Thursday, October 09, 2008

Banks Bailed Out

As I gazed blankly at the newspaper front pages while swaying under a grab rail on the Tube yesterday morning, they all seemed to headline on the extraordinary bail-out of the banks. Except for The Sun, whose 'Mother Of All Council Houses' lead story berated a single mum who apparently gets £170,000 in benefits and lives in a rather large house. This is presumably because she has lots of kids and is in very great need. But hey ho - the government gives £400,000,000,000 to banks because they got themselves in trouble, but The Sun thinks kicking a claimant is much more important.

Read that figure again: £400,000,000,000. Wow, that's a lot. If I had more time, I'd work out how many hospitals, schools, jobs, homes, kidney transplants, teachers, youth clubs, public transport services and other useful things that could buy. The comments box welcomes any such stats. The point is not just that the government should spend such money on this thing rather than that thing, but that it says that the public purse "can not afford" the socially-useful stuff, but obviously can afford the bail-out.

Such a comparison is both easy and necessary to make. It's the sort of thing we lefties regularly say about wars too. But it is only ever half an argument. If the spending is justified then it's justified, even if there are other deserving causes that the cash could have been spent on. But is this justified, especially in the detail of how it is being done?

£50,000,000,000 is going on 'recapitalisation', buying 'preference shares'. This means that the government buys shares in the bank, which will bring back dividends, but I can see no guarantee that the return will be more than the interest that the government is paying on the loans it is taking out to buy the shares in the first place. Moreover, preference shares carry no voting rights, so the government may have taken 'part-ownership', but it is part-ownership with no control. If this is nationalisation, then it is not as we know it.

There are belated pledges to ensure that the begging bankers do not line their pockets on the back of the 'rescue plan'. But we must await the detail, and there is little comment on the wodge that already lines their pockets.

The buzz words include 'shoring up' and 'stabilisation', suggesting that the main motivation is to 'normalise' capitalism to a steady state, to recover from the recent binge of 'excessive risk-taking'. But although the risk-taking has fallen flat on its face, it was not excessive in the context of the capitalist system itself - it was normal behaviour for capitalists, operating in a system that not only encourages but relies on this sort of thing. Capitalism does not need normalising, it needs superceding. The job of socialists, of working-class representatives, is not to stabilise capitalism but to expose and replace it, and in the immediate, to defend workiing-class interests, to make sure that those who made the mess clear it up. Or, as Edgar Lansbury put it in the 1920s, to compel capitalism to maintain its victims.

If this is not done, then we can be sure that it will be working-class people who will foot the bill sooner or later. If the £200,000,000,000 government under-writing of inter-bank lending has to be shelled out ie. given to one bank because another goes bust and defaults on the loan, then that is £200,000,000,000 lost to the public purse. That's a lot of higher taxes and/or service cuts.

So what does the left propose? Before this week's developments, the SWP was touting its 'People Before Profit' charter, which I would have had to oppose if it had come up in the RMT, because it would have shifted the union's policy significantly to the right. Hopefully, they will quietly drop that now (even more hopefully, the SWP will account for their mistake, but that really would be a triumph of optimism over experience).

The Left Economics Advisory Panel (LEAP), promoted by the LRC, proposes the following:

LEAP has also put forward its own strategy: A People's Programme for the Crisis – which was launched with John McDonnell's letter in today's Guardian:

We are calling upon the Government to implement a people's programme to protect our people from the crisis not just the bankers, including:

1) nationalising the banks and establishing democratic control over banking decisions, ensuring democratic representation on boards, ending the bonus binges, controlling executive pay and share holder rewards;

2) Cutting interest rates significantly and immediately, restoring democratic control over key economic decision-making by not only widening the remit of the Bank of England beyond ensuring price stability to advising on the wider economic health of the country but also reverting the bank's role to being one voice amongst many others to be taken into account;

3) Securing people a home by converting repossessions to social rentals so that people have a 'right to stay' in their homes and embarking on a massive council house-building programme;

4) Enhancing security in employment by ensuring people have a say over the future of the companies by strengthening rights and representation at work;

5) Bring fuel bills under control with price controls on the consumer price of gas and electricity, so that people are not being forced to choose between heating and eating this winter, with the threat of nationalisation if needed.

That's OK as far as it goes. But it's a disappointment that point 5) avoids advocating - merely threatening - that the utility companies be brought back into public ownership. If you want to control the prices, then the best way is to own the company! "If needed"? Self-evidently, it is needed. Moreover, other privatised industries, such as the railways, should be brought into public ownership, under demoncratic workers' and users' control.

We should also explicitly say that the nationalisation should be without compensation except on the basis of proven need (which would include, for example, ensuring that people dependant on the investing pension funds do not lose out).

Point 3) should add that homes left empty by landlords should be taken over by local authorities and made available for rent. And that the government policy to make council/social housing rents harmonise with private sector rents ie. be determined by a landlord-controlled market, should be rescinded and housing made genuinely affordable.

Point 4) should also be strengthened with a call for a much higher minimum wage, the scrapping of the public sector pay freeze, and the nationalisation of any companies that threaten job cuts.

To tackle unemployment, there should be a legal maximum working week of say, 35 hours, with no overtime and no-one losing pay as a result.

It has also long been a staple of the left to call for 'public works' to prevent unemployment. In the 1920s, this meant road-building and electrification, but I think we've moved on from that now! However, there is a clear social as well as economic need for, say, more teachers, nurses, other health workers, youth workers, railway staff and others - as well as the builders implied by LEAP's point 3) - and the government should set about recruiting and paying them properly.

Finally, a call to tax the rich and big capital is noticeable by its absence from LEAP's list.