Campaign about greedy bankers to hide the depth of the crisis

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The media is currently dominated by the campaign about incompetent bankers and their undeserved bonuses, on the one hand, and the beginning of ‘quantitative easing' on the other.

The fact that the bourgeoisie seems incapable of hiring people who actually know how to run banks is not an irrelevance and, indeed, has intrinsic interest as an expression of the crisis. However, the main reason for the concentration on the remuneration of undeserving bankers is to distract from the seriously bad news that is accumulating about the world economy, and to give the impression that the state has a workable strategy for dealing with the credit crisis and the recession.

Here we will reverse the order of approach. We will look first at the seriously bad news on the economic front, and that will give us a correct framework within which to discuss the phenomenon of errant bankers and to address the question of ‘quantitative easing'.

International dimension of the crisis

The world economy continues to deteriorate at great speed. For example, in the last month, the recognition by the bourgeoisie that the Asian economies, in particular China and India, are completely caught up in the downward spiral. At one time the bourgeoisie were putting forward the idea that the Asian economies would ‘decouple' from the western economies, in the hope that the dynamic built up there in the previous decade would carry on and offset, to some extent, the decline in the western economies. The bourgeoisie abandoned that rather hopeful vision some time ago, but they still thought that there would be some independent economic life in Asia in the sense that trade between the Asian nations would hold up. Since that appears not to be happening the bourgeoisie have been forced to the realisation that much of this trade was the logistics of manufacturing (Korea, say, supplying parts to China or Japan) where the ultimate destination of the goods was the western market. Overall the speed of contraction of world trade has taken the bourgeoisie by surprise. They are right to think that this is of exceptional importance, since it provides the most direct measure of the speed and scale of contraction of the global economy.

Response of the British bourgeoisie

The British bourgeoisie have a particularly acute sense of the fact that the performance of their own economy is tied to the performance of the world economy because of the economic history of Britain, with its overdeveloped financial sector (we explored this in the last issue of the paper). This is reflected in Mr. Brown's search for a united response from the ‘world community' and his focus on his recent visit to the US and on the upcoming G20 summit. The G20 meeting will include many more countries in the discussions than the usual meetings of the G8 countries.

The world bourgeoisie have, up to now, experienced considerable success in managing the economic crisis that started in the late 60s and was clearly apparent by the mid 70s. However, they have only been managing the crisis, not overcoming it - despite, for instance, Mr. Brown's affirmations over the last decade of the ‘end to boom and bust'. The bourgeoisie now have to face the reality of the situation rather more squarely. It is predicted now that the British economy will contract by perhaps 5% this year and 2% more during 2010, and firms of all types and descriptions are battening down the hatches, reducing their expectations, trying to clean up their balance sheets and laying off workers. There are a very few counter-examples, such as fast food firms, but these examples are understood to be an expression of the recession rather than going in the opposite direction.

Furthermore the Bank of England seems to accept the very negative evaluations being given of the prospects for the recession and has finally initiated a policy of ‘quantitative easing' (printing money). Some of the bourgeoisie's experts have been saying for some time that the Bank should take this route and would have been happier to see it happen earlier. On the other hand many experts are not at all confident that the process will do anything to rectify the situation since the Bank of Japan has pursued the same policy for a sustained period without it having much appreciable effect. And the open printing of money always brings with it the real threat of devaluing the currency and unleashing powerful inflationary tendencies.

Mass unemployment - a fundamental sign of the crisis

The recession will accentuate phenomena that are already clearly established as the result of the long term decline that has taken place since the end of the post-war period of relative prosperity and sustained growth. Most important is the phenomenon of mass unemployment that was hardly dented even by the superficial success of the 10 year period prior to the credit crunch. The bourgeoisie like to blame this either on the unemployed themselves or the ineffectiveness of their own bureaucratic schemes for dealing with the situation. The one thing that they will not do is accept (at least in public statements) that unemployment is an expression of economic reality.

For example, the London Evening Standard on February 20th summarised an article originally written for The Times:

"A devastating critique of Labour's flagship New Deal for the unemployed has branded it an ‘expensive failure'.

Frank Field, the Labour MP and former minister for welfare reform, said the jobs scheme and related tax credits had cost £75 billion since 1997 yet failed, even at the height of the boom, to produce results.

‘The results are derisory', he said, adding that in a decade the number of people doing no work had fallen just 400,000 from 5.7 million. Yet at the same time the number or young people not in work or education had actually gone up. Labour's New Deal incorporates a series of schemes that compel the unemployed to take training, work places or community work...

The Labour veteran said that only a third of young people held a job for more than 13 weeks after being on the New Deal - even during the boom. The rest returned to living on benefits....

Many youngsters would stay on benefits for life unless the system was reformed, said Mr Field. ‘The recession calls for a totally new programme of welfare reform', he said."

Since the recession will add hundreds of thousands and probably millions to the total of the unemployed it is difficult to see how a ‘programme' can be set up that will deal with the situation, given the balance sheet drawn up by Mr Field of the operation of the New Deal scheme during the so-called ‘boom' period. What he really shows is that we are in a period in which the bourgeoisie can only speak of ‘boom' periods at the expense of ‘overlooking' uncomfortable realities like the real scale of unemployment. And, having shown the futility of such schemes, he can only put forward as a ‘solution' ‘a totally new programme of welfare reform' - in other words another austerity ‘initiative'.

Whether or not prominent members of the bourgeoisie can convince themselves that such schemes can somehow miraculously ‘deal with' the phenomenon of unemployment, the reality is that unemployment is a fundamental expression of the crisis.

Marx noted this in the mid-19th century. In Capital (Volume 1, Chapter 25), he wrote:

"The life of modern industry becomes a series of periods of moderate activity, prosperity, overproduction, crisis and stagnation. The uncertainty and instability to which machinery subjects the employment, and consequently the conditions of existence, of the operatives, become normal, owing to these periodic changes of the industrial cycle."

So it is nothing new in itself that the lives of the workers - or ‘operatives' - are afflicted by unemployment. But Marx was writing in a period when the industrial cycle - Brown's ‘boom and bust' - was a reality: crises of overproduction were alleviated by what Marx called "expanding the outlying fields of production", penetrating into new economic regions of the globe, and during the resulting phase of growth the army of the unemployed could be considerably reduced. This has not been the case for most of the 20th and 21st centuries. The Great Depression of the 1930s and the subsequent world war, the long drawn-out crisis since the late 60s, the menace of a new depression today, all reveal a tendency for the crisis to become permanent and to push capitalism towards disaster and self-destruction. This is why so many young people, as Mr. Field's exposition so eloquently says, have extremely little expectation of ever becoming ‘operatives'.

Errant bankers are an expression of capitalist decomposition

As we said in our last article, the financial manoeuvrings of the bourgeoisie that have characterised the last decade are not the cause of the crisis but part of the bourgeoisie's response to the growing bankruptcy of capitalism. Since the crisis is so deep and has gone on so long, the fabric of capitalist society is collapsing. This is expressed at the highest levels of the bourgeois class, and the behaviour of the financial engineers of various hues (including bankers, certainly) is an expression of this. It has now become very tangible, given that the crisis in finance and banking have in the end assuredly deepened the crisis of the ‘real economy', that the expedients taken up by the bourgeoisie to ameliorate the crisis rebound with ever greater certainty on the heads of the bourgeoisie themselves. But there is also an irrational element here which is characteristic of a society in decomposition. It lies in the fact that that the bankers (in particular) have ceased to have any sense of responsibility to the institutions that they serve. That may not seem perverse, since these institutions are not laudable. But their own futures were bound up with the future of the institutions they served. Very many of them are being laid off in the current cut backs in the banks and other institutions. Such a fundamental failure to have regard to the future consequences of their actions speaks of a class that has a basic difficulty seeing any future for itself or society at all. That does, of course, correspond to the actual situation.

However, the bourgeoisie as a whole will never simply give up the fight to preserve its class rule or just take the money and run like some of the banking fraternity. The ‘greedy bankers' can provide a last service to their class by acting the part of a recognisable scapegoat that people can blame for the crisis, obstructing any deeper investigation of the real contradictions that lie behind the crisis and encouraging the belief in false solutions like a more moral, more responsible, better regulated, more state-controlled form of capitalism.  

Hardin 5/3/9

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