Whose Crisis, Whose Future?

Susan George

• Publisher: Polity
• Year: 2013
• Print ISBN: 9780745651385, 9780745651378
• eBook ISBN: 9780745659695
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

Crisis? Whose crisis? Today we are in the midst of a multifaceted crisis which touches the lives of everyone on the planet. Whether it's growing poverty and inequality or shrinking access to food and water, the collapse of global financial markets or the dire effects of climate change, every aspect of this crisis can be traced to a transnational neoliberal elite that has steadily eroded our rights and stripped us of power.

And yet our world has never been so wealthy, and we have, right now, all the knowledge, tools and skills we need to build a greener, fairer, richer world. Such a breakthrough is not some far-fetched utopia, but an immediate, concrete possibility. Our future is in our hands.

1

THE WALL OF FINANCE

We had to struggle with the old enemies of peace: business and financial monopoly, speculation, reckless banking, class antagonism … they had begun to consider the government of the United States as a mere appendage to their own affairs. We know now that government by organized money is just as dangerous as government by organized mob.

Franklin Delano Roosevelt, final speech at Madison

Square Garden in the presidential campaign, announcing the Second New Deal, 31 October

Despite appearances, the financial saga that led to the megameta-crisis the world still endures is not particularly difficult to understand. A specialized vocabulary and the array of confusing acronyms such as SIVs, CDOs and CDSs give the issue an aura of complexity, but in reality the unfolding of the drama is underpinned in quite a banal way by base instincts like greed and the everyday actions of intelligent people ‘just doing their jobs’, as well as wilful negligence on the part of governments imbued with the ideology of the self-regulating market. Animal spirits, as the great British economist John Maynard Keynes called them, or hormones such as testosterone, as chemistry would now interpret them, also played a part. So did the will to power. The banks lobbied and manoeuvred until they became literally ‘too big to fail’, as the standard phrase now has it, which unfortunately did not mean ‘too big to bail’. Private financial power completely overtook public capacity to regulate or even to understand what was happening.

‘To bail out’ means three things in non-financial English: to use a receptacle to empty water out of a boat so that it doesn’t sink; to parachute out of a distressed aircraft; and to pay a large cash deposit in order to release an accused person from jail while awaiting trial. Figuratively it can mean to help someone out of a bad predicament.

The huge bank bailouts across the world fit all these definitions. Governments have emptied the banks’ boats of a lot of their stupid loans and toxic assets; they have helped the bankers strap on their golden parachutes and float gently down to solid ground with large sums of money in their jumpsuits; they have kept the bankers out of jail (Bernard Madoff doesn’t count, he was the sacrificial wolf); and they have coughed up astronomical sums to extract the banks from a nasty predicament of their own making.

The risky loans and fancy financial products that precipitated the crisis were intellectually justified at the time by a pious belief in market self-regulation, the patent fiction that all participants were perfectly rational, possessed of equal knowledge, and that markets could not lie. Whatever people were willing to pay for was valuable. The financial products sold rested on impenetrable mathematical formulae whose inventors were too smart for their own good and that of their banks. Apparently only ten or twelve people inside a given bank even pretended fully to understand the complex products they were flogging all over the world.

The banks wanted the government out of their affairs; they lobbied and manoeuvred until they got their wish for near total deregulation; disaster followed – at least for some. The bankers responsible have rarely suffered because governments have intervened just when it mattered, although tens of thousands of lower-level employees have lost their jobs. That is the whole point of being ‘too big to fail’. And when you know that is what you are, you have an incentive to take huge risks, since someone else can be counted on to clean up after you. Such risks are risky not for those who take them, but for society collectively. Heads I win, tails you lose.

We will make no attempt to cover all the details,¹ but we will meet some of the main actors, examine their behaviour and contemplate with suitable knowledge the devastation they have wrought. I believe that the remedies prescribed so far will not and cannot work, if by ‘working’ one means devising a financial system that serves the needs of the real economy and of society and avoids irremediable damage to innocent bystanders. We need different strategies if something other than a swift return to business as usual – and renewed crisis – is the goal. The obvious solution, in my opinion, would start by getting our system under control, treating finance and credit as common or public goods operating under wellunderstood, democratically established rules and serving the needs of individuals, families and businesses and considered as services, not profit-making activities in themselves. The crisis could have been – could still be – used to achieve such an outcome, but governments are taking an opposite path. At the very least, and in the hope that it may not be too late, concerned people can help to promote genuine democratic solutions better than those on offer today. I shall elaborate on these points in the final chapter.

HOW WE GOT HERE FROM THERE

Although events accelerated especially after 2001, the financial meltdown was a long time building up, and understanding it requires a bit of background. It’s important to examine first the ideology of neoliberal globalization, then some recent history.

Recall what Adam Smith said about the Davos class: ‘“All for ourselves and nothing for other people” seems in every age of the world to have been the vile maxim of the masters of mankind.’ If you don’t tell people who wrote it, they generally attribute it to Marx, Hobbes or Machiavelli. Smith is usually referred to as ‘an economist’ but considered himself a ‘moral philosopher’. We shall try to show how his vile maxim applies to the twenty-first-century masters of mankind, the golden boys, traders, investment bankers and assorted financial hucksters in New York, London and other major centres, and how the world of finance and the real economy followed them like lemmings over the cliff.

Another sharp-witted commentator who regularly deals with the same subject as Adam Smith and reveals the nature of this class is the artist William Hamilton in the New Yorker, the sophisticated US weekly which has been publishing his cartoons for decades. Hamilton casts a cold but amused eye on the doings of New York’s upper echelons and captures their essence.² Unsurprisingly, a lot of his drawings are of wealthy people talking about money – who has it, who hasn’t, how much, how they got it, how they go after more, what they do with it. I provide here a few random samples of his observations.

Two 1980s college students walking in the woods; young woman replies to young man, ‘That is incredible. Do you know that I, too, want as much as I can get as fast as I can get it?’

Two executive types drinking in a crowded upscale bar: ‘The point is to get so much money that money’s not the point anymore.’

Woman explains to man at black-tie party, ‘Of course they’re clever. They have to be clever. They haven’t got any money.’

One businessman to another as they gaze out the window of a private jet: ‘How little we really own, Tom, when you think of all there is to own.’

In the world Hamilton knows inside out, money invariably figures in the language of seduction, courtship, friendship, marriage, party-going, child-rearing, shopping, divorce and, of course, the everyday business of business. If you want to understand from an insider the present masters of mankind, the mentality, mores and manners of the exotic tribe of New York bankers, top corporate executives, their wives and even their children,* Hamilton is your man – a better guide than any anthropologist.

To get ‘All for themselves’, this class had to accomplish several tasks, and let me make clear once more that I am not talking about conspiracies. Dark and secret plots are unnecessary when the common interests of the rich and powerful are at stake. Their first order of business was to change the redistributive model of the welfare state that developed in both Europe and the United States after the Second World War and made societies much less unequal than they had previously been. In those days, governments knew they had been elected with a mandate to tax the better off so as to spread at least part of the wealth and to give the ‘other people’ some financial security, education, health care, pensions and decent public services. Let us recall that, in the era of Republican President Eisenhower in the 1950s, the topmost income bracket was taxed at 90 per cent. In 2009, the top tax rate which applies to income above $372,950 is 35 per cent. The member states of the European Union are already engaged in a kind of race to the bottom where taxes are concerned, both for individuals and businesses, and the treaties make harmonization virtually impossible. Such steep declines represent one of many neoliberal victories.*

In the USA in particular, the wealthy always saw themselves as the victims of the welfare model and complained bitterly that it ‘confiscated’ their advantages. They wanted this model abolished, but were no longer totally in command. Right-wing intellectuals serving the interests of these elites helped them to understand that the only way to bring about lasting change in favour of those at the top and return them to the position they had – in their view, rightfully – occupied in the earlier twentieth century, before the Depression and the Second World War, was to transform the redistributive culture of the welfare state. These intellectuals found a willing audience and financial support among business leaders, private family foundations and other right-wingers who were also offended by the growing power of the anti-Vietnam War, civil rights, feminist and gay liberation movements that then dominated popular culture, especially among the young.

The right undertook the transformation of society in a systematic way, targeting the centres of production and dissemination of ideas, the manufacture of persuasive images and the creation of popular myths. Purchasing top, politically reliable talent and skilled communicators, conservative foundations based on large industrial fortunes financed the ideological crusade; they showered generous rewards on these professional idea-mongers and patiently built their institutional infrastructure and ideological superstructure. They nurtured think tanks, such as the Heritage Foundation and the American Enterprise Institute, or smaller, more specialized organizations to campaign for conservative causes. They created publications of their own, financed everything from scholarly quarterlies to campus news-sheets, inundated the media, and manipulated the public using management and marketing skills to spread the message.

While the right was busy changing the whole atmosphere, indeed the character, of the United States by funding the development and spread of ideas, the few left-of-centre foundations and philanthropists were funding projects to improve some aspect of disadvantaged people’s lives. In the context of an increasingly unfavourable ideological and political climate, most of these projects eventually failed.³

THE DOCTRINE

George Soros is credited with inventing the phrase ‘market fundamentalism’, which tells us in capsule form that the doctrine spread by these intellectual mercenaries is akin to a religious one. Perhaps neoliberal holy writ was easy to sell because it was so simple, ideological, and had little to do with genuine knowledge or sound economics. In any case it sold. Part of the doctrine came from the émigré Austrian economist turned social philosopher Friedrich von Hayek, who trained generations of ultra-conservative monetarist economists such as Milton Friedman at the University of Chicago. Hayek taught his ‘Chicago Boys’ that government intervention in individual or social life would put nations on ‘The Road to Serfdom’, the title of his most famous book. Economic freedom, meaning the right to gain and to dispose of one’s wealth without outside interference, was placed on the same pedestal as hard-won political, religious or personal freedoms enshrined in the Constitution and the Bill of Rights.

In Hayek’s view, the law should be limited to forbidding certain actions. It should not be used for positive prescriptive purposes such as mandating programmes for poor people or even obliging rich people, through their taxes, to pay for common goods such as public schools and hospitals. Thus, in Hayekian language, the sentence ‘I can eat, you can eat’ means simply that we are free to do so because no law forbids it, but tells us nothing about the presence or absence of food on a family’s table. His basic principle is that people exercising their individual choices will make far better collective decisions than any government, because no centralized bureaucracy can ever be in possession of enough information to know what people really want and need. Hayek’s doctrine was an updated and harsher version of Adam Smith’s famous ‘invisible hand’.

The ideology purveyors concentrated on spreading such beliefs as these:

•	The private sector always outperforms the public sector in terms of costs, efficiency, quality and price to the consumer.
•	The government (sometimes disparagingly referred to as ‘the nanny state’) should not interfere in people’s lives by enmeshing them in bureaucracies, particularly bureaucracies intended to ‘help’ them.
•	The individual should be self-reliant and free to make his or her own choices and thereby to succeed or fail.
•	The market, bringing together all these individual decisions, will be omniscient and thus make wise judgements, draw correct conclusions, value goods and services fairly, and ensure that the public gets exactly what it wants.
•	In order to attain optimum equilibrium and thus to reach optimum decisions, markets should be self-regulated, not regulated by any external body.
•	The rich are rich because they are smarter, harder working, more daring and more entrepreneurial than you and me; they are creators of wealth and providers of employment, so they and their businesses should be minimally taxed, if at all. The same goes for shareholders, and the aim of every business is to create ‘shareholder value’ (essentially higher dividends and market prices for the company’s shares).
•	Philosophically, the individual is sovereign, owes nothing to others, and is looked upon primarily as a consumer rather than as a citizen. Margaret Thatcher pithily expressed the neoliberal bottom line when in 1987 she told Woman’s Own magazine that we were living in a period when ‘too many children and people have been given to understand “I have a problem, it is the government’s job to cope with it!” … “I am homeless, the government must house me!”, and so they are casting their problems on society – and who is society? There is no such thing! There are individual men and women …’

In Hijacking America, I described the quite awesome material means, machinery, methods and messianic zeal of the ideological workforce that succeeded in making such notions commonplace and generally accepted. Following Antonio Gramsci, and taking seriously his concept of cultural hegemony as the key to domination, the culture warriors understood that real political power was best kept invisible. It cannot be durably acquired through violence and coercion; rather, you must undertake what Gramsci called the ‘long march through the institutions’ in order to make your own ideas the ‘common sense’ of your time. Get into people’s heads – their hearts, hands and votes will follow.

The election of Barack Obama gave millions of us, whether Americans or not, a thrilling and euphoric moment of hope after the violent, intensely neoliberal years of George Bush. We can also admit – at least I can – that we tended to project all our long-held, frustrated dreams and fantasies onto this charismatic man, who, despite rumours, does not walk on water or cure lepers with his touch. I fear that, despite such inspiring events as his election, neoliberal ideology is far from dead and can even be found stalking the White House corridors that lead to the Oval Office.

How else can one explain the renascent power and great rivers of money unfailingly flowing towards the very people and institutions that got us into the present mess by devout adherence to neoliberal principles and the interests of the rich? But here I am getting ahead of the story. The ‘All for ourselves’ crowd and their hired help concentrated on embedding their doctrine in the schools and universities, the press, radio and television, the law schools and the courts, even the churches and family institutions. They often succeeded in convincing people to vote massively against their own economic interests.⁴

THE TRIUMPH OF CAPITAL

Neoliberal doctrine, coupled with accelerating globalization and a simple desire for maximum profits, also favoured foreign investment wherever salaries were low in relation to workers’ productivity. Capital naturally preferred jurisdictions where government...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Contents
• Introduction
• 1 The Wall Of Finance
• 2 The Wall Of Poverty And Inequality
• 3 The Most Basic Basics
• 4 The Wall Of Conflict
• 5 Our Future
• Conclusion
• Notes
• Index