You couldn’t make it up! About two years ago the banks in Britain, the USA and all over the world began to go bust. It started over here with Northern Rock and culminated in the USA with the collapse of the giant Lehman Brothers, the biggest corporate bankruptcy in history. The problem for governments was that the banks were threatening to take whole chunks of the capitalist system over the precipice with them. The banking collapse and the ‘credit crunch’ were the triggers for a general crisis of capitalism.
So governments here and everywhere else hastened to bail out the banks. This was seen as necessary because the capitalist system is based on the circulation of commodities by means of money, and money circulates via the banks. In other words governments intervened in order to prop up the capitalist system.
This rescue cost enormous sums of money – our money. In the case of Britain, the cost of keeping RBS and Lloyds TSB in business is reckoned to have cost about £1.5trn added to the national debt. This is almost as much as our GDP – as much as 60 million people in the country produce in one year! As a result of this crippling burden of debt Britain is running a deficit of more than 10% of GDP. This is the equivalent of spending £110 for every £100 you earn. This cannot go on. The national debt has to be serviced and ultimately paid for through out taxes or, like repaying any other debt, by going without other things.
There is a second reason for the crisis in state finances apart from the failure of the banks. The fact is that the crisis is costing the government money. In a boom, tax revenues roll in and relatively few people are claiming benefits. It’s a different story as recession bites. Tax receipts collapse and welfare payments balloon. A crisis of capitalism necessarily brings in its wake a crisis in government finance. Then we get calls for austerity from the rich. They demand cuts. They demand that the working class bears the burden of the crisis.
How are the bankers faring in the crisis? Having been given the kiss of life with taxpayers’ money, are they humble and contrite? Not a bit of it. Has the government used the opportunity to bring them to heel so they don’t lead us on another crazy financial steeplechase? Not at all. As Adair Turner, head of the regulatory Financial Services Authority, has pointed out, the remaining banks are coining it. And they’re not so stupid as to lend these windfall profits out to those who have fallen on hard times because of the banker-led recession. On the contrary, they are ‘recapitalising’ their books as the easy money rolls in. Those substantial profits are “a legitimate matter of social interest, rather than a private matter [for the banks]”. This really presents a cast-iron case for the socialist nationalisation of the banks that Socialist Appeal has been calling for.
The government, and all the main opposition parties, are proposing instead that we cut big chunks out of the welfare state to repay ‘our’ debts. The welfare state is one of the most precious gains of the British working class. It offers an element of security in a capitalist world riddled with uncertainties.
Is it teachers and nurses who are responsible for the present crisis in state finances? Is it the sick, the elderly and our children in need of education who are to blame? Of course not. So why should the working class make all the sacrifices to get capitalism out of a crisis of its own making?
Yet that is what the capitalists are trying to insist upon. The cuts they demand could mean a generation of austerity. They want us to pay twice for their crisis, once through bailing out the banks and again through cuts in social spending. The burden of repayment could actually serve to throttle off the recovery, but paying back their money comes before the welfare of the poorest and most vulnerable.
The ruling class has means at its disposal to get its way. Governments usually borrow money by issuing securities to rich people, to members of the capitalist class. If the state needs a lot of money all at once, it will have to pay a higher interest rate on these securities, and government debt will become still more unmanageable. The financiers can refuse to play ball. The bosses can even threaten a “strike of capital” if their privileges are seriously threatened.
It’s a clear alternative. We can either continue to uphold the capitalist system where profits are the only thing that counts and the working class pays for the bosses’ crisis. Or we can fight for socialism, for a society where people come first. To do that, we need to take over big business and not just the banks.
This article first appeared on Socialist Appeal.
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This post was written by Mick Brooks