The latest revelations concerning the deceitful manipulation of the inter-bank (Libor) interest rates and the miss-selling of onerous interest-hedging policies to small businesses, comes in the wake of a list of other dodgy practices by Barclays International Bank.
But aggressive tax avoidance, outrageous bonuses and unwarranted high salaries are not exclusive to the institutional ’culture’ of Barclays. It extends throughout the whole of the banking system and on into the financial institutions in the ’City of London’ and the spiders web of global financial Markets emanating from the joint Anglo-Saxon finance network of the City of London and Wall Street.
The junior partners of this network in Europe and the other financial districts of the global network of capitalism are also up to their elbows in similar graft. Currently over 20 other institutions are under investigation and even this high number represents only the tip of the total finance-capital malpractice ice-berg.
Much of the speculation and losses – yet to surface – are currently hidden below the murky waters of ‘off-books’ and ‘under the counter’ transactions, which are glossed over by their institutional accountants and publicity departments.
It is this murky world which is unlikely to be revealed by the current – and future – governmental sponsored enquiries into the banking and financial sector. For it is well known that politicians receive substantial campaign donations from their pals in the banking and financial sector. Most right-wing and other politicians in Europe, the UK and the US are akin to ’pimps’ of the economic and financial elites. It is perhaps a little exaggeration to say that any investigation by politicians into banking practices is the social equivalent of drug overlords being investigated by their street dealers. Hyperbole yes – but not too far off I suggest.
Politicians start the blame game.
So now that it has become impossible for the political and financial elite to deny that the entire economic, financial and political system – on a global scale – is rapidly unravelling, we are now witnessing the blame game in full swing. Blaming the victims – the average mortgage holders and credit card owners – has been tried and has largely failed. It is now the turn of a few so-called ‘rogue traders’ and senior managers to have the spotlight turned on them.
In the hope that the public will swallow the flimsy logic that a few greedy or careless individuals can bring the whole global financial system crashing about our ears, these scapegoats are now being sequentially identified. It is true a number of individuals have behaved recklessly and greedily but they could only do so as long as greed and recklessness in banking was possible and that there were (and are) sufficient incentives to fuel greed and take risks.
Even so this particular fact cannot explain the near total ‘collapse’ of the entire global economic and financial system. There are significant structural changes to capitalism that are being ignored. [See ‘Capital and Crisis’ above and ‘Workers and others in the 21st century‘ at Greater Manchester anti-capitalists blog]
Within political circles the blame game is being fought out on the terrain of who was in government during 2005 – 2008 – the earlier period of this intensifying crisis. Yet it is clear that governments – of all political persuasions – during that period and before, were complicit in allowing the situation to develop as it did. Of course, the real economic, financial problem lies in the capitalist mode of production which has a cycle of over-production – crisis – stagnation – before starting the whole cycle again.
However, the size and extent of the regular systemic crisis can be amplified by the actions of those in the financial and political elite. In the case of the current derivative-driven financial crisis the root cause can be traced to the de-regulation policies of the 1970’s under the dynamic duo of Margaret Thatcher (elected 1979) in the UK and Ronald Reagan (elected 1980) in the US.
Spurred on by right-wing intellectuals such as Friedrick Hayak, Milton Fiedman, Arthur Laffer in the US and Sir Keith Joseph in the UK, they introduced a neo-liberal programme of sustained de-regulation. This became the new mantra and de-regulation was continued by Bill Clinton’s administration in the US and the Blairite Labour politicians in the UK.
The Gramm-Leech-Bliley Act (Financial Services Modernisation Act) led the way in the US with similar de-regulation activities in the UK. In retrospect, the Commodities Futures Modernisation Act (CFMA) in the US and the Financial Services Act in the UK, can be viewed as further signposts along the path to speculation and eventual collapse. But this view was available not only in retrospect. Among many commentators, the alarm bells were already ringing at the time of such ‘innovations’.
The military-industrial system has a rotten heart.
In some rare critical words, the UK Financial Times editorial of June 29 (2012) said this whole episode exposes; “…the rotten heart of the financial system.” Indeed it does! The same editorial thought that such ‘confidence tricks’ were ‘damaging the reputation of capitalism‘. They neglected to add that ‘sovereign debt‘, illegal wars, ecological destruction, poverty and a host of other symptoms caused by capitalism were damaging its image. This outburst by the Financial Times explains the anger of one section of the capitalist class against another.
The capitalist class and their supporters are only against exploitation and deceitful dodgy practices, in two particular sets of circumstances. The first is if those practices effect their own parasitic share of the intense exploitation which is the basis of capitalism. The second instance is when the normally hidden dodgy practices come to light and embarrass them or as the Financial Times expresses it ‘damages the reputation’ of their system.
The US, UK and European elite are now deep into damage limitation mode. The capitalist and pro-capitalists are trying to pin the blame on a few scapegoats rather than the system itself. Another victim of the blame game is a lax system of oversight and regulation of the bankers.
Both targets avoid an examination and the questioning of the entire systemic nature of finance capital risk-taking and speculation. However, in one sense the ‘lax regulation’ unwittingly hints at the systemic nature of the crisis.. This is because blaming the regulators is a de-facto admission that the system is so corrupt that it needs regulation – and further strong regulation at that.
It should come as no surprise that this blame avoidance strategy and the symptom of being in denial is the preferred response of the pro-capitalist economic, political and intellectual elites, for they all benefit in one way or another from the existing system. So there will be much debate and discussion on how and in what manner to sacrifice these scapegoats and improve regulation in order to then carry on with business as usual.
It has moved on from wagging fingers and tut-tutting and now carefully controlled and staged ‘enquiries’ along with a few ‘retirements’ and dismissals are the new stop-gap responses. In the UK, criminal investigations are also creaking into low gear as a way of neutralising or appeasing public anger.
Representing the conservative political elite in the UK, Cameron declared recently (June 25 – 29) that “people have to take responsibility for their actions“. Indeed, they should and effective punishment should follow that. But this statement, and other similar ones across the political spectrum, conveniently avoid the question of taking responsibility for one’s – inactions. If warnings are repeatedly given and ignored with damaging consequences, then a serious responsibility would fall on those in responsible positions who ignored the warnings.
The political and educated class, particularly the elite of all political parties, Labour, Conservative and Liberal in the UK, Democratic and Republican in the US have been given repeated warnings of the nature of the capitalist system and in particular the finance capital sector. Any sensible university economics course, which most of them will have taken at one time or another, will have covered Adam Smith, Ricardo and Karl Marx.
All of the above political economists warned of the cyclical nature, the structural crisis and fraudulent practices of the economic system driven by capital. Any political or economic course, designed for future ’leaders’ who chose to ignore the above three radical economists could have hardly avoided Keynes, the ‘moderate’ economist who stated;
“Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes the by-product of the activities of a casino, the job is likely to be ill done.“ (John Maynard Keynes. ‘The General Theory of Interest and Money’. Page 159.)
Of course they could have forgotten or ignored such pertinent observations by a pro-capitalist economist of the 1930’s who had seen first hand the results of the last great structural crisis after the Wall Street Crash of 1929. But then how can we explain why the warning given all through the 1980’s, 1990’s and 2000’s by high-profile people – and others – in the wake of the speculative collapses of American, Japanese and Irish Banks of those decades, was ignored?
Or how can the fact of ignoring even the more recent and numerous academic warnings in the wake of the Northern Rock, Lehman Bros and assorted other banks collapses in 2008 be explained? These were collapses in the system, which the political class chose to ’rescue’ after these banks had indulged in even more uncontrolled bouts of speculation. To be kind there can only be one conclusion – disaster myopia! More bluntly – it clearly benefited them for a time to turn a wilful blind eye.
The fact is the political class, along with the national and local state officials, the Bankers and the financial speculators are all culpable in one form or another. Predictably all will find some excuse to minimise the blame and place it elsewhere than where it really belongs. The Leveson enquiry in the UK recently demonstrated how the political class are never able to remember doing anything which might implicate them personally in any clearly indicated wrong-doing.
However, the rapidly accumulating record suggests that the International political class and the capitalist financial elite can only escape their own complicity and responsibility for the mess we are in, as long as the rest of us, by support, naivety or indifference, allow ourselves to be fobbed off and then distracted by one means or another.
Saving the system or changing it.
Meanwhile it should be obvious that any rational capitalist government in this crisis situation would fully nationalise the banks, refuse to honour the accumulated speculative debts, sack and prosecute all the senior staff, close down the ‘casino’ banking sector and bonus culture, which drives speculation and put the new ‘managers’ under strict regulatory control.
This will not happen in the short term however, since as the expenses scandal in the UK indicated, the pro-capitalist politicians are as corrupt and fraudulent as their ‘buddies’ in banking. However, some further forms of ‘nationalisation’ may yet have to be done as the bond-holders interests serve to deepen the crisis. If the ATM’s are eventually shut down and the banks close as they did in Argentina in 2000 to save the system from itself, this may prove a necessary stabilising step.
In contrast, any anti-capitalist inclined governmental power would have to go much further than this bourgeois solution and ‘socialise’ the banks, close down all speculative investment activities, place bank functions under the ‘direct’ control of ordinary bank staff and local customers with elected supervisory staff on ‘reasonable’ salaries. Only such a course of action, along with other revolutionary transformations, such as rejecting the ‘odious debts‘, taking production out of the control of private capital and taking democracy out of the hands of a professional elite, would create a serious improvement for humanity on the existing lying, cheating, ecology-destroying capitalist ‘rip-off’ system.
Roy Ratcliffe. (July 2012)