Sidewinder

Crisis? What crisis?

Unless you’ve been stuck in cave for the last few months, you’ll have noticed a certain amount of hysterics in the media about the current financial crisis. A crisis judged so severe by the Taoiseach that he recently decided to back all the top Irish banks with €400 billion. That’s nearly twice our annual GDP and €100,000 for every man, woman and child in the state. Money that wasn’t available for our broken health system or our children’s crumbling schools, apparently.

So what’s the cause of all these alarms, it’s link to the gathering recession and what does it bode for the future for ordinary workers and tax-payers?

Pyramids not houses
The official story is that the origins of the current crisis lie in the collapse of the US subprime mortgage market - i.e. poor people not paying their mortgages. Although this may have been the trigger event, it is not the real cause. The real cause lies in pyramids not houses. Specifically the enormous debt pyramid built up by the Western countries, particularly those following the Anglo-saxon economic model - which, unfortunately for us, includes Ireland.

The financial framework constructed to support the globalisation of trade and production, has enabled the growth of a huge, unregulated credit sector known as the "Shadow Baking System" which has allowed the ballooning of credit not backed up by any capital reserves. Now this system is collapsing and the banks are having to take the bad debts back onto their balance sheets meaning that most US and European banks are in danger of not having enough of the reserve cash required by law to back up the loans - many of them dodgy property loans.

The result has been the biggest wave of nationalisations in the Western world since the aftermath of WW2. However we are not nationalising railways, mines or manufacturers but banks.

Nationalisations = Socialism!
Some blowhards in government and media have labelled this outbreak of nationalisations as a return to socialism. Nothing could be further from the truth. Here the only thing that’s being socialised is the risk and the losses while the profits remain privatised. Socialism is about redistribution from the parasites to the producers, not theother way around.

Some commentators on the Paulson Plan’s $700 billion bail-out have noted that the figure almost exactly matches the amount the US has spent on its wars in Iraq and Afghanistan, but only in passing, as a coincidence. In fact, there is an indirect connection here. After the tech bubble burst and 9/11, then Fed Secretary Alan Greenspan, lowered the dollar interest rate right down below 2% to prevent a crash. He then kept interest rates very low, right through to 2004, dropping down to 1% just after the US invasion of Iraq. It was this ultra-low rate, in part motivated by the need to provide cheap money to fund the Iraq adventure, which contributed to the growth of the property bubble. In the American neo-cons’ original plan, the Iraq adventure was supposed to pay for itself with seized Iraqi oil. Now it looks like the US taxpayers will have to pick up the bill. But they will not be the only ones to pay. As the collapse of this debt pyramid drags us into a global recession, we will all end up paying.

Normal service will not be resumed
"Raw capitalism is a dead end", US Treasury Secretary Hank Paulson now says. The political and business establishment are suddenly agreed that government intervention and regulation are not only a good thing, but a vital necessity. Well they’ve sure changed their tune. These are the very same people who have been bashing us over the head since the1970s with the neoliberal dogmas that regulation is bad, that markets can look after themselves far better without government interference. The whole neoliberal catechism is now in shreds. So we will not be going back to the way things were before this crisis. Nor will we be going back to the way things were before neo-liberalism, to a revival of the previous, Keynesian international system. Keynesianism was founded on a post-WW2 world order where the USA was the unquestioned industrial superpower of a non-Soviet world, still ruled by the West. That world order is no more. Globalisation has meant the shift of industrial power to the East. China is now the workshop of the world. With its failure to seize control of the world’s oil reserves, US power to continue to dictate the terms of trade and the global economy is waning.

What’s next?
Capitalism is no stranger to crises. In many ways crises are seen as an opportunity to overcome obstacles to profitability that tradition or popular resistance have established over time. The capitalist solution to the crises they create is always to try and make the workers pay. In concrete terms this means an all-out assault on wages through the rotten partnership process and further assaults on public services like health, education and public transport. Our response must be to fight back and not let them saddle us with the bill for their screw-ups.

"The market heals itself". "The less government intervention in the market the better". Such are the dogmas of neoliberalism that the current financial apocalypse has now consigned to the dustbin of history. But we need to look behind the media spectacle of crashing banks and panicking stock market traders if we want to understand the real causes and meaning of the current crisis.

While politicians and economists fight over whether this crisis is a crisis of liquidity or solvency, we say both and neither. This crisis is above all a crisis of globalisation and of distribution, that is to say, of class power.

Neoliberalism allowed capitalists to outflank western workers power over production by the relocation of production to the Far East. To do so they had to create a global financial system that transcended the power of nation states to regulate or control them. This new system in turn formed the basis of a shadow banking system on which the currently collapsing pyramid of unsecured debt was built. This is the crisis of globalisation.

Credit for workers has been part of the foundation of consumer capitalism since the 1920s. However, under neoliberalism, since the mid-70s, workers real wages have fallen. The gap in aggregate demand has been increasingly filled with credit. The rich got the profits, the workers got credit cards and home equity loans.

The crisis of the banking system is a breakdown of the wholesale money market. Banks get their income from retail deposits - from workers - and wholesale lending - from the rich, via money and hedge funds. The huge redistribution of money to the rich from the workers brought about by neoliberalism, means that when the rich withdraw their cash from the interbank lending market it seizes up, throwing the whole capitalist financial system into crisis. This is the crisis of distribution.

None of the current solutions being put forward address the distribution problem. So although neoliberal ideology may be bankrupt, it’s regressive distributional drive carries on. Until the question of "aggregate demand" - i.e. worker’s income - is raised again, the current bubble-burst will morph into a general depression in the West. Those questions will not be raised as long as workers do not have the strength to force them onto the social agenda.

If a surfeit of workers power brought Keynesianism to its knees in the mid-70s, it is a dearth of it that has now brought about both the creation and the collapse of the Western debt pyramid. It is a geopolitical irony for Western capitalists that in using globalisation to undermine Western workers power, they have mistaken profit for power, power which is increasingly shifting to the Far East.

Last night there was a unique coming together of Christian, Jewish and Muslim groups in protest outside the Houses of Parliament. Were they coming together to express their horror at the US-UK instigated bloodbath in Iraq or the torture of the Palestinian people? Of course not, they were united in their hatred of gays and lesbians.

They were protesting to support the attempt by a member of the house of lords (and they call this farce a democracy - who voted for these parasites?) to sabotage a bill to outlaw discrimination against people on the basis of their sexuality. This the "faith" community are keen to tell us is an outrageous assault on their "human rights" - specifically their right to live their life according to their beliefs that gays and lesbians are intolerable.

Of course in the USA this kind of discourse has been taken to it’s (ill)logical extremes long ago. For decades now neo-nazis in the US have exploited the USA’s liberal "you can do anything you like and not pay tax as long as its a church" laws to carry on their tendency. The Church of the Creator is a creation of neo-nazis to set up their party masquerading as a church or religion - they claim that their belief in aryan supremacy, the global zionist conspiracy and the desireability of a final solution to the same is simply part of their religion and is therfore not only legal, but tax-deductable. All of this is simply the taking of an originally liberal-mided initiative to allow people freedom of religion, faith and assembly.

The problem is not one for the lawyers, it is intrinsic in the whole discourse of "rights". To illustrate, let’s contrast a properly secular approach - if the codes of society are for us to make as best they suit us, then let’s talk instead of agreements or pacts.

Let’s re-examine the god-botherer’s protest that toleration of gays and lesbians is an infrigement of their rights. In agreement terms, they are asking us all to agree that they need only accord egality to straight people. That’s not a socially stable solution.

The political ethic of egality is in reality, both conceptually and pratically, a ceasfire line. Ultimately, there are more arguments against egality than there are people to die for them. We take our basic argument for egality and the process of progress through debate and experiment from the no-brainer that no-one will settle permanently for being on the losing side of any other kind of settlement. Further, that peace is more prosperous than the war of all against all.

The concept of "rights" is a historical hangover from the era of theology, let us now talk of reasonable agreements. Let us agree on the right to co-exist. Let us hope that we all we ultimately come to appreciate that when it comes to diversity and "otherness" less is, in actual fact, less… and more is genuinely more.

The devil is always in the detail… Like another blogger I was watching the good news of local Leeds boy Mirza Tahir Hussain having his dodgy death sentance in Pakistan quoshed last night on More4 news when I caught the quick passing mention of the fact that the jail he has been on death row in for the last few years is sponsered by Pepsi. The covering journalists managed to sneak in a quick 3 second flash of the Rawalpindi jail sign with the Pepsi logo and mention it in the voiceover. First off, all power to the journalists for managing to get this into their report, however briefly. It’s certainly more than the beeb or the main Channel4 news managed. There was mention in a Times report last month, but other than that, bugger all. Oddly enough there seems to be no mention of Pepsi’s generous sponsorship of Rawalpindi nick, which incarcerates not only prisoners awaiting death by execution, but also juveniles under 15, in the soft drink and junk food group’s website on corporate citizenship and worth donations - I looked at the "Diversity and Inclusion" section in vain. The image above is from another prison, this time in Trujillo, Mexico - is this a pattern? More digging required…

So farewell then, Donald Rumsfeld. You prick.

So Korea explodes what may or may not be a nuclear device. And the question nobody’s asking is… where’s Donald Rumsfeld? How strange that at this moment where one pole of the "Axis of Evil" is singing "Come and have a go, if you think you’re hard enough…" the high priest warlord of the neo-con crusade is nowhere to be seen. One of our Rumsfelds is missing… Actually that’s not all that’s missing from the neo-con war machine. The official line from the Dubya House is that they are working with the UN to address the issue. This from an administration that appointed an ambassador to the UN previously chiefly known for two things - his outspoken conviction that the UN was an institution best abolished and being the last known public adherent of the Joseph Stalin moustache appreciation society. It appears that the bullish confidence of the neo-cons in the ability of US military power to establish global command unilaterally is faltering somewhat. It seems as if the object lesson of getting their arse kicked in both Iraq and Afghanistan (where it is mainly the loyal brit attack poodles that are taking the brunt of the onslaught) has dampened this administration’s ardour for old-style nation-state based imperialist solutions. We may well be witnessing the spectacle of a transition to more multi-lateral "Empire"-style approach to governmentality by the US. The Commoner’s blog has an interesting piece on this in relation to the US seeking international cooperation in financial counter-measures and the uneasy seeking of a common ground with China. This from an administration that started out rattling sabres against China over a downed spy plane back in early 2001 before, unusually, the voice of sanity from the State Department (presumably backed up by a sober assessment from the Pentagon before Rumsfeld managed to get his "Revolution in Military Affairs" snake oil spin machine in place) put the kibosh on the idea. Where-o, where is our Donald Rumsfeld?