Socialising the losses

We just can't seem to concentrate on our rereading of Nietzsche's "The Genealogy of Morals", which we'd been planning on doing since Christmas. Partly it is the continuing sense that the world is on a historic brink and we just can't find the kind of Taoist inner calm to give our minds entirely over to a very difficult text from the 19th century. There are too many troubling things like Credit Default Swaps, which we still can't fathom out - things that are a real thorn in the flesh. It seems imperative to understand what Credit Default Swaps are, and what the other derivatives (derivatives of what?) might be, and how it could come to be that the value of all those derivates exceeds the total earnings of everyone on the planet. It seems that over the last decade, while we were tending our hillside vegetable plot and sleepily reading Rousseau's "Confessions" in the evenings, Finance was taking off in a historically unprecedented way and we were completely unaware of it until something hit the proverbial fan.

We've already mentioned the video Money as Debt, which was a real eye-opener and set a convincing agenda for monetary reform, and today, while trying to find out about Quantitative Easing, of which the BBC and Al Jazeera are full at the moment, we came across an oddly heart-warming blog - "oddly" because this is the blog of a trader who seems to have been led by a careful consideration of the numbers (which just don't add up any longer) to the conclusion that the free market needs a radical rethink, beginning with the banks and the money supply. Nathan Martin seems like a very sound chap.

Nathan has some charts. Some of them (because they touch on our evaporated pension funds) are too shocking for us to look at. But there is one that we would like to reprint here. It is a chart of the reserves held by banks. Now a sensible chap would assume that banks would actually have to keep quite a lot of money in the vault, and certainly not lend out more money than they have (although a sensible chap who has had a chat with a few bankers might end up thinking that maybe it's okay for banks to lend out - say - 10 times the amount of money they keep in the vault, as long as they do actually keep that tenth safe and sound). Am I just stupid, or does it not seem right if regular chaps are borrowing money to buy cars and houses and suchlike from insitutions that actually don't have a dime?

Did Marx foresee all of this, or was he so focused on the extraction of surplus value from the sweat of the worker that he paid insufficient attention to the way the whole show ended up being run for the benefit of the banks?

It is all so difficult to understand, though. We find ourselves scratching our heads like idiots and wishing we had studied some economics alongside our philosophy instead of spending so much time pouring over half-understood early 19th century German poetry. For one thing: If banks create 97% of the money out of thin air when they give loans, why does there seem to be so much pain when things go wrong? They never had the wealth in the first place, so they haven't really lost anything, have they? If the deposits of regular savers are such a small part of banking business, why can't the government just guarantee all those deposits and let the banks fail? And with the sub-prime people, why not just cancel the debts and let them keep their houses? There seems to be a choice between cancelling the debt (hitting the banks and other lenders, i.e. the culprits) and the government taking on the debt to relieve the banks (which effectively passes the debts to the tax payer, i.e. the victim). If that is the choice, surely it is better to let the banks take the hit.

Maybe we are just naive, but we want to see Obama set the tone for things by nationalizing savings and pensions, and closing the rest of the financial services sector down. A run on Wall St? Ban share trading and turn all shares into stakes in a state pension system, and offer companies loans of state-printed money in place of the funds raised by the sale of shares. The companies don't want to be hamstrung? Hey, that's not being hamstrung; that's democratic accountability. Pie in the sky?

Nathan reminded us of a nice commentary on the right-wing criticism that current government intervention smacks too much of socialism. What the government is doing, though, is socializing the losses, spreading the debts of the rich across the rest of the populus; during the good times, by contrast, the profits remain private.

Globalization or genuine economic and social development?

Please excuse the vagueness, but I dimly remember some fairly recent developments in the fishing business off the west coast of Africa. Let me sketch in the outlines of the story: for millennia families with small, home-made wooden boats fished the seas off the west African coast in a sustainable way, then a few decades ago huge trawlers from foreign ports started sweeping the coastline and taking a massive proportion of the fish stocks - stocks that were depleted to such an extent that the relevant authority (we forget which) had no choice but to ban foreign trawlers and pass a law allowing fishing only from the traditional small boats.

The reasons in this case were partly ecological but also partly an expression of the self-interest of business (because there can be no fishing business - either modern and globalized or sustainable and traditional - without fish). The point that we want to make is this: Why think that either ecology or this simplest form of business self-interest are the only reasons for putting the brakes on globalization and looking for some alternative form of development? The policy on the west African coast was great for the local population and fantastic for the economic autonomy (or let's just call it the autonomy) of the region. Are these not also extremely good reasons for putting on the brakes? Seeing the community in this part of west Africa flourishing, do you not see a reason for questioning the kind of globalization represented by the foreign trawlers?

Part of the resistance to this idea seems to come from an odd dynamic in the discourse of globalization itself - the way it has built into it a belief in both a technological imperative and what might be called an arithmetic fetish (the conviction that more or faster must be better than less or slower). Globalization of a certain sort (big foreign trawlers, in this case, and because they are much, much bigger and much, much more effective at catching fish, it goes without saying that they are - in a supposedly absolute sense - better) is identified with progress, and everyone wants progress, don't they? It just seems so self-evident that business must become big business, and that big business must become even bigger. Is this not progress? Is this not unquestionably good?

Another example: Opel in Germany. Opel make cars, a lot of cars, and they are a big player in the German economy. Some ridiculous percentage of the German economy revolves around the manufacture of cars (including all the associated car-related businesses). It's not just Opel, but Opel is one of the biggest. Entire German towns (one of which is Bochum) have grown up around Opel factories and depend on the continued existence of the business. Doubtless hundreds, if not thousands, of German youngsters go to technical schools in the hope that they will one day be able to find work with Opel.

Once upon a time Opel was bought by General Motors, whose headquarters, apparently, is on the 30-something floor of a tower in Detroit. In the midst of the crisis, the workers (and their bosses) in Germany hear that the board of directors in Detroit is thinking of closing the German operation down. Some of those at Opel argue that it makes no sense. It obviously looks different from Detroit.

Can it be right that the future of such an important part of the German economy is decided by a handful of guys enjoying the view from the top of a steel and glass tower in Detroit? Although there is a lot to be said for foreign investment (injecting capital into an economy that lacks it), there is something very dubious about investors then controlling the fate of entire communities - and controlling it without any meaningful accountability (because it seems that our wonderful form of globalization does not require the guys from Detroit to travel to Bochum and persuade everyone there that they must give up their jobs. Where is the justification for allowing a tiny group of people to have greater and greater control of larger and larger parts of foreign markets (and markets mean jobs, which mean communities)? This justification is especially difficult to grasp if we bear in mind the extent to which a company like GM was depending on things like the infrastructure in Germany and the local educational system to provide skilled workers and the health care system to keep them fit and healthy - all paid for, presumably, not by GM but by German tax payers.

I find myself looking for the most dubious assumption behind all of this. What is it? Is this the really dubious assumption: Only if we allow the unbridled pursuit of profit, will the economy develop? Now for that not to be an empty tautology about the accumulation of profit, it must mean the following: Only if we allow the unbridled pursuit of profit, will people's needs for goods be satisfied. (This is the message we were fed so often during the Cold War with footage of empty East European shelves, implying that only the free market can come up with the goods.) Isn't this a very, very dubious assumption? The trawlers (they may have been Spanish - forgive my terrible memory and laziness in checking the facts) off the coast of Africa did not improve the supply of fish to the local African market. And I wonder if GM's purchase of Opel all those years ago did anything to improve the manufacture of cars. Did more people get better cars as a result of it (assuming more people ought to have cars, which is itself a dubious assumption and unfortunately one whose serious discussion is discouraged by the principle of the free market that consumers will decide such things, not citizens through debate and democratic decision-making)?

This might be old socialist pie in the sky, but the opposite might sometimes be the case. If a car manufacturer did not have to worry so much about making a profit and fending off hostile take-over bids, it might be able to develop a better kind of car. I seem to remember reading a scurrilous article about a prototype of an electric car by Ford that was scrapped perhaps because it was too reliable and too easy to maintain (so that there would be little or no profit to be made from spare parts and frequent maintainance). By easing off the profit neurosis, the phenomenon of built-in obsolecence could be ended, which would be one good thing.

There is no reason here to make profit into a sin. I have my little book and it would be nice if I could make a profit out of it. I would also like to set up my own little publishing business so that I could publish my book and similar books myself. However, I would find it perfectly reasonable if I was looking, for instance, at publishing opportunities in Nigeria and found that the Nigerian government only allowed me either to lend money to Nigerian businessnes or to sell my expertise, not buy up a massive part of the Nigerian publishing industry. In a similar way, if there is a future in fishing off the west African coast, could the Spanish (instead of sending in the trawlers) not provide credit to local fishermen or sell their know-how so that the locals can improve their techniques (providing that the improved techniques are sustainable)? Even if we limit ourselves to ignorant and bovine economic motives, there are opportunities to make money in this way without, for instance, making a quick profit by scooping up pretty much every fish in the waters off west Africa. In this way, is the development of real and sustainable economies not possible without the expansion of irresponsible foreign ownership and control? Is it not possible to rethink globalization so that it doesn't become synonymous with the growth of a hideous international oligarchy (and it is a terrible contradiction that western democracy is effectively a tool for the growth of such an oligarchy)?

Democratic Banking

Doubltess everyone else saw Money As Debt years ago. I only got round to seeing it a couple of days ago. Hugely recommended, especially for those, like myself, who are economically illiterate.

We had previously considered it outrageous that our schools did not and do not organize a single meaningful classroom activity on our great democratic tradition. The same must now be said of money and banking and international finance. If it can be so effectively summed up in a 47 minute cartoon, it ought to be compulsory viewing for every 18-year-old still in full-time education.

The conclusion we draw is that monetary reform is imperative. The picture (which may or may not be quite accurate - we are not in a position to say) of a financial system dependent on an ever-expanding debt that can NEVER in principle be repaid is just as disturbing as the rape of the planet.

Our working hypothesis, while we hurriedly follow up some of Paul's interesting footnotes, is that the banks must all be nationalized and that banking must become politically/ethically/socially concerned. The idea that banking is a business that must be allowed to go its own sweet way while it wreaks havoc with our prospects for a pension so that we will probably now have to go on working until we drop dead at the lathe - this idea must be publicly vilified. We are surprised that in all the articles we previously read about democratic theory we never came across an injunction to democratize the banks (and democratization surely presupposes nationalization). It just seems glaringly obvious that the state (or state controled organisations) should issue the loans, and issue them WITHOUT interest (bring back the sin of usury, if necessary). Of course we have heard before that the state cannot be trusted. Now it is clear, though, that the banks certainly cannot be trusted. And if the state cannot be trusted, then democracy cannot be trusted, in which case let's scrap the charade of voting. No, we think the state can be trusted, but we feel that this presupposes not the rise of the technocrats (the Bernanke's of this world) but putting a stop to the anti-democratic dumbing down of the populus.

Of course the crisis ought to be a great opportunity for some radical change, now that there is no ignoring the political, social significance of the economy. What is almost as depressing as the loss of one's pension, however, are the signs that nothing essentially will change - everything will be geared to getting us back to the unethical, undemocratic, depressing and alienating mess we were in before.

Protectionism: the power of a suffix

As political leaders feel the sand slip between their fingers and start to panic, pronouncements are made about what must not be done. An oft-heard soundbite is that there must be no return to protectionism.

What amazes is how this very word has acquired a power to close off debate. There really is no need for debate once it has been uttered. If something can be called protectionism, it must simply be bad - very bad. Isn't that just obvious?

Hang on, though. Isn't this a bit odd? Protectionism is about protecting things and isn't this - prima facie - good? Since the verb "protect" is not short of positive connotations, how have they managed to make such a closely related noun into a word that sounds so bad?

An odd sort of language game (would Wittgenstein recognise it as such?) is being played which puts the onus where it ought not to be. Because it is so easy to label a policy protectionist without any argument to justify such a slur, the onus immediately falls on the person who would protect - they have to justify curtailing economic liberties (known simply as "freedom" - another dubious identification that has also been pulled off by another linguistic sleight of hand (strange how spin gets so firmly sedimented in language)). The game is set up in such a way that there is no assumption about anything being worthy of protection. "Protect what?" The forces of this dubious "freedom" are on the offensive - they set the terms of the debate - and who are you to stand in their way? "A detour? Why? Justify yourself? Try and justify diverting the course of world history?" The attempt to justify it has come to sound almost blasphemous.

This was a topic that came up very briefly yesterday in a paintshop. Somehow my joking complaint about the price of five litres of undercoat (25 euros) touched off a short exchange about globalisation and the free market. The shopkeeper indicated gruffly that he was having none of it. The spin had not got to him. But he was a man of very few words - very firm opinions but with little to say about them. Perhaps those most affected are those who play the language game - those who inevitably have to accept the terms of the debate that have already been established by the mysterious forces of linguistic imperialism (hegemony someone said - was it Laclau?).

At the risk of mixing up too many metaphors, the shoe should really be on the other foot. If people are in work in a country and feel some sense of security and some sense that life is not the bitch that elsewhere it is said to be, then whoever wants to throw the borders open and make a mess of the situation ought to be grilled long and hard and forced to come up with a bloody good explanation for why this is necessary. Why does this not occur? It is simply announced that these are the Forces of Freedom and it is taken for granted that the gates must be opened.

Despite the recent harranging of that blackguard protectionism, it is to be hoped that the present catastrophe will provide an opportunity for the terms of the debate to shift somewhat. The promise of unending economic growth, which was always twinkl ing in the eye of the economic libertarian, has proved to be a deceit. Greed has lost its theoretical underpinning and is now seen for what it really is. Is the ideology not going to collapse? Is the table on which the language game is played not going to be turned?