De winnaars en de verliezers van de crisis

The Morning Star logoDit is een artikel dat op de Engelse website Morning Star verscheen op 14 juni jongstleden.

De Britse supperrijken hebben het zeer goed gedaan tijdens de crisis. Volgens de Sunday times, werden de 1.000 rijkste mensen op een jaar tijd 77 miljard Pond rijker. Of een winst van 30%. Hun volledige rijkdom bedraagt nu 333 miljard Pond.

Britain’s super-rich have done amazingly well out of the crisis. According to the Sunday Times, the wealthiest 1,000 people have increased their assets in just one year by £77 billion. That’s a gain of 30 per cent, bringing their total wealth up to £333 billion.

This is an interesting figure. It’s more than twice the size of the £156bn annual deficit which we are told has to be eliminated by all-round sacrifice and massive cuts in the welfare state.

Is there a connection? Indirectly, yes. And it is vital that we understand it – because currently across Europe people are being subjected to a confidence trick so gigantic and dangerous that it would make even Bernie Madoff blush.

The same financiers who precipitated the economic crisis are now demanding that working people pay the cost. They are doing so to ensure that the profits of the very rich are maintained even if the result is deeper crisis and recession.

Governments in virtually every EU country have been bullied into announcing cuts in public expenditure that will reduce economic activity by between 1 and 2 per cent annually for the next four years. Japan has just announced it will do the same.

The cumulative result can only be long-term economic depression. Governments are taking this action in the middle of the world’s worst economic crisis since the 1930s at a time when those who control the capitalist world’s assets are not investing but hoarding and speculating.

So are those who advise governments mad? Well, no more so than the inventors of the dodgy “financial products” that precipitated the crisis in 2008 – which were also very profitable for some.

On this occasion, however, the proposals are designed to benefit the whole class of the very rich. The destruction of the welfare state will push a massive amount of provision back into the private sector.

It will directly attack the main surviving bastion of trade union resistance which is now concentrated in the public sector. It will increase unemployment and reduce wages. And it will cut taxes.

As they say, never waste a good crisis.

If any apologists of the existing order are reading this article, they might now object, saying: “But you are all shareholders. Your pensions and savings are invested in the stock exchange. They depend on corporate profitability.”

True – but only up to a point. Has any wage or salary-earner seen their bank savings gain a 30 per cent rate of interest in the past year?

There is a reason why they haven’t. It’s called finance capital. This is the result of the massive concentration of capital ownership in the course of the last century and the use of this capital to dominate and control the banking system.

Last September former senior official in the Office for Fair Trading John Chapman, writing in the Financial Times, effectively exposed finance capital’s present-day workings.

He focused on what is called the “alternative investment” sector. It is made up of the investment banks, hedge funds and private equity companies that manage the wealth of the very rich. It currently manages about £1,000bn – as against the £5,000bn invested in pension funds across Europe, mainly workers’ savings.

In the years running up to the 2008 crisis the alternative investment sector was marking up average returns of over 15 per cent. It did so mainly through “leverage” – borrowing from retail banks and pension savings of ordinary people who have to be satisfied with a much lower level of interest.

As Chapman noted, the alternative investment sector is only open to the “very wealthy” – effectively those with investable wealth of well over £3m.

In Britain this amounts to a minute fraction of the population, roughly 0.2 per cent, at most 50,000 adults.

They have the privilege of being able to invest through institutions that are not regulated, generally not taxed and can borrow unlimited amounts from the retail banking sector.

It was of course the speculative leveraged borrowings by some of these alternative investment banks that precipitated the 2008 crisis – precipitated, but not caused.

For causes you have to go deeper – to the age-old contradictions of capitalism. Exploitation expands capital and impoverishes workers. Profits can’t match the increase in capital and workers can’t afford the expanded production.

Temporarily bank lending was used to sustain demand – and lending to the poor is always very profitable until people cannot afford to pay it back. Then the retail banks were left without the minimal interest to cover workers’ savings.

As a result Northern Rock went bust, the mortgage banks did the same in the US and the crisis began.

This is why the current actions of governments are so dangerous. Poverty was the immediate cause of the crisis. Poverty and unemployment will perpetuate it.

The level of average household indebtedness in Britain remains 150 per cent of household income. So what is the government proposing? Sack another 300,000 people and cut benefits.

It may not make sense to you. Yet, as we have seen, it may do for the very rich.

But it is based on a gigantic confidence trick. Public spending did not cause the deficit. Expenditure on public services is less today than it was in 2007.

The deficit was caused by two things – the money used by the government to bail out the banks and the economic crisis triggered by the banks – which reduced the number of employed paying tax and increased the cost of benefits paid to the unemployed.

In historical terms the deficit is not even very large. Even at its biggest, as forecast for next year, the total national debt will be less than that in the late 1940s when the welfare state was created or during the full employment of the 1960s.

What is enormous is the aggregate private debt of the banks – that falling due in 2010 is equivalent to 23 per cent of national income in Britain compared with 7 per cent in the US (IMF figures). This is what really frightens the managers of finance capital and the bankers of the EU.

And this is why we need an alternative to this mad system. Remember, the richest 1,000 alone increased their wealth last year in Britain by £77bn. The deficit is £156bn.

In 2009 the TUC backed the People’s Charter and its demand for the government to take control of the banks, ban hedge funds, close down tax havens and use our savings for productive investment. Wouldn’t that be a good start?

© 2010 The Morning Star