%, but the biggest squeeze is on the frankly hopeless Liberal Democrats (whose main economic spokesperson is also mooting public spending cuts). Meanwhile, even Labour Party members still think little of Brown [pdf], with half of them saying he's doing badly and 66% saying he isn't radical enough. It has come to something when they can say that Blair, arguably the most despise Prime Minister in living memory whose ratings at times dipped below those of Thatcher, is seen as having been a better bet. So much for the hopes invested in the 'secret socialist'.

The political impact of this crisis is still wide open. People expect the ideas of the radical left to gain currency, but some of the rush back to Labourism in light of the Tory resurgence has also been reinforced. Moreover, if ideological radicalisation is not matched by effective collective resistance to job cuts, then it can collapse alarmingly rapidly into despair or, worse, support for the far right. But given that the government is so bloody eager to help the bankers, it ought to be a pushover to say they should be protecting jobs - don't just part nationalise and throw money at the banks, take the whole banking system into public ownership and run it in the interests of full employment and strong wages. As it is, they seem to be allowing a sort of social Darwinism to operate in the banking system such that - rumour has it - HSBC employees are now joking that their advertising slogan "The world's local bank" should be changed to "The world's only bank". (Next to Goldman Sachs, that is). And if we can run up a debt to fund the banking system, there is no reason to accept cuts to the public services with wage cuts for public sector workers. And ultimately, if the bosses suddenly find capitalism so fucking inconvenient for them, why should we accept it?

Labels: banks, capitalism, economy, financial sector, neoliberalism, new labour, socialism, tories

Interests posted by Richard Seymour

Labels: capitalism, crisis, federal bail-out, financial sector, neoliberalism

March in the City posted by Richard Seymour

Two quick points. First of all, there is to be a march in the City of London, starting at Mansion House station from 4pm on Friday 10th October, opposing bail-outs for the bankers and demanding that the government defend pay and jobs instead. As the seriousness of this crisis becomes ever more apparent, so does the ability of governments to do anything meaningful to stop it. Even today, both Wall Street and the European stock exchanges have plunged as more companies fired staff and reduced operations. What the government can do, however, is stop running policy in the interests of those who have benefited most from the boom and are most responsible for the slump. So, turn up if you're available, why not?

Second point, if you attended the anti-Bush protest in June, you need to be aware that the police are still pursuing people from that protest. Bear in mind that this follows revelations that there were police provocateurs in the march trying to stir things up and create a conflict. Clearly, there is a politically motivated attempt to deter protests and undermine the morale of oppositional movements. In this vein, at least one person I know of has had his face splashed in the London papers with a Crimestoppers number underneath it, and he has had to go and turn himself in to face charges. Subsequently, because his face was in the papers, his employers have started a witch hunt against him. So, bar this in mind: anyone who was there - even if you didn't do anything likely to give rise to suspicion - does face the possibility of harrassment. There may be attempts to nab people at future demonstrations, but please don't allow this nonsense to intimidate you. When the state is on a campaign to deter protest, it becomes all the more important to defy that campaign. Stop the War's advice is to contact a solicitor first, and then to let the StW office know.

Labels: capitalism, financial sector, protest, stop the war coalition

Hard rain posted by Richard Seymour

So, the stock markets turned up their noses at $700bn. Too little too late, apparently - all the stress and the bullying and arm-twisting and bribing and threats of 'martial law' were to no avail, at least if the idea was to avert catastrophe. According to Nouriel Roubini, the bail-out may either be inadequate or make matters worse, or both. After all: "When a nuclear option of a monster $700 billion rescue plan is not even able to rally stock markets, you know this is a global crisis of confidence in the financial system." So: "The next step of this panic could be the mother of all bank runs, i.e. a run on the trillion dollar-plus of the cross-border short-term interbank liabilities of the U.S. banking and financial system, as foreign banks start to worry about the safety of their liquid exposures to U.S. financial institutions. A silent cross-border bank run has already started...". Aside from which, European governments are already behaving as if a run on the banks across the Eurozone and beyond is approaching. (I could swear that the German finance minister who announced that savings would be protected insisted only a few days ago that the problem was an American one and that no decisive intervention in the banking system was required).

But let's get this straight: it isn't that $700bn is too little, or even $810bn if you include the pork barrel measures included in the final bill. As mentioned before, the total cost of bail-outs so far in the US alone totals $1.7 trillion. This raises the US federal debt to $10.1 trillion. One of the measures of the bail-out bill was to raise the borrowing limit to $11.3 trillion, so they evidently expect it will soar again. Given that the US stock markets can lose over a trillion dollars in a single day (29/9), this may not seem like much. It's a ten hour working day for a decent broker who, as you know, conjures up the wealth in sort of Rumplestiltskin operation before deciding to invest it in ways that are selflessly designed to benefit the working class. But someone will eventually have to start paying this back, and the Rumplestiltskin machine is on the blink. Either McCain or Obama are going to break some hearts once they get in - unless they seriously expect the US to continue to be able to sell unlimited debt securities at a time when its major financial institutions are imploding, they will probably make big cuts in public spending and increase taxes for everyone but the 'donor community' (a lovely phrase to describe ruling class political bribery).

The trouble is, who's going to have the money to pay it back if you can't touch the real wealth? Arguably, the US working class can work it off, as they worked off the deficit from the Reagan/Bush years under Clinton's "belt-tightening" regimen. However. If Joseph Stiglitz is right, and we're facing the prospect of an L-shaped growth trend, with mass foreclosures, soaring unemployment and GDP contraction (while "C.E.O.’s, investors, and creditors are walking away with billions"), where will the money come from? This is where the global struggles over domination of energy, as well as land, labour and resource markets sharpen and become dangerous. We have seen a short preview in Georgia, and that is very much 'To be continued'. On top of that, and very much related, we have the war that is still expanding into Pakistan, and the prospect - put on hold for the time being - of a military attack on Iran by either the US or its regional proxies. But these will look like pretty small beer indeed if the US is in need of loot and goes hunting, on whatever pretext. Moreover, there is the problem of managing Americans who get ideas above their station. The largest recent spate of US working class struggle was the massive migrant labour mobilisations, and the subsequent rounds of state repression have broken that up for the time being. But this doesn't mean that the beast is dead. As I pointed out the other day, if it had been up to much of corporate America, there would have been goose steps by the Potomac during the last Great Depression, rather than New Deal liberalism. Their coup failed in part because General Butler ratted them out, but who needs a coup these days? They don't have to rely on a private army now (not even one as illustrious as Blackwater), because:

Army Unit to Deploy in October for Domestic Operations

Beginning in October, the Army plans to station an active unit inside the United States for the first time to serve as an on-call federal response in times of emergency. The 3rd Infantry Division’s 1st Brigade Combat Team has spent thirty-five of the last sixty months in Iraq, but now the unit is training for domestic operations. The unit will soon be under the day-to-day control of US Army North, the Army service component of Northern Command. The Army Times reports this new mission marks the first time an active unit has been given a dedicated assignment to Northern Command. The paper says the Army unit may be called upon to help with civil unrest and crowd control. The soldiers are learning to use so-called nonlethal weapons designed to subdue unruly or dangerous individuals and crowds.

But what would the legal scope for such operations be? Thanks to the act known to its acquaintances as HR 5122, passed unanimously by the Senate in 2006, these troops can be stationed anywhere in the United States. The executive can order that the troops take control of any National Guard units, without state consent, and implement martial law in the event of a serious public disorder. I suspect they brought this law in with the intention of using it at some point. They can even hire Blackwater, as I believe they did during the 'little Somalia' which, you may recall, did serve as a testing ground both for the implementation of martial law and for disaster capitalism. And, well, speaking of those Mexican labourers? During the Great Depression, and later in the mid-1970s, Mexican workers who had been invited during boom time were ethnically cleansed ('repatriated', legally and illegally) in the hundreds of thousands. Not that race matters in America any more. Oh, these are just a few of the many possibilities for an even more bunkered authoritarian state in an era of intractable capitalist crisis.

Labels: america, american working class, coup, economy, financial sector, martial law, new orleans, US imperialism

A different kind of bail-out posted by Richard Seymour

Corporate self-help, old-school...

Labels: corporations, coup, democrats, fdr, financial sector

Spec-tac-u-lar posted by Richard Seymour

It is impossible to watch the news media for any length of time in this climate. The conventions that work so well when things are merely tough all over jar horribly when things are turning to shit. The pseudo-belligerent tone of inquiry, the determined trivialisation, the handy diversion of any serious thought into prepared memes, all of this is just enraging. Take this, for example. The economist Nouriel Roubini and the former investment banker turned tabloid columnist Oliver Kamm are invited to discuss the financial crisis with presenter Stephen Sackur. Roubini describes the proposed bail-out as "socialism for the rich", and Sackur immediately diverts it into the right-wing meme, "he's saying it's socialism!" as if that's the same thing. He then goes on to refer to Roubini as a Prophet of Doom, and then as Dr Doom. And he taunts him a few times by saying that he would rather allow the economy to collapse and wait for a 'pure' plan than accept the imperfect one that has been proposed, seemingly impervious to Roubini's reply. He then invites Kamm, as a former merchant banker, to say he has been too greedy, as though the activities of hedge funds and so on were a matter of individual choice rather than of the imperatives of capital accumulation (for which Kamm is an ideologue and an apologist). Kamm naturally bats this noisome question away with ease. All of this perplexing, frustrating inanity is offered under the rubric of 'hard talk', a somewhat laboured attempt to capitalise on the Paxman fetish in which viewers enjoy the thrill of watching some politician or commentator get roundly abused and sometimes spoken down to. It is almost as if every time Roubini tries to give a serious answer, someone is yelling Sackur's ear that it's getting too boring, that he must interject some confrontation somehow, make it more exciting. Infotainment. If it's going to be that way, they may as well give Sacha Baron Cohen the contract so that at least we can be pleasantly diverted while the ship sinks. At the same time, Chris Morris could be left to review Sarah Palin's 'debate' performances and produce 'word clouds' representing David Cameron's speeches. And that way, when David Cameron cuts corporation tax and inheritance tax, cracks down on Muslims, slashes public spending on vital services, and does nothing to compel banks to increase the supply of affordable mortgage credit, we will at least know that his favourite word is 'people'.

More insidiously, there is the constant drama of the stocks: they're up, they're down, they're chaotic, they're unstable, the brokers apparently subject to wild mood swings due to 'optimism' or 'pessimism' about the bail-out. One finds oneself ignoring the evidence of one's own senses. If the evidence relates that there isn't really that strict a correlation between the fluctuations of the stock market and the politics of the bail-out (albeit, we all know that the markets will throw a massive hissy fit for a day or two if they don't get their billions), so much the worse for the evidence. The media narrative is unbelievably uniform, from country to country: almost every major outlet has it that the bail-out is essential to avoid sudden death, accusing those who voted against it of being too attentive to voters' concerns (or rather, too 'populist', as it is often put). The financial surges and slumps are thus interpreted as providing empirical support for the Bush administration's blackmail. The market data becomes the stuff of a glorified form of geomancy, or palmistry: "this line right here, that's your marriage line, says you'll be divorced before this crisis is through... that one says if you don't give Paulson everyone he wants, you're going to lose your home... this one warns you against your natural herd-like 'populist' instincts...". We are sternly warned of the horror that awaits us, horror whose dimensions can only be guessed at from the mortified faces of the stockbrokers themselves, if we refuse to capitulate, and tell the bankers to take a hike.

But there's something else. Take a look at this (via Qlipoth):



This is the destruction of the American 'middle class'. Their lives, their homes, their belongings, all consumed in the relentless fury of creative destruction. People flee in a hurry, as if a tornado was rushing toward them, leaving behind computers, televisions, birth certificates, photographs, memories, all of it now material for the furnace of waste capital. This is a normal component of the capitalist 'business cycle'. And if a function of the news media is to bracket public memory in such a way that each crisis is experienced as if it were brand new, the result of an exogenous assault on an otherwise venerable profit system, a function of culture appears to be to naturalise the experience of crisis when it does come. By 'function' I do not mean 'intended effect' - it is just the particular contribution that the media industry makes to the reproduction of the social system. The weltanschauung winds have been blowing for a long time in this direction. For every half-way decent anti-corporate production that the media corporations produce (Michael Clayton, The Wire, etc), there are probably several thousand that encourage one not to be so wedded to one's stuff, from the pantheistic American Beauty, to the pop-Heideggerian Fight Club, to the eco-capitalist Wall-E. These, and lesser shows like them, are often praised as 'anti-consumerist', but it is surely more accurate to describe them as 'anti-materialist'. Please don't fret, by the way, if you happen to like some of these films and think I'm spewing arse-gravy. I like them all, and this isn't an attack on your enthusiasms. After the way my review of Batface: the Dark Shite went down, I feel obliged to point that out. I am just speculating about a deep cultural logic. The aesthetic appreciation of the destruction of our stuff seems to be as essential to cultural production as waste production, planned obsolescence and the cyclical obliteration of use values is embedded in capitalism. Congruently, the idea that people might have a collective interest in, and strategies for, defending their stuff, is not within the culture industry's repertoire of conventions. In fact, for all the justified mockery of the evangelicals and their evident delight in spelling out the ineluctable and grotesque end that awaits most of humanity, it is a cultural commonplace that there is nothing we can do in the face of catastrophe other than aestheticise it. Indeed, just as in Christian eschatology, we prove ourselves equal to the catastrophe and thus worthy of redemption in the cleansed aftermath precisely by exulting in it. Everyone else belongs to the growing nation of whiners, who ought to be repenting their sins of over-indulgence rather than trying to stop the inevitable.

Labels: bush administration, capital, capitalism, culture industry, federal bail-out, financial sector, media, spectacle

An alternative proposal posted by Richard Seymour

Labels: crash, federal bail-out, financial sector, neoliberalism, ruling class, schadenfreude

Gilding the lily posted by Richard Seymour

The rich are beautiful people. They never set a foot wrong, and yet everyone is constantly out to get them: the haters, the whiners, the terrorists, the jealous, the hippies, the lefties, the liberals, the protesters, the welfare queens, the quakers, the bakers, the candlestick makers etc. You, hypocrite lecteur, have never actually tried to live their lives, yet you persist in finding them at fault for some putative flaws. You're just jealous of their freedom. The latest challenge faced by the rich is that their mega-welfare-handout might not be processed through the system as rapidly as they had anticipated. The reason is that there might actually be some slight reflex in the state that still demands legislative review and judicial oversight.

Apparently, there are some little flaws to the proposed bail-out that cynics might carp about. For one thing it really does look like a parachute for the empire, in that it will bail out any global financial institution that happens to have what Paulson deems 'significant' investments in the US economy, whether they are in deep trouble already or not. This looks like a move to consolidate America's faltering command of the financial system and to ensure that the global appropriation of labour continues to operate overwhelmingly in the interests of US capital. Secondly, there are no protections for homeowners or taxpayers, no limits on executive remuneration, no plans to stimulate the economy, and no demands for reciprocity (ie, we give you $700bn, you give us...). This is just throwing money at the ruling class. So, as one might have predicted, the crisis is being used to shore up the class power of the rich through a massive act of expropriation. Thirdly, so it seems, the legislation includes a clause ruling out executive or judicial oversight of any part of this wealth transfer. So, the state is taking the opportunity to enhance its ability to act on behalf of capital without accountability.

Obama initially backed the Bush administration, but is offering some opposition to the current plans. A slew of right-wing commentators are also opposed, on the grounds that they thought all this bullshit about the 'free market' and 'moral hazard' and 'accountability' was in some sense meaningful. Only the reactionary statists of the Bush administration could force 'fiscal conservatives' into the same corner as liberals and leftists. No wonder the markets rallied on hearing of the Bush administration's plans: the owners saw a naked attempt to restore profitability by jacking the taxpayer further, thus ensuring a future 'belt-tightening' period of restricted income for Americans workers. And now we have an interesting bit of blackmail to deal with: if the legislation doesn't pass very quickly and without amendment, the markets may tumble again, thus threatening jobs, growth and trade.

Labels: 'free markets', financial sector, george w bush, neoliberalism, us economy

Planet of the toppling giants posted by Richard Seymour

How fabulous. Everyone is scared, insecure, ready for the brown envelope and the foot in the arse, because of a totally irrational, wasteful and destructive system of production whose beneficiaries and apologists have not ceased to laud as the most efficient and benevolent institution mankind has yet invented. The latest financial giant about to tumble is Morgan Stanley. Say what? Yeah. Morgan Stanley, which last year posted a net income of over $3bn, which manages $779bn of assets worldwide, that services states and corporations the world over, is hitting the fucking bricks. There are potential buyers for Morgan Stanley. Both HSBC and, which is more interesting, the China Investment Corp are making their bids. Actually, there will probably be a few more, since so many banks are heavily exposed to that company. But that just means any suitor will take on Morgan Stanley's weaknesses, and large numbers of jobs will still be shed anyway.

Of course, I don't care about their shareholders or their gold-plated investors, but the simple fact is that we have a struggle to make sure they don't make us pay for their crisis. After all, the capitalist class has a procedure for situations like this: cut your losses, shred papers, fire staff, take the profits, retreat behind some gated communities with armed guards, let everyone else fight over the scraps, and wait patiently for a decent investment opportunity. Didn't these motherfuckers just come for your social security recently? Wasn't it only months ago that the UK government was talking about cutting disability benefits and the entitlements of single mothers? Aren't they pushing for a roll-back of your state pension entitlements? And how many people no longer have a pension to speak of because it has disappeared into a financial black hole? If these people have the monopoly of political initiative, they'll be able to use this crisis to roll back your rights even further. They'll say that trade unions are distorting the market by artificially raising wages and discouraging hiring, and they'll want new laws restricting membership. They'll say that social security distorts the market by disincentivising labour and encouraging widespread abstention from work. They'll say that pension entitlements are unsustainable with an ageing population, that the retirement age needs lifting since people are living so long, and that the taxes paid by corporations and the rich to help fund such bleeding-heart programmes are discouraging investment. If people resist, they'll say that violence is being promoted by political extremists and that for the time being certain rights need to be suspended until such time as people prove themselves mature enough to have them restored. Oh, but, don't worry: they're your friends, and they're there to help you. Just be patient and the wealth will trickle down.

Being equal to this situation is difficult in part because this is a crisis with no real historical precedent. In many ways, it could be worse than the Depression. The urgency of this moment has to result in a strong protest at the Labour conference, a good attendance at the Convention of the Left (Guardian report here), and some serious weight being put into such initiatives as People Before Profit. It has to result in a grassroots push in the trade unions for a massive fightback against the incomes policy, and for a radical new economic programme. The government, another toppling giant, has nothing to offer. It is spent. This, for example, is some lame-ass shit, the latest of a series of embarrassingly puny moves by an administration on its last legs. The best they've got to offer is the head of Gordon Brown, and so what? Whoever takes over will lead the Labour Party to a humiliating defeat, and the most likely successor is some right-wing scumbag like Alan Johnson or John Reid anyway. Or there'll be a 'dream ticket', whatever the fuck that means. There are those who still want to 'reclaim' the party - good luck to them, but they haven't got a choirboy's chance in Winchester. No, it's time to move on, regroup, and urgently get our shit together.

Labels: capitalism, economy, financial sector, great depression, neoliberalism

Think of the victims posted by Richard Seymour

Won't somebody please think of the victims?:

And when they do get home, how long can they afford to stay if the rent is high or a mortgage outstanding? What about the builders remodelling the kitchen? The nanny and the cleaner? How will they pay for the private school? The private health insurance? The car, the clubs, the tennis lessons? Dining out, theatre, opera? Christmas presents, holidays, charities? The accumulating pile, which to a banker serves as a report card, means many different things to those who help to spend it and to those on whom it is spent.

For every vanished pile there will be crying children, an angry spouse, unemployed builders and domestic help, goods left on shop shelves, flats and houses available to rent or buy, empty restaurants, and villages in Africa that don't get their new water pump after all.

Labels: economy, financial sector, neoliberalism, spoilt city brats

The sound of raining bullshit posted by Richard Seymour

Hank Paulson tells us that the system is sound. The Daily Telegraph is sure that the chimera known as the "free market" is still "our best hope". Anatole Kaletsky of The Times believes that the fundamentals are sound and that the worst of the crisis is to be spent outside the 'real economy' in the surreal financial sector. And, as a special treat for British workers, the governor of the Bank of England says that his Monetary Policy Committee is now "firmer in its belief that a period of muted economic growth is necessary to dampen pressures on wages and prices and return inflation to target." Yes, you read that correctly! They're keeping interest rates high to beat the shit out of wages and depress the economy, right in the middle of a global downturn, right when deflation is the vogue threat. Ten'll get you five, this is driving a further wedge right into the heart of a government that is already collapsing before our eyes. A few days ago, the good governor directly intervened in policymaking by warning the government not to raise spending on public services for fear that this would reduce the credibility of the government's fiscal rules on borrowing in the eyes of investors. Well, isn't he sweet?

First thing. I hate to remind everyone, but this crisis is rooted in the fundamentals. Take an example. One reason why hedge funds aren't hurting so much today is because the credit default swaps on the Lehman Brothers securities brokers soared in value over the last few days before it declared bankruptcy. Why is that? A credit default swap (CDS) is, essentially, insurance taken out on debt you are owed if you think the borrower might default. You then might insure the CDS by taking out a further, derivative, CDS on that, if you think the institution providing the first CDS might itself default. The CDS will end up on the market like everything else, being bought and sold, generally by hedge funds because of their more secure position. The value of the CDS will increase as the company on whom the original protection was taken out becomes more and more likely to default on its debts. So, those who retained investments in Lehman Brothers despite the warning signs (such as George Soros), got burned, but most hedge funds, adhering to catholic investment doctrine, actually withdrew before the climax anyway, and probably even made something from Lehman's collapse. So far, it just looks like the conventional story: the rich man's betting club collapses on itself, with some winners and losers, and the challenge is to prevent the whole thing from "spilling over into the real economy".

But, of course, what caused Lehman Brothers to default on its debts was its exposure to the subprime market, and this is where we get down to those fundamentals. Lehman Brothers brokered in securities - to a large extent, mortgage-backed securities (MBS). A single MBS might consist of thousands of mortgages bundled together, which can be bought and sold on the market at extraordinary profit for as long as there is a boom. The subprime MBS market was always risky, but when the MBS market was worth trillions, having doubled between 2001 and 2003, it looked much more attractive than it does now. And at any rate, in order to generate more value out of relatively sluggish economic growth, many companies turned to the riskier investments because of the promise of greater rewards. But what caused the massively inflated value of the MBS market in the first place also contributed to the stock market bubbles we have seen before and after the 2000-1 recession. Households with incomes depressed on account of the clobbering of labour unions and of neoliberal policies designed to repress wages, had to rely on relatively inexpensive credit to meet their needs. As house prices went up, they could use their homes as collateral for increasing indebtedness. Without the staggering amount of private debt built up by US households through the 1990s and 2000s, the system would have collapsed much earlier, because there would not have been sufficient demand to sustain it. But that debt also provided the basis for a stupendous stock market bubble, and with it a massively inflated MBS market of the kind that tempted poor old Lehman Brothers to sin. The story of the collapse of Lehman Brothers is a story of weak fundamentals. The weaknesses of the 'real economy', far from originating in the financial sector, were conducted into the financial sector and then amplified.

Second thing. The news can't talk sensibly about this, because they can't talk about class. They implicitly favour the capitalist purview in their focus, but they cannot directly address the issues involved. That is why no one relying on the papers and the television for enlightenment is going to have a clue what is going on. You receive one staccato bulletin after another - it's Black Monday in New York, Oh Shit Tuesday in Tokyo, Nuclear Dawn Wednesday in Moscow... You get human interest, dramatic footae, soft focus interviews, political soundbites, wonkery, etc., and if you put it all together, you still walk away befuddled. In fact, the best explanation you are likely to end up with is that some banks made some horribly bad bets on mortgages for poor people (and, therefore, what? - poor people shouldn't have mortgages?). To talk realistically about this crisis is to talk about what has happened to wages and profits for thirty years, the contours of class struggle and the associated political projects (socialism, social democracy, neoliberalism, etc), as well as the basic mechanism of exploitation behind that. To talk realistically about the issues raised by this crisis is also to talk about class, and particularly the impact on working class people. You can't understand why those who gain most from the system suffer least when it fails, while those who gain least suffer most unless you at least mention the fact that there is such a thing as highly concentrated class power in the society. You certainly can't understand the government and Bank of England's decision to restrict consumption in response to the crisis without seeing a preemptive strike against the bargaining power of labour (this obsession with wage pressures). This conflict of interests, this class struggle, is expressed a little bit more openly in the German media because the unions there are building up for a big fight to seriously enhance take-home pay and have the resources to combat the dominant narrative about the threat of inflation. One could go on, but at every point where an issue like this comes up, the news media tends to become curiously cryptic.

But just because the media doesn't recognise the very distinct working class interests that arise at this juncture doesn't mean that they aren't going to make themselves felt in a very serious way. The co-ordinated pay revolt planned by unions, provided it is pushed for in a big way by union members, could potentially be massive. And this is not just an 'economic' struggle. This menacing climacteric, with a global economic downturn dovetailing with intensified inter-imperial competition and looming climate chaos, raises all sorts of political questions. In the short term, it demands a clear formulation of what kind of programme we would actually need from the government in contrast to what we're actually getting; in the medium-term, it raises the question of how we are to express our interests politically when the official party of organised labour is busily waging the class war on behalf of capital; and, in the long term, it adds grave importt to the much more fundamental questions raised by the anticapitalist movement. Can we continue to live with this system, given its obvious perils and injustices, or do we have the means to build an alternative kind of society? But who would ask such a question when the system is sound and the free market remains the one and best hope?

Labels: capitalism, economy, financial sector, imperialism, neoliberalism, socialism, subprime