The Liberal Democrats are calling on the Government to nationalise the failed bank Northern Rock, and denouncing New Labour from being held back from this course by "ideological preoccupations".
Such are the weird convolutions produced in British politics by the Blair-Brown counter-revolution in the Labour Party. Lib Dem economic spokesperson Vincent Cable, a man solidly on the pale-Thatcherite right wing of the Lib Dems, denounces the Labour Party leadership for having "ideological preoccupations" against public ownership (Guardian, 20 November 2007)!
Cable, of course, only wants "the government to take the bank over temporarily. It can thereby stabilise the position, avoid being held to ransom by fortune hunters in the City or the shareholders. Public ownership would also create time for an orderly sale".
Philip Richards, boss of one of the big investment fund with shares in Northern Rock, goes part of the way with Cable. He too wants the Government to delay getting Northern Rock sold off, though he thinks the delay can be done without nationalisation.
Otherwise, says Richards, the whole operation will simply enrich some "vulture capitalist".
The Government has extended about £40 billion of credit to Northern Rock, £24 billion in loans and £18 billion in guarantees for people who have their savings in the bank. The amount is bigger than Britain's annual military budget, and nearly 40% of the annual health service budget - all going to prop up one fairly small bank.
The former Northern Rock bosses have resigned, without personally losing anything. The huge credit guarantee from the Government sets the scene for a group of financiers to buy the bank cheaply, chop it about, siphon off huge salaries and bonusues, and then sell the business at a huge gain a couple of years later.
The Government, so Richards put it, will be "channelling money from 140,000 small shareholders into the hands of a vulture capitalist".
The precedent is the purchase of Japan's collapsed Long Term Credit Bank in 2000 by an American financial group. The financiers snapped up the bank for $1 billion; four years later they floated the chopped-about business on the stock exchange at a value of $10 billion. According to another American financier: "This may [have been] the most profitable private-equity deal of all time".
The way to cut out the vultures is for Northern Rock to be nationalised - for good - and the rest of high finance to be taken into public ownership too, with no compensation except for small shareholders.
We would need a different sort of government from the present one to be able to "demand" such a measure from the Government. But if we had a workers' government - a government accountable and responsive to the organised working class - that is what it would do.
Some would tell us that this is unthinkable. "Financial and business services" now account for an unbelieveable 30% of GDP in Britain. A great deal of the financial froth-swilling in the City would implode immediately on nationalisation. Fees charged by City firms on the financial dealings which they manage are a huge part of Britain's "exports" (about £20 billion).
Yes, it is true that many of the people now working in the City would have to be retrained and redeployed to other jobs: but why should the smartest brains in the country be devoted to high-class gambling rather than something socially constructive?
Yes, Britain would lose out relative to other countries if high finance were toppled from its perch: but do we really want Britain's income to be sustained by fees on the debt-management of poorer countries?
The secret of the last 20 or 25 years is not, as it appears to be, that capital has gone into the financial sphere rather than into production. It is that financial manipulations have allowed what Marx called "fictitious capital" to double and treble.
Marx wrote in Capital volume 3: "The same piece of money can be used... for various loans... It represents in the various loans various capitals in succession... The number of capitals which it actually represents depends on the number of times that it functions as the value-form of various commodity-capitals... Everything in this credit system is doubled and trebled and transformed into a mere phantom of the imagination".
The financial manipulations have expanded enormously since Marx's time, and especially in the last 25 years. The proportion of world financial assets to world output has trebled since 1980.
Its apologists say that this vast multiplication of credit has allowed new productive enterprise to get started more easily. In fact, in the USA, the greatest centre of self-escalating high finance, research and development expenditure has lagged since 2002 (in large part because government-financed research has dwindled). Productive investment has been sluggish, compared to profits. the UK's huge concentration of high finance does not make its research spending particularly high.
Meanwhile, the escalation of high finance has made the chopping-up and asset-stripping of productive enterprise much easier. "Private equity" groups raise cash in the financial markets, take over companies, and ruthlessly chop them up with a view to quick gains and tax benefits.
As the Observer put it (11/02/07): "Private equity works on the basis of making at least a 20 per cent return on investment in a three-to-seven-year timeframe. Savage cuts to workforces and asset disposals - particularly property - are the preferred route....
Today British firms controlled by private equity generate total sales of £424bn, export £48bn and, according to the British Venture Capital Association, account for 2.8 million jobs, equal to 19 per cent of private-sector employees.
At the AA, which is jointly owned by [private equity group] CVC and its industry rival Permira... hours have been extended and intense pressure and the casualisation of labour have stoked a climate of fear".
Most of the growth of high finance is nothing to do with banks lending more to productive enterprise, but rather with banks and financial groups sloshing round funds more among themselves.
Financiers cannot, in the last analysis, live by taking in each others' loans, any more than a community can live by everyone taking in each other's washing. The profits and the bonuses and the new office towers we can see in the centres of high finance are revenue siphoned off from the efforts of productive labour elsewhere in the economy.
This is also one of the reasons why in 1987, 1991-2, and 2001-2, huge crises could develop in high finance in the big capitalist economies with relatively small effect on trade and production. Financial crises do have "real" effects: even if the current credit crisis, originating in the US mortgage market, goes no further, it will mean up two million people in the USA losing their houses, and a big slump in the construction industry. But the real effects can sometimes be limited because the financial dealings are so far removed from production.
Taking the financial sector into public ownership - preferably international, or at least Europe-wide, public ownership - would enable us to make the choices for where investment goes transparent and democratically accountable. It would vastly increase the resources going into socially constructive purposes, at the expense of fees, bonuses, and pay-offs for "vulture capitalists".