We must stop protecting the rich from market forces(41 Posts)
The 'American' global economy punishes the poor while giving handouts to failing banks. It's time for some balance
Superb article - explains simply what we all know is true.
The balance between nations, and the amount that US (and Europeans) consume per capital is an absolute disgrace in global terms.
We need significantly greater austerity in the developed word, as this wil, be the way to pay other nations a fair price for what they produce. There will be no answer to inequality within communities/nations before the huge, obvious global unfairnesses are tackled.
This of course means a big hit to US (and UK) economies and standards of living. It is rare to see people standing up and acknowledging they need to reduce their profligacy more.
Brilliant article. It's hard to choose, but here are some of the choicest bits.
Gore Vidal, the recently demised American writer, once famously quipped that the US economic system is "free enterprise for the poor and socialism for the rich".
Since the outbreak of the global financial crisis in 2008, not only has the US lived up to Vidal's caricature but the whole of the rich capitalist world has become more "American". The poor are increasingly exposed to market forces, with tougher conditions on the diminishing state protection they get, while the rich have unprecedented levels of protection from the state, with virtually no strings attached.
The poor are told that their states are bankrupt because their previous governments splashed out on welfare payments for them.
They especially if they happen to be from the "lazy" eurozone periphery countries are lectured that they have to pay for the "good times" they had with "other people's money" by working harder at lower wages and by accepting lower levels of welfare provision, with more stringent conditions.
Of course, this narrative is completely misleading. The current budget deficits are mainly the outcomes of the fall in tax revenues caused by the financial crisis, rather than excessive social spending.
In fact, in the runup to the crisis, countries like Spain and Ireland had run budget surpluses (for a decade, in the case of Ireland), while the deficit levels in other countries, except in Greece, were at manageable levels.
The "laziness" argument also does not wash, as most poor people work much harder than the rich in any given country, while the Greeks, the Spaniards and the Portuguese work much longer (by at least a few hundred hours per year) than the Germans or the Dutch. In contrast, the rich are enjoying unprecedented levels of protection from market forces.
Many financial and industrial companies have been bailed out with the public's money, but very few of those who had run those companies have been punished for their failures.
The British government has taken over (with shares with voting rights) two of the world's biggest banks the RBS and HBOS but refuses to order them to do its bidding, as any decent capitalist would have done to a company that he/she had taken over.
While being helped by government protection to make money, the rich have also been given special allowances to keep as much of it as possible.
And while they spend significant resources tracking down and punishing welfare cheats, the governments of the rich countries do nothing to close down tax havens, which have allowed many large companies and super-rich individuals to get away with paying less than their fair shares of tax.
The spread of Vidal's "American" system, fortunately, may be meeting resistance. The recent news about the French government's injection of public money into the struggling car maker Peugeot-Citroen in return for tough conditions on the company's dividend payouts and re-investment, is a case in point.
The very fact that the French government proposal is considered unusual eloquently speaks to the absurdity of the current situation in which the rich get more and more government protection with fewer conditions, while the poor get less and less protection with increasingly demanding conditions. It is time to redress the imbalance.'
And there's more ...
I don't disagree with the underlying points in the article despite being a free market libertarian flat taxer. I think the interference in the market in ways which benefit the rich is wrong too.
Banks should have been left to fail.
Interest rates should be allowed to soar to their natural level.
Friedrich Hayek's principles have never been allowed full rein (similarly in a sense to the fact that the opposite points that pure communism has never really been tried).
However i don't think the banks were saved to protect the rich. It was more to protect the poor. The real rich make money out of market plunges and rises if you get in at the right point, instability can be way to make money but it does not help most citizens so Governments seek to avoid it.
Brilliantly written piece, I like Ha-Joon Chang, I watched the RSA lecture a few months ago where he dispels the myths of capitalism. www.youtube.com/watch?v=whVf5tuVbus
it is very interesting and he speaks about how american style free market economics doesn't work, how investment stalls because share holders have no loyalty to businesses and failing to invest in your business can show up as short term as profits, which is all share holders are interested in.
Didn't Maggie like Hayek? That's not a good recommendation
Lady Thatcher is one of the women many mumsetters most admire. Let not a word be said against her but it is the economic theory I hope mumsnetters read, not who is connected to whom.
Mini, you should also watch the Max Keiser Report. It is excellent, very funny and informative. He discusses all the scams and swindles and conspiracies of the markets. You haven't got a TV, but you can see the programmes on youtube.
I hope libertarians of MN did not miss a chance to sign the Petition on Privatising Margaret Thatcher's funeral.
"In keeping with the great lady's legacy, Margaret Thatcher's state funeral should be funded and managed by the private sector to offer the best value and choice for end users and other stakeholders.The undersigned believe that the legacy of the former PM deserves nothing less and that offering this unique opportunity is an ideal way to cut government expense and further prove the merits of liberalised economics Baroness Thatcher spearheaded."
There always seems to be a nastiness about the left you never see with the right and yet they think they have some kind of moral high ground. In fact the right consider and look after the poor best who are safest in their hands.
Xenia, would you like to qualify that statement in any way?
Why do you think statement of opinion is statement of fact? Or is it?
A) you are goading because it's fun
B) you are playing devils advocate so that people on the left can give full voice to their opinions without any real cognisant argument in opposition, which actually gives ground to left wing theory
C) you met a few lefties on MN who make you work harder to put your point across and therefore they are mean towards you
D) You lack any evidence for what you say but think hell if I keep blasting them with polemic they will give in.
E) you lack the evidence & the language to fully express yourself?
I think Xenia does have a point and many people have recognised it for years. You never hear any right wingers discussing Michael Foot, Tony Benn, Tony Blair or any other Labour leader with the same nastiness as some of the left apply to Margaret Thatcher. And yet some have the outright audacity to refer to the Tories as the "nasty party". The only possible explanation can be the psychoanalytic theory of 'projection'.
Interesting that the BBC had Max Keiser on the Politics Show.
Hi Claig interesting idea, I can only speak for myself......find a post where i call Torries nasty????? or attack Thatcher personally. I don't, I am not even motivated by personality or partisan politics. I don't have an opinion on IDS as a person that effects my reasoning, his politics is grounded in the liberal 18th century tradition, do I agree with it, well no. I think the man is misguided at worst not nasty. Actually I think he has a great deal of integrity. I like him, I don't agree with his politics. Thatcher......well she has a lot to answer for in terms of how her half witted confidence in the free market has effected millions both here and abroad, do I want to jump on her grave when the old bird passes, no. Some do but maybe that is because they are third generation unemployed under economic conditions that fail to deliver. There is a lot of anger, I don't think that makes people nasty, it just means people are beginning to realise and have conscious of their class position. This is a necessary development if ever we are to overcome the obstacles to a fair and just system where people are more than just the sum total of their wealth.
Food security is the big thing, if you consider that all of mans development has been about the acquisition of food, from fashioning tools in the iron age to earning a subsistence in the 19th century to flooding farm land in petro chemicals in the 20th, freedom from hunger is what motivates us all. How we go about ensuring that this need is met, is the only thing that motivates the left. Meeting human need, real freedom is freedom from hunger. The free market and capitalism fails to deliver, unless you think freedom for the rich to line their walls with art at the expense of their workers hunger, is delivering equality, when even working people are begging at foodbanks, lining up to see if Mr Benefits thinks he is worthy or unworthy. It's all pure liberal right/Christian 18th century morality over the poor that is guiding the cons, do I hate them, no, the sooner they make life very difficult for the majority and not just a huge minority, the better. Change will happen then not because the right are evil but because they fail to deliver the groceries.
I think it is class and IQ actually. If you have a limited vocabulary and cannot argue points you refer to "Tory scum" or if you are working class policeman you pretend minster said pleb when he didn't.
Of course some on the left are polite but they do seem often to suggest only the left cares about people, whereas plenty of those on both sides in politics are doing it to help others rather than the "huge" MP salary.
I agree with Xenia that bailing out the banks may have protected the rich from market forces but it more importantly rescued the poor. Before Northern Rock was privatised it wasn't the wealthy queuing up outside worried about their life savings, it was pensioners. If all the banks affected by the 2008 crash had been allowed to fail it would have created hardship in the general population on a grand scale. 'The rich' also goes way beyond bankers & I don't see any government subsidising the motor, construction, retail or other industries. The lesson, I would have thought, is not about protecting the rich from market forces but the dangers of being overly-reliant on one business sector for revenue.
I think we may have bailed out a few car plants over the years, interference in the market with local grants. If I ever do advice to people in Cornwall or Wales 90% of the time there is some massive state subsidy involved otherwise the useless project would never have happened. Whole industries of people have evolved to do with markets generated by grant funding.
Well now the banks know they will not be allowed to fail which of course is not the message you want in a free economy.
In the 1930s the US let banks fail www.livinghistoryfarm.org/farminginthe30s/money_08.html and much earlier in the UK we had the South Sea Bubble and we let failures then occur.
This is where left and right might meet around the back. The left might say nationalise all banks and the right might say let banks fail so customers instead pick banks who carry the risk profile they choose.
a) Michael Foot and Tony Benn haven't destroyed entire communities and wrecked the lives of hundreds of thousands the way Thatcher has.
b) The equally left hated Tony Blair for the illegal and invasion of Iraq, which killed hundreds of thousands of innocent Iraqi civilians.
c) It is right and proper to have hatred and contempt for mass murderers and people who destroy lives.
d) You read the Daily Heil, therefore your opinion is invalid.
I am from a mining family. It was no way to live. Industry has always changed over time over the world.
I agree there was some dislike of Tony Blair over Iraq.
I certainly agree we should stop protecting anyone against market forces. We would do a lot better if we did not interfere in free markets quite so much.
Xenia and Cogito, unsurprisingly, try to frame the bailing out of the banks as 'rescuing the poor'. As if the global ruling class finally developed a conscience after hundreds of years of waging class warfare to feed their greed.
The reality is that the banks were bailed out because, had they not, the entire Capitalist economic system would have been at risk of collapsing. It was naked self-interest, and nothing more. Had they been concerned about people's bank accounts, governments could have directly given money to savers to make up for any losses, bypassing the banks. Instead, they choose to throw a historically unparalleled amount of money at banks because they knew they weren't just saving 'banks' - they were saving Capitalism itself.
So when Xenia, with her immature 'free-market' ideology says that the banks should have been left to fail, she fails to see beyond the end of her nose. Doing so would have destroyed the very thing she is trying to promote.
I agree Xenia, some use terms such as Tory Scum , it's just a short hand. It is about talking to the right and having to engage with them, when most of us know that many on the right lack the intellect to understand anything more than just rhetoric and soundbites.
Should the banks have been left to fail? Yes for the reason Ttosca states.
There we are - right and left meeting round the back as it were. Banks have often failed in capitalism and capitalism itself doesn't fail. Nothing works as well at all. We lucky to have the system that we have. Those who do not like it are free to vote in a party who is against it or form their own state elsehwere on the planet and good luck to them. It is always interesting to read about other systems. I am reading a very long book abotu North Korea at the moment. I rather like their National Anthem www.korea-dpr.com/anthem.html
I agree with the article.
Cogito makes a good point that the bailout of the banks like Northern Rock did also bailout the poor and ordinary customer but that is a good thing that deposits were protected because retail investors do not have the means or the information to assess the risk of individual banks. A functioning economy has to protect the basic banking and payment system as a 'common good'.
Where I an outraged is the bailout of sophisticated investors who knowingly took huge risks and gamed the regulatory system to the hilt to their own massive personal financial benefit. Most especially the management of banks that have gone on to collect further huge bonuses. That is utterly wrong. Capitalism has to be allowed to work and losses should fall on those that take the risk.
Furthermore by bailing out banks and allowing them to carry on not recognising their losses means they have become zombies living on Govt largesse and not lending money out they have bene given. Look at Japan to see how that can drag on for decades.
"Had they been concerned about people's bank accounts, governments could have directly given money to savers to make up for any losses, bypassing the banks."
When one small bank - Iceland Bank - was allowed to fail the repercussions spread very widely. Savers were only compensated up to the maximum the FSA scheme allowed which I think was about £30,000 at the time which meant that councils, charities and other organisations that had millions saved were in serious trouble. The Equitable Life crash in 2000 meant thousands of ordinary policyholders lost their pension, were not compensated at the time and are, 12 years down the track, only likely to get 25% of it back in compensation. If those same experiences had been replicated wholesale in 2008 it would have involved many billions in deposits, pensions, investments and the eventual cost to the taxpayer would probably be a lot higher than it actually was. Some banks would have disappeared completely meaning thousands of job losses. Administering millions of claims would have been a massive extra cost on top. Not to mention the subsequent impact on the welfare bill as all these self-sufficient people suddenly became dependent on the state. The knock-on of the crash has been bad enough as it is.
I don't agree with the way Brown handled the 2008 situation as I think he missed a big opportunity to control banking practices in exchange for help. But I don't think he had much choice other than to save capitalism. The alternative would have been disastrous.
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