It wasn’t the stars, or geology. It wasn’t ocean currents, or the weather. The world economy was brought crashing down in 2008 by the particular way we have allowed it to be organised.
It was brought down by being organised around the priority of maximum competitive greed and gain of a small exploiting minority.
Today the world economy stands on the brink of crashing again, or at best of a long period of depression. Two emergency measures could stop that: expropriate the banks and financial institutions, and reorganise them as a public banking, insurance, and pension service, oriented to social investment; and tax the rich.
The governments are doing the opposite. Now that the British government has come up with some weak proposals for regulating banks, even though those proposals aspire to no more than protecting bank depositors from the bank bosses’ desire to use their funds to play the markets, the plans have come under fire from the bankers and look like being postponed some years.
A few of France’s, Germany’s, and the USA’s (not Britain’s) ultra-rich have mused aloud that the governments should at least tax them a tad. The Financial Times drily reports: “Early signs suggest that the ‘tax me more’ drive by some prominent rich [people] is unlikely to gain traction”.
From the early 1980s to 2008, world capitalism became more and more governed by the drive for quick, fluid gains, measured and coordinated through an increasingly complex and fast-flowing system of world financial markets.
Ever more elaborate forms of credit were packaged and traded, faster and faster. The bubble was bound to burst soon. There have been periodic financial bubble-bursting crises all through the recent decades. This time, the bubble-bursting was big enough that its knock-on effects threatened to ruin the world’s leading banks.
Over the time since 2008, millions have lost their jobs and their homes; in some parts of the world, millions are starving as a result of the food price rises which have been one sequel.
Fuller collapse was avoided only by the intervention of social control. Governments stepped in with “socialism for the rich”. In Britain, the government pumped the equivalent of £18,000 for every child, woman, and man in the country into the banks, in cash, loans, credit, and guarantees.
Writers called this the “privatisation of gains and socialisation of losses”. Then, it was a matter of a “socialisation of losses”, government bail-outs with taxpayers’ money, coming after the “privatisation of gains” in previous years and decades.
Now we have the “privatisation of gains” and “socialisation of losses” simultaneously.
As soon as the immediate crisis of late 2008 passed, the ultra-rich started coining it again, their costs reduced by the job cuts and wage limitations they had been able to impose in the crisis.
Between 2009 and 2010, the top thousand multimillionaires in Britain increased their wealth by £77 billion, or 30%. The wealthiest 50 in the world gained £150 billion, a 25% rise; the 50 richest in Europe, £88 billion, a 27% rise.
The trend has continued. Top bosses at the top 100 FTSE companies in Britain had median earnings rise 32% in 2010-11. At the same time jobs, services, and real wages are cut for the majority. In Britain workers’ real wages dropped 2.7% in 2010-11.
A market economy dependent for its impetus on the always-volatile spending of a rich few is necessarily more unstable than one more geared to the steady demand for routine services and goods by the majority.
The bail-outs of 2008 are now being paid for in the form of financial crises for governments, especially in the eurozone. The governments try to deal with those crises by cutting the services, jobs, and wages of the majority, again and again. The cuts make economic depression deeper.
In the Financial Times of 5 September, Wolfgang Münchau, a conservative economist who writes solely from the point of view of what will best help capitalism go forward, declares:
“The very least one should expect [now] is for all the eurozone to abandon all austerity programmes with immediate effect... allowing the automatic stabilisers [such as an increase in social welfare spending when private income sags] to kick in...
“Instead [we get] contagious austerity with a contagious downturn”.
The top one thousand people alone in the UK have individual wealth totalling £396 billion. If those top thousand were reduced to £1 million each (to routine luxury, rather than ultra-riches) then that would yield £395 billion.
As for the banks, HSBC alone has assets of US$2,690 billion (£1,670 billion), and last-year profits of $13 billion. British bank profits totalled about £30 billion for 2010. Bonuses in high finance and in other industries totalled £22 billion this year.
The cuts in education, local services, health, and benefits in Britain, huge in their social impact, are small in comparison to the wealth of the rich: about £18 billion from benefits, £16 billion from education and local services, over five years.
The public sector pension schemes now under threat have total liabilities, for all the millions of workers they cover, and all the dozens of years of those workers’ future pension years, of about £770 billion.
Seriously taxing the rich, and taking the wealth of finance capital under public democratic control, would reorganise economic life so that it could be made to serve human needs rather than taunting and ruining us.