Converging Crises

Which Is The Greater Crime: Robbing A Bank Or Owning One? – The converging crises of global capitalism

Introduction

The question in the title of this essay, so currently (end 2008) appropriate in the global financial meltdown, was famously asked by German playwright Bertold Brecht. But then again he was a Marxist, wasn’t he, and Marxists would, wouldn’t they?

Problem is, we are all Marxists now. As the global financial system punctually melts on the 160th anniversary of the Communist Manifesto, the Archbishop of Canterbury finds Marx’ theory (of ‘commodity fetishism’) convincing, i.e. that capitalism ascribes human agency to lifeless economic entities; the German Finance Minister Steinbrück is quoted as saying: ‘In general one would have to say that certain parts of Marxist theory aren’t so wrong after all.’[1] An Australian journalist in London reports from Highgate cemetery: ‘…interest in his grave has never been greater – and now, much of Western Europe seems to be singing to the tune of Marx. The Times, in an editorial this week, mused that the philosopher had become as ‘fashionable as this season’s colour on the catwalk.’’[2]

And if we aren’t quite Marxists yet, fashionable or not, then at least we are back pre-1973 with President Nixon: ‘we are all Keynesians now’, which of course amounts to almost the same thing from the perspective of hitherto economic orthodoxy, neo-liberalism and the globalized ‘disaster capitalism’ (Naomi Klein) known as the Washington Consensus. As neo-liberalism finally sinks under the 30 year weight of its own suicidal contradictions, the big neo-liberal doctrinal no-no, pro-capitalist state intervention, is officially back in vogue. As the ironies deliciously accumulate as fast as the worthlessness of a collateralised debt obligation, the overriding PR task for the ruling elites and their media now becomes to make the egg on a lot of faces look like a spray tan.

Let the markets decide! Let managers manage! Cut Red Tape for Business! Governments Can’t Pick Winners! Big Government is the problem! There Is No Alternative (to Thatcherism)! All the tired mantras of the Chicago School-inspired  ‘reforms’ introduced by neo-liberal radicals (aka ‘conservatives’) Pinochet, Thatcher, Reagan, ALP-Hawke – and faithfully followed by social democrats and the corporate media everywhere – are in tatters. 

Angry US Republicans and the conservative Club For Growth scream ‘socialism!’ and ‘un-American!’ and have to be brought kicking and screaming back into line by their über-disaster capitalist Vice-President Cheney (ex-Halliburton) as his ex-oil CEO President, defensively jocular and furrow-browed as usual, fearfully warns that ‘this sucker could go down!’ (Or, as one might also say, ‘mission accomplished’ George W.). His Treasury Secretary and ex-Goldman Sachs tycoon Henry Paulson literally gets down on his knees to beg for almost a trillion taxpayer dollars from Democrat Congress speaker Nancy  Pelosi to buy up the toxic debts of the big private financial institutions (including of Goldman Sachs of course, which received $10 billion) at public expense, i.e. socialise these debts.

Other hitherto neo-liberal-to-the-boot-straps politicians are scrambling to change their tune. France’s Nicolas Sarkozy, Britain’s George Brown and Australia’s Kevin ‘I’m-a-fiscal-conservative’ Rudd rush to save capitalism by magically distinguishing a ‘good’ (‘entrepreneurial’) from a ‘bad’ (‘speculative’, ‘extreme’, ‘greedy’, ‘cowboy’) capitalism. (A binary ploy wedging of industrial and financial capital much used by the Nazis, by the way, only in the latter case with the added anti-Semitic refinement of equating ‘Jewish’ with speculative and ‘Nordic’ with entrepreneurial).

The final social democratic prayer is for a miraculous new spirit of trust, integrity, fairness, perspicacity, equality and kindness to descend upon a renovated capitalism magically driven by some form of greed lite, a renewed call for that mythic capitalism with a human face:

From the current turmoil, more regulation is likely, and with any luck, more perspicacious company boards, greater equality, les greed and greater kindness towards the unemployed will help keep capitalism safe for another 160 years.[3]

De-Masking: The Crisis as Opportunity for Insight into Basic Realities

Whatever the fate of the capitalist world economy, all is not doom and gloom, at least not from a radically democratic perspective. No nasty Marxists, but the capitalist system itself has de-masked itself and de-mystified its religious beliefs in ‘free markets’.[4] The global financial crisis is as much a credibility crisis for the political elites as it is for the economic ones. Not only individual ‘masters of the universe’ have been shown to be corrupt, stupid or wanting, but the whole (non-)regulatory political system has been shown up to be such.

This is thus also a great opportunity for democracy, since it starkly reveals the core undemocratic realities on which democratically constituted societies have always been based and which are usually concealed behind layers of ideologies, media obfuscation and PR spin. The spotlight of crisis has been switched on and, at least for a short period, the glittering emperor of democratic capitalism well and truly has no clothes, at least for those still capable and willing to look.

I would argue that the basic general realities revealed in the crisis are the following. (Note: these working hypotheses flow from a Marxian, not a Marxist perspective. Like Marx himself, I am not a Marxist.)

1. This may be a historical watershed. Not only the latest neo-liberal phase of modern capitalism, but the American Imperial Era is essentially over and the Chinese-Indian Imperial Era is beginning.

In times like these it pays to read the main section less and the Business section more. Here is John Garnaut of the Sydney Morning Herald:

For 60 years the US has shaped the global financial system and occasionally made threats to get what it wants. In August a new era began.

Now China stands between the US and national bankruptcy. […]

The overriding comfort for the world is that it makes no sense for China to abandon its US government investments. [5]

A small example of where real power now lies: when the People’s Bank of China told the US Treasury they expected it to ‘do whatever is necessary’ to protect China’s investments in troubled US mortgage giants Freddie Mac and Fannie Mae ($US 400-600 billion),

the US Treasury promptly gave guarantees to China and the agency bond holders that had lent to Freddie and Fannie, while allowing shareholders to lose everything.[6]

Through its recent bailouts the US government has lifted its national debt from $US 10.615 trillion to $US 11.315 trillion. It is already in deep hock to China. China has accumulated more than $ 3 trillion in foreign exchange reserves. Experts estimate that 70% of China’s foreign assets are held in the form of loans to the US government and its agencies., meaning US debt to the Chinese government is worth about 10% of US GDP and 40% of China’s GDP, or more than twice as much as the combined value of all the companies on the Australian stock exchange.[7]

Despite lag times, military might will always follow economic might in the end. Symbolically, the Beijing ruling class displays its historical ascent at the Olympic Games and by having a man walk in space at the same time as the US economy seems to be in its first death throes. (Some possible jokers in the evolving pack of imperial succession, however, are whether a tottering US empire will be tempted to militarily over-compensate and lash out at some new weaker victim like Iran or whether a new Chinese empire and global hegemony can be run without cheap and abundant oil and with an internally collapsed ecology.)

It is the all too familiar historical trajectory of imperial hubris, over-expansion and ultimate collapse long traced by historians from Arnold Toynbee to Jared Diamond. US liberal commentator Gary Younge sums up: ‘Add the credit crisis to defeat in Iraq and problems in Afghanistan and what you are left with is a sub-prime nation – overextended both militarily and economically, living large and beyond its means.’[8] In other words, borrowing the jargon of the old neo-cons, the US is not only a ‘rogue state’ engaging in wars of aggression and war crimes but now also a ‘failed state’ desperately in need of some sort of ‘regime change’. (The latter a phrase now apparently used by US Federal Reserve officials themselves in late 2008 to characterise their state intervention in the financial sector [9]).

Let us leave the last word on this to a neo-con expert. Right wing former presidential candidate and one-time advisor to Reagan, Pat Buchanan noted about the financial crisis: ‘it was a Katrina-like failure of government, of our political class, and of democracy itself. The party’s over. What we are witnessing today is how empires end.’[10]

2. The many chickens of industrial capitalism are coming home to roost. Multiple converging debts are being called in and the post-war affluence party is almost over.

The US and Australian economies and rising living standards have long been founded on rising levels of both government and household debt. America’s number one export is now debt. The US current account deficit increased from $ 114 billion in 1995 to $ 731 billion in 2007. The enormous US government debt exploded with the super-militarist deficit spending and corporate tax cuts that began in the Reagan era. The debt legacy of the arms race spending competition that helped bring down the Soviet Union is now also about to impact on the US itself. For real economic stabilisation, both the US government and households, like the Australian ones, would need to stop living on credit and borrowing so much. That would mean more saving and less spending and consuming. Common sense and this dirty little secret are of course absolutely taboo in mainstream politics: ‘Can you imagine McCain or Obama going around saying he wants to reduce your standard of living?’[11] So deckchairs on the Titanic are re-arranged and the myriad distractions, PR and spin-doctoring go on till the Titanic finally sinks.

Equally taboo in mainstream politics is the need to vigorously confront the even more serious climate, energy and ecological chickens now also coming home to roost. These mounting debts to the biosphere are also the result of democratically uncontrolled industrial capitalism, whether of market- or state- driven form. They also necessitate reductions in over-developed standards of living.

Climate change can be viewed as simply another collective debt that is being called, the debt to the atmosphere. Two centuries of fossil fuel pollution by industrial capitalism have now reached their critical limits. If humanity crosses this threshold (the common scientific estimate being plus 2 degrees over pre-industrial levels), the risk of tipping over into uncontrollable and irreversible climate chaos and high levels of planetary destruction is immeasurably increased to almost certainty. So far, the ruling elites are more than happy to blithely cross this threshold, even in their concerned economic sections (e.g. Stern in the UK, Garnaut in Australia, Copenhagen).

Another and related ‘chicken’ is Peak Oil, the outstripping of diminishing oil supply by increasing demand, which will inevitably mean the end of the cheap oil era, thus energy-intensive consumerism and affluence and thus modern capitalism as we know it.[12]  The various debts of industrial agriculture’s ‘green revolutions’ are also being called in in the form of escalating genetic erosion and vulnerability, price explosions due to cost increases in all fossil fuel inputs and food-for-fuel substitution, mounting food insecurity and food riots in affected countries. The scientific head of the IPCC Rajendra Pachauri thinks that the financial crisis, although ‘a major distraction’ from climate change, might ultimately be helpful: ‘I think unbridled capitalism without any regulation, without some control, is something people are not going to accept now.’[13]

Corollary: leaving the ‘solutions’ to these unprecedented historical challenges to the ‘markets’ (carbon trading and sequestration, energy-intensive alternative fuels, nuclear energy, genetic and geo-engineering etc) will ultimately have similar results to corporate and financial ‘self-regulation’: global ecological collapse.

3. Capital rules, not politicians. Politicians watch. (And then try to pick up the pieces.)

The crisis has starkly displayed where radical political theorists have always maintained the real power lies: in the economy. Despite repeated and ignored warnings, politicians just watched as markets plummeted. Then they belatedly attempted to respond with a variety of (probably largely ineffective, if not exacerbating) measures to the sudden change in economic realities. The US presidential campaign between Obama and McCain became less relevant, not more, with both ‘at the mercy of events and the market’ and neither of them at all knowing what to do.[14]

As the crisis first hit in September in the US, the irrelevance of President Bush and the centrality of ex-Goldman Sachs Treasury Secretary Henry Paulson became very evident and suddenly it was revealed where real power lies. It is only when a PR pep talk to the nation is needed that the President is then shown to have had crash emergency lessons in the economy while having in fact long been ‘asleep at the wheel’ :

Watching television in the past two weeks, a visitor to the US would have been excused for thinking Henry Paulson, not George Bush, was leader of the country.

It has been the Treasury secretary’s face that has appeared nightly on TV, warning […]

But on Wednesday night Bush was forced to come out of the shadows and make a sales pitch to the nation, as it became clear that Paulson was struggling to convince an angry public and equally angry legislators of the value of his plan.

In the past fortnight, the President has made only a couple of short statements on the crisis. He has not held a news conference. […]

Bush gave Americans an economics lesson on how things had gone so awry. It sounded as if he had just learnt the lesson himself.

The speechwriters had tried hard to skirt around the obvious conclusion that the man delivering the speech had been deeply asleep at the wheel.[15]

A similar relationship of powerless spectatorship towards the economy has been more comically revealed in the Australian government’s various ‘watches’. Grocery and fuel prices skyrocket? Set up grocery and fuel ‘watches’. To do what exactly? Well, to watch. Mass obesity and diabetes crisis due to market saturation with industrially processed junk foods? No problem: don’t intervene in junk food production and marketing, just provide citizens with tape measures to measure and watch their waistlines. What no corporate government (conservative, liberal or social democrat/Green) will ever do is intervene for the common good in the corporate prerogative of determining investments, products and prices. That would amount to ‘socialism’. The result is that democratic governments are thus ever voyeurs to the non-consenting relationships that go on in the economy. Capital calls the tune, governments dance.

Corollary: whoever you vote for, the government gets in. We live in one-party states where the one corporate party has two wings (Gore Vidal). Elections, however important occasionally for selecting the least worse wing of the one party, are as irrelevant in terms of introducing real changes to the economic system and power structures as in any totalitarian system.

4. Deregulation + Privatisation = Casino Capitalism + Gated Economies of the Super-Rich + Class Warfare From Above

Since neo-liberal deregulation and privatisation from the mid-late seventies onwards, global capital has developed a vast, private, secretive, completely self-regulated economy of its own that is outside the official economy still open to some state influence and taxation.

Private hedge funds of the super-rich gamble trillions in completely speculative financial instruments like derivatives, futures trading and short selling. They may place bets on currency movements, credit risks or falling stock or mortgage prices. They accounted for about 40% of all market activity at the peak of the speculative boom.[16] The amount of money in speculative financial derivatives dwarfs those in all areas of the productive real economy by far. Due to systemic over-accumulation (i.e. under-consumption), much capital has been ‘financialised’, i.e. increasingly shifted from the productive to the financial sphere, from investment to speculation.[17]

Thus much of capitalism has become ‘casino capitalism’. While the value of all the companies listed on Wall Street was $ 25 trillion, the amount invested just in speculative ‘credit default swaps’ alone was $55 trillion ($55,000 billion); while the total value of all goods and services produced globally in 2007 was $ 54 trillion, the amount nominally invested in speculative derivatives in December 2007 was an incomprehensible $ 596 trillion ($596,000 billion), more than ten times as much![18]

With this sort of astronomical wealth, hedge fund speculators can blackmail or bring down governments and wreck whole national economies by currency speculation and capital flight. Their activities are completely unregulated. Being private companies, disclosure is minimal. Nobody knows any details about these funds. Their undisclosed profits can thus also be easily stored in secret accounts and tax havens.

According to research by John Christensen, a development economist and ex-advisor of the tax haven of Jersey, rich individuals have parked at least $11.5 trillion in secret accounts offshore, thereby avoiding around $250 billion in national taxes each year.[19] According to the World Bank, cross-border flows of the proceeds of tax evasion, criminal activities and corruption lie between $1 trillion and $1.6 trillion per year, with commercial tax evasion making up $ 700 billion to $ 1 trillion of that figure. Tax havens lie at the heart of global financial markets, with over $ 2 trillion flowing through them each day.

Former Goldman Sachs CEO and state rescuer of the system Treasury Secretary Paulson himself negotiated a special exemption from tax when he took the government job.[20]

All this consciously avoids and undermines state regulation and tax systems. It is supposed to. The net social result has been to shift the tax burden downwards:

Across the world the tax charge has been shifted from those who can afford it, powerful companies and rich people, to workers and consumers; the inevitable outcome has been less job creation, greater inequality and rising poverty rates.[21]

Financial deregulation has also enabled many charming ‘financial products’ and speculative practices that sit around like time bombs waiting to blow up the whole system. In 2003 über-investor and second richest US citizen Warren Buffet warned (like fellow speculator George Soros before him) that derivatives were ‘financial weapons of mass destruction’. Nobody had been ‘overseeing the complex derivatives market, which has been allowed to swell in value to more than $US 60 trillion – more than the value of all the physical assets in the US.’[22]

As just one absurd criminal example among many, Wall Street banks were able to borrow ‘30 or 40 times their available capital to place bets that home buyers would pay off mortgages 10 times the size of their annual pay checks’.[23]  All this helped inflate their profits and justify CEOs’ astronomical remuneration packages (e.g. collapsed Lehman Brothers boss Richard Fuld pocketed $US 466 million between 1993-2007, and $66 million just before the collapse). Another example is the arcane practice of ‘short selling’. This practice – blamed for creating volatility undermining the prices of banks and other financial stocks – consists of ‘speculators selling shares they do not own in the hope of buying the stock back later at a lower price to create a profit.’[24] In a lucrative self-fulfilling prophecy, short selling can thus help actually drive down share prices. A potential destroyer of the system is not banned but can actually be rewarded.

Economic analyst Ian Verrender asks the obvious question about the causes of the financial meltdown and provides the obvious answer:

Could all this have been avoided? The answer is undoubtedly yes. Lax regulation standards in the US failed to curb the appetite and ambitions of those running Wall Street’s biggest finance houses. Bank shareholders around the world demanded ever greater earnings and profits. As competition increased, profit margins on traditional loans were squeezed and the institutions created new products to sell to an unsuspecting public. By the time the regulators caught up with these products, it was too late.[25]

Neo-liberalism is not just about economic deregulation, privatisation, globalisation, tax evasion and tax cuts for the rich. Socially, it is a form of class warfare from above and has immensely benefited the super-rich. Neo-liberal ‘trickle down’ theory is a cover for real world ‘trickle up’. According to independent US Senator Bernie Sanders, while the US working class is suffering and the middle class has collapsed under President Bush, the top 0.1% of Americans now earn more money than the whole bottom 50% and the top 1% own more wealth than the whole bottom 90%; the richest 400 people saw their official wealth increase by $670 billion under Bush.[26] Salaries of $27-36 million per annum are now the norm for the CEOs in Wall Street and London’s City. Meanwhile, 2.3 million, mostly black, Americans are in prison and almost a third of the population is functionally illiterate.

In the past the ruling classes in crisis have usually managed to deflect popular anger against themselves and their system towards internal scapegoats and/or other nations by using fear and appealing to the authoritarian craving for strong authorities and temporary certainty provided by such traditional top-down bonding devices as nation, religion or race. Nationalist xenophobia is already a potent force in many countries like Australia under Howard, Russia, Austria, Switzerland, Germany, Belgium, Italy, Britain, Denmark, Norway.[27]

Corollary: if inequality and discontent are to be held even within the limits needed for relatively stable social systems, the state is caught in a systemic dilemma. It will have to radically intervene on many levels, including in the private economy itself; at the same time it cannot do so and still remain the corporate state. The only other option it has is the authoritarian police-state one. The post-liberal infrastructure for the latter is already in place in many democracies (elimination of habeas corpus, anti-terrorism laws and hotlines, ‘rendition’, surveillance states etc).

5. The ‘invisible hand’ of free market theory is invisible because it does not exist.

In capitalism there is no body representing the public interest. People are supposed to stick to their narrow economic roles of consumers/workers and occasional passive voters, not act as engaged citoyens debating, forming and implementing their own (public) interest. Parliaments are powerless rubber stamps for the executive. Democratically constituted governments are corporate states representing minority economic interests. They do not express the majority will of the people except where convenient. Majority against the invasion of Iraq? Go ahead anyway. The current financial crisis is another example.

At the time of the raising of the first US $700 billion rescue package, a Rasmussen polls indicated that around 65% of US citizens were against government bailouts of Wall Street speculators, with only 7% supporting the plan.[28] Congress at first rejected the plan. Even after the usual corporate media attempts to then massage public opinion and manufacture consent, a Pell poll found that a majority of Americans still opposed or were unsure about the government bailing out financial institutions, 60% were angry at the government plan, 44% said they were worried about government ‘becoming too involved in financial markets’ and nearly three quarters expressed concern at the thought that ‘those who are responsible for causing the crisis will be let off the hook.’[29]

When the majority will is convenient it is called ‘community standards’ or ‘the overwhelming pressure of public opinion’. When it is to be ignored it is called ‘populism’, or even ‘ignorance’. In this case it was of course mere populism and ignorance that had to be ignored in favour of the ‘real leadership’ needed to ‘restore confidence in markets’. Such is the burdensome duty of the managers of ‘the national interest’ under capitalism. Democracy only when convenient.

The tight nexus between political and economic elites works on many levels. Corporate party campaign funding, ongoing intensive lobbying and the lucrative revolving doors between corporate government and big business are all long-standing feature of our systems. Public bureaucrats and politicians of all persuasions become business people or lobbyists peddling their influence with their old political networks, while business people become politicians. The ruling elites of the political and the business classes make up one class. State regulators and the corporate regulated are often the same people at different points in their careers. Sometimes the corporate regulated even write the policies that benefit them for the state regulators themselves (e.g. Howard and Bush governments’ pro-carbon and -nuclear energy policies[30]). The US rescue package for financial capital is being implemented by the very same people from Wall Street firms that caused the problems in the first place and for the benefit of those very same firms, at least those still remaining.

The main function of democratically constituted governments – of whatever persuasion – is not to express the will of the people or secure their welfare, or even survival, but to maintain ‘confidence’ in the system, i.e. the capitalist economy, wealth distribution and power relations no matter what. When necessary, this may entail the state intervening to save the system from itself. This is usually the role of ‘left-of-centre’, social democratic governments in times of crisis (Roosevelt, Obama, Rudd, Brown).

Corollary: there can be no real political democracy when the major driving segment of society itself, the economy, is autocratic and quarantined from democracy. A truly democratic society needs a democratically run economy.

6. The democratic capitalist system has always meant ‘socialism’ (state subsidies and welfare, bailouts) for the rich and capitalism (labour market and ‘external costs’) for the poor.

The ‘free market’ is a neo-liberal myth. This is not only revealed by government bailouts of failed financial institutions. Even in non-crisis times capital could not accumulate without constant state help and intervention. Indirectly, the state provides the education of the labour force, the transport infrastructure and picks up the many downstream welfare costs of the capitalist system in terms of poverty, homelessness, physical and mental ill health and suffering.

The billions of direct taxpayer subsidies to industries are legion. Globally, governments annually subsidise corporate destruction:  according to Professor Norman Meyers in 2006, the fossil fuel and nuclear industries were subsidised to the tune of $71 billion, farmers $362 billion, $25 billion to destroy the earth’s fisheries, $14 billion to wreck the forests and an immense $ 1.1 trillion to climate destroying road transport.[31] According to the neo-liberal Cato Institute, the US government in 2006 directly subsidised corporations like Boeing, GE and IBM to the tune of $ 92 billion, gave $21 billion to agribiz companies and even subsidised CEO salaries via tax rules to the tune of $20 billion.[32]

The driver and core of the US economy has not been a ‘free market’ system but a state-sponsored military-industrial complex for around seventy years. Wars and military interventions are its health. By the reckoning of ex-World bank economist Joseph Stiglitz, the war in Iraq to 2006 had, on ‘very conservative’ estimates cost the US a total of between $ 1 and $ 2 trillion.[33]

In Australia, the government first privatised the public water commons by creating a water market in 1994: they over-allocated river water entitlements and handed them out to corporate agribiz virtually for free. Locked into a ‘free market’ paradigm, it now sees itself as needing to spend billions to belatedly ‘buy them back’ in a belated and desperate attempt to stop the Murray-Darling system from collapsing completely. The ‘free market’ is a purely ideological construct needed to disguise the economic reality of a corporate state run for the benefit of private capital.

‘Free markets’ can also be translated to actually mean that while profits are always privatised, costs and losses are routinely socialized. This is not only the case in financial crises. When governments sign over public road rights to private companies, for example, they then have to pay them millions in compensation should car traffic (and carbon emissions) be reduced; the government then has a direct material interest in increasing car numbers, running down public transport and increasing greenhouse gas emissions.

The social and environmental costs of big business and capital accumulation (suffering, pollution, ecocide) are always ‘externalised’, i.e. handed on to powerless others: workers, poor people, plants and animals, embryos, future generations. The fact that they can routinely do this is an expression of their complete social power and is a form of ‘structural violence’ (Johan Galtung). The violence is usually invisible and unquestioned because it is part of the power relations embedded in the impersonal economic structure itself. It is ‘normality’ within this system. If, in contrast, these ‘external costs’ foisted onto the socially powerless were instead ‘internalised’ (i.e. if the true costs of products were paid by producers and consumers), the system would collapse. Thus to ‘internalise’ these costs would only be possible by some form of power struggle or social revolution.

The trillions now being spent on rescuing mega-rich financial speculators from their own reckless gambling debts simply mean the transfer of their toxic debts onto the powerless public via the corporate state. The private debt problem has been transformed into a public debt problem. This in turn means severe potential stress on national budgets, debt ratios, credit ratings and public spending plans. People, having lost their own property (houses, superannuation savings), will sooner or later also suffer from future government spending cut-backs in social welfare, health, education  and infrastructure programs. As the credit crunch impacts on the productive economy, a severe global recession has resulted. A global depression is possible. Years of mass unemployment and suffering could result.

7. Justice is inversely proportional to wealth and power.

There is not one law for all, but one for the poor and a different one (or none) for the rich. The larger the crime, the less chance of punishment (and vice versa). White collar crime – even when recognised – is never considered as significant as blue collar crime although it may hurt infinitely more victims. ‘Dole bludgers’ are universally execrated, corporate bludgers are rescued at taxpayers’ expense. They can continue their reckless and irresponsible schemes because they know the state will always bail them out. (Corporate economists euphemise this as the problem of ‘moral hazard’). A bank robber goes behind bars. Bank owners are rewarded for robbing low income home owners via ‘sub-prime’ mortgages and selling on the debt in complex nifty ‘packages’ that then bring down the whole financial system when the credit-fuelled housing bubble deflates. The big end of town is simply ‘too big to fail’.

The law is for the little suckers. When it comes to making money, the wealthy and powerful always know how to situate themselves outside the law where necessary:

Money markets […] have flown neatly under the radar when it comes to regulation. The exclusive domain of the big end of town due to their sheer size and complexity, they are a law unto themselves.[34]

Of course this is business as usual within democratic capitalism. A backyard polluter burning tyres will be fined a hefty sum. A company emitting tons of heavy metals, dioxins or radio-active toxics that pollute people for millennia will be left to ‘self-regulate’ and considered a good corporate citizen because they provide those needed jobs and profits. All they have to do is continue to pay their own (‘independent’) consultants to write those excellent emissions reports.

The double standards in law and morality are similar to those pertaining in democratic foreign policy and wars. The little guys are the patsies for the ‘credible deniability’ of the big guys. For foot soldiers to shoot women, children and old people at 500 paces, as at My Lai, is, when found out and however reluctantly acknowledged, a war crime. (Later pardoned by the President of course). To kill them by dropping artillery shells, cluster bombs or napalm on them from 50,000 feet, however, is considered utterly normal or even heroic, as are those ordering these wars and mass bombing strategies back in the bunkers and offices of state. The lower rank wardens who tortured prisoners at Abu Ghraib in Iraq were put on trial while the President, Attorney General and Secretary of Defence who ordered or consented to such criminal policies enjoy their retirement and may even get a monument or two.

Corollary: judicial justice and social justice are indelibly linked. One cannot exist without the other. Democracy, justice, non-aggressive foreign policy, ethical self-respect and legitimacy can all only work without double standards.

8. The ‘opportunity cost’ of capitalism is human survival.

The opportunity costs of the state bailouts, guarantees and consumer spending stimuli are huge. The trillions of taxpayers’ money spent to prop up the wealthy and powerful have been lost for eradicating poverty, remediating the environment and building the massive low-carbon infrastructure desperately needed to survive the overwhelming twin challenges of climate change and peak oil. While irreversible climate tipping points loom ever nearer, governments pour the trillions of our money needed for transitioning to a low-energy future into saving the institutions of casino capitalism that have greedily gambled and foolishly lost. Billions of taxpayer dollars are pumped into the economy in a vain attempt to keep alive the growth and consumerism that are destroying the planet. For corporate governments the choice is clear: if the choice is between saving the world and saving banks, the banks will win out every time. In trying to save the economic system and ignoring the environment upon which all ultimately depends they will inevitably provoke the collapse of both.

Governments are always saying that cutting greenhouse gas emissions is too expensive for ‘our economy’ and in general there is never enough money to spend on health, education, public transport, renewable energy etc. At the same time world governments as of mid October 2008 have magically found countless trillions to bail out financial institutions, guarantee deposits, artificially stimulate economies (about $US 6.4 trillion in direct bailout assistance in the US alone from August to October 2008 [35]). With state coffers depleted by these redistributive actions for the wealthy and economies in recession or worse, the political and economic elites will now argue that all efforts to avert climate change have become secondary or luxuries ‘we’ can no longer afford.

Corollary: if we want to save the world and ourselves from climate chaos, global environmental collapse and further immense suffering, we had better think of how to radically change the capitalist system that is locking us into this path over the abyss. After all, both the global financial and climate crises have again starkly revealed that it has neither a rational nor a moral leg to stand on.

(October 2008)


[1] Interview in Der Spiegel No. 40, 29/9/08, p. 34 (translated from the German, P. L-N).

[2] P. Totaro, ‘Marx shines as a man for grave times’, Sydney Morning Herald, 25-26/10/08, p.44.

[3] A. Horin, ‘The keepers of capitalism Marx never saw coming’, Sydney Morning Herald, 18-19/10/08, p. 31. In a similar vein: W. Hutton, ‘Only integrity can save us’, The Guardian Weekly, 3/10/08, p. 18.

[4] ‘Pleite der letzten Utopie’, Die Zeit No. 40, 25/9/08, p. 63.

[5] J. Garnaut, ‘American era ends – China calls the tune’, Sydney Morning Herald, 13/10/08, p. 19-20.

[6] Ibid.

[7] Ibid.

[8] G. Younge, ‘Old ideas can’t cure America’s new woes’, The Guardian Weekly, 3/10/08, pp. 18-19.

[9] E. Andrews & M. Landler, ‘US expands its arsenal in battle to end turmoil’, Sydney Morning Herald, 11-12/10/08, p. 42.

[10] P. Hartcher, ‘End of the American Century?’, Sydney Morning Herald, 4-5/10/08, p. 25.

[11] J. Fox, ‘America’s No. 1 Export’, Time Magazine, 6/10/08, p.19.

[12] Cf. R. Heinberg, The Party’s Over. Oil, War and the Fate of Industrial Societies (East Sussex: Clairview House, 2005).

[13] M. Wilkinson, ‘It’s not too late to save the planet, says UN climate chief’, Sydney Morning Herald, 24/10/08, p. 9.

[14] G. Younge, op.cit., p. 19.

[15] A, Davies, ‘Outsiders may wonder who is really in charge of the US’, Sydney Morning Herald, 26/9/08, p. 10.

[16] M. Maiden, ‘It’s a crash, but not as we know it’, Sydney Morning Herald, 11-12/10/08, p. 40.

[17] W. Bello, ‘Wall Street Meltdown Primer’, Foreign Policy Focus, 26/9/08, at the Common Dreams website. Bello also sees globalisation and neo-liberal restructuring as the two other means capital has used to deal with its systemic problem of over-production and over-accumulation.

[18] IMF figures in Der Spiegel No. 40, 29/9/08, p. 28. Nobody can really imagine figures like this. One help might be to just take the US October bailout figure of $US 700 billion and realise that if it takes about 37 years to count to out one billion one dollar pieces (taking one second to say each number), it would take 25,900 years to count out 700 billion.

[19] J. Christensen, ‘Can pay…won’t pay!’, in New Internationalist 416, October 2008, pp. 9-11. All tax statistics are taken from this article.

[20] W. Hutton, ‘Only integrity can save us’, op.cit., p. 19.

[21] J. Christensen, op.cit.,  p. 11.

[22] A. Davies, ‘Fixing a broken system’, Sydney Morning Herald, 20-21/9/08, p. 44.

[23] D. Von Drehle, ‘The Financial Crisis: Who Can Lead Us Out Of This Mess?’ Time Magazine, 6/10/08, p. 17.

[24] E. Johnston, ‘ASIC in total ban on short selling’, Sydney Morning Herald, 22/9/08, p. 19.

[25] I. Verrender, ‘Go ahead, blame the banks, says one who knows too well’, Sydney Morning Herald, 9-10/8/08, p. 41.

[26] A. Davies, ‘The glum old USA’, Sydney Morning Herald, 4-5/10/08, p. 26.

[27] W. Aly, ‘Beneath the financial crisis waits a nastier beast’, Sydney Morning Herald, 13/10/08, p. 11.

[28] A. Davies, ‘Fixing a broken system’, op.cit.

[29] A. Davies, ‘The glum old USA’, op.cit.

[30] Cf. G. Pearse, High and Dry. (Camberwell Vic: Penguin Group, 2007).

[31] G. Monbiot, ‘costing climate change’, in New Internationalist No. 396, December 2006, p. 31.

[32] G. Monbiot, ‘The free market preachers have long practised state welfare for the rich’, The Guardian Weekly, 30/9/08.

[33] G. Monbiot, ‘costing climate change’, op.cit.

[34] I. Verrender, ‘Global finance: no one’s in charge’, Sydney Morning Herald, 10/10/08, p. 2.

[35] Der Spiegel No. 40, 29/9/2008, p. 21.

Popular 19th century socialist poster

[Given the current turmoil on the global financial markets, a re-publication of this essay from the beginnings of the overt financial crisis in late 2008 may be appropriate.]

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~ by Peter Lach-Newinsky on May 21, 2010.

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