economic crisis

Nationalise the succesful companies, not the failures

economic crisis, socialism
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As someone who had been saying for the past few years that things like Nixonian wage and price controls would be considered beyond the pale in a world that, I thought, understood and appreciated some basics of free markets more than it did 35 years ago, well, it’s a good thing my jaw has dropped so much on the past week’s news that I have room to fit a lot of crow.

Is there anything more sad than a disillusioned libertarian once he discovers his beloved mistress capitalism isn’t as pure as he thought she was, but is quite willing to undergo intervention if that suits her interests? Well, yes. Brian Doherty’s discomfort is after all safely theoretical, a vague unease that the economic laws to which he dedicated his political life are being overturned now capitalism has failed again and the people responsible need the help of the state to bail them out, again. Unlike like many of the people who’ve lost their jobs, their houses or both in the process, Brian’s safe. Capitalism always needs its useful idiots.

One such useful idiot is the near-mythical taxpayer, who is going to pay the costs of all those emergency nationalisations and bailouts their governments have committed themselves to, from Northern Rock to AIG. Because it’s never the strong, succesful companies that are taken over, but the wrecks left behind once the shareholders and executives have sucked them dry. Not that there’s anything new to this pattern. Remember Railtrack?

Or, further back, look at which industries were nationalised by the great social democratic governments of Europe in that great wave of nationalisations after World War II, especially in Britain. The railways, coal mines, British Leyland, all industries that were in trouble, losing their profitability anyway, to the point were state interference is welcomed as much as resented. And it then fell to the state to dismantle these industries and deal with the fallout of this, like a eneration of unemployed miners after the 1984 Miner Strike. Even those industries that were re-privatised by succesive Tory and Labour governments still leaned heavily on government support, directly or indirectly.

Which is whay nationalism this way isn’t a victory for socialism or even social democracy, but just another way in which profits are privatised but risk nationalised. What we need is not the propping up of empty husks, but the nationalisation and put into the public trust of all key industries, a reworking of society in such a way that cooperation, not competition is its central
organising feature, where “to each according to their needs, from each according to their abilities” is its motto. To do anything else is just keeping capitalism alive to cause more disaster.

NUT: the union with balls

economic crisis, Unions
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That’s three times this week that the NUT, the National Union of Teachers, has impressed me with their plans. It’s not often in this time of sadly defanged unions that you read about a properly militant one, but the NUT seems to have suddenly (?) become one. First there was their threat to call strikes if the government does not give teachers an above inflation pay increase, neatly scuppering Berown’s calls for wage moderation in this time of crisis. (Ever noticed how wage increases for the little people always come at the wrong time?)

then there was their refusal to any longer let the army recruit their cannon fodder in schools:

Paul McGarr, a teacher from east London, said only when recruiting materials gave a true picture of war would he welcome them into his school.

These would have to say: “Join the Army and we will send you to carry out the imperialist occupation of other people’s countries,” Mr McGarr said.

“Join the Army and we will send you to bomb, shoot and possibly torture fellow human beings in other countries.

“Join the Army and we will send you probably poorly equipped into situations where people will try to shoot or kill you because you are occupying other people’s countries.

“Join the Army, and if you survive and come home, possibly injured or mentally damaged, you and your family will be shabbily treated.”

finally there’s Steve Sinnott, the NUT’s general secretary, calling for an end to faith schools:

The National Union of Teachers proposals represent an attempt to rival faith schools. All schools should become practising multi-faith institutions, and faith schools should be stripped of their powers to control their own admissions and select pupils according to their faith, according to proposals in the union’s annual report, backed at its conference in Manchester yesterday. The daily act of “mainly” Christian worship required of all schools by law should be liberalised to include any religion, the union says.

That’s three examples of renewed militantism and a remarkable display of common sense in one week. Must be some kind of record.

Economic orthodoxy

Dutch politics, economic crisis
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Last night the eight o’clock news managed to make us happy by revealing that the Dutch economy will indeed feel the hit of the American credit crisis and grow much less this year and next. Less growth, more unemployement, more inflation and higher pices for everything, dogs and cats living together, a veritable smorgasbord of doom and gloom. though the expert on tap did say that the Dutch economy was robust enough to withstand this storm, he did predict dire consequences if wages and benefits kept rising. Which is typical:

  • In the economic downturn of 2001-2003 we were told we should tighten our belts to keep our jobs
  • Then when the economy started to improve, we were told that wage rises would hurt the recovery
  • Then it was Balkende who said that we had to get the sour first before we’d get to the sweet, confusing everybody until we realised it still mean no wage or benefit increases until an unspecified later date
  • Then the economy boomed again, unemployement dropped and vacancy upon vacancy went unfullfilled and still wages and benefits could not rise, because that would encourage infaltion and we wouldn’t want that.
  • Now the economy is doing slightly less well, mainly through corporate greed and stupidity in the US and of course we cannot have rising wages when prices of everything, including food are going through the roof, because that would hurt the economy and raise inflation and offend the spirits of our ancenstral stockholders.

Meanwhile the idea that companies and stockholders could learn to live with slightly less exuberant profit margins, that’s just insane. No, it’s wage moderation all the way, even if you never catch an economist living on minimum wage. It’s always the workers who have to pay, not the capitalists.

Which is why I was pleasantly surprised by minister of Finance Wouter Bos, when he presented his plans to target top earners more. He wants to put a thirty percent tax rate on socalled golden parachutes and leaving bonuses over 500,000 euro, change the basic tax rate of hedge fund managers to a higher band and a freeze on stock and option packages of CEOs and directors of companies involved in takeovers. These measures in themselves are not that spectacular, no 100 percent income tax bands for millionaires or something like that, but if enacted are a decisive break with a decades old policy of coddling capital.

National Rock

economic crisis, libertarianism
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So Northern Rock is to be nationalised, but as the Darling treasurer hurriedly explained, only as a temporary measure and only as a last resort; wouldn’t want to do anything that frightened business, now would we? The Tories immediately started howling about how this was all an embarassement and a prelude to a new winter of discontent, with the mass strikes and the power cuts and the dead piling up in the streets and all that, while Northern Rock shareholders immediately started making noises about sueing because of course no matter what happens they deserve their pound of flesh. For the rest of the financial sector, however much they may not like the dreaded n-word, they seem happy to let it happen and have the tax payer take responsibility for their failings.

For all the angst surrounding it, this nationalisation really is only business as usual, as over eleven years of New Labour it has always been willing to guarantee private profits with public money, although it’s usually done through less visible methods like private finance initiatives. Nationalisation happened only because Darling was unable to get rid of Norther Rock any other way, had spent too much money propping it up already to sweep the losses under the carpet and the crisis was too high profile to resolve through the usual sleight of hand. Not just the opposition and the voters were watching, so was the EU competition commissioner. Any hint of preferential treatment and the EU would’ve pounced. Since nobody was stupid enough to buy an almost bankrupt company with a multiple billion pound debt, nationalisation was the only option remaining.

But while nationalisation should not be seen as some huge blow for socialism, the mere fact that the government actually wants to go through with it is a significant break with the past. until now the profit principle, privetisation and marketisation as the solutions to all ills had been sacrosanct. To abandon them in the case of Northern Rocks means things are changing. It fits in a larger pan-European trend of abandonment of free market principles, as even the Dutch government has now admitted privetisation of public services has largely failed to bring the benefits that they promised it would. Plans to sell off Schiphol have been halted and the threatened liberalisation of public transport in the four biggest cities has fallen through. The finance minister has even gone so far as to say that privetisation of remaining state run companies would be stopped entirely, unless there were compelling reasons otherwise.

This u-turn is not to be explained by a change in ideology on the part of the British or Dutch governments, but simply because both can see the threatening recession looming at the horizon and both know that this recession is likely to be severe. Contrary to free market ideology, business has always relied on the government to shelter them through these storms.

Glad to see somebody’s optimistic

economic crisis, US politics
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Not.

Just take a look at these Federal Times polls of US government workers. Not very happy campers. If their agency offered buyouts for which they were eligible 82 percent of those polled would take them. 81 percent thinks “Bush’s proposal for a $500 million performance fund — to reward top- performing employees with raises above an across-the-board 2 percent raise” is a bad idea. Etc. etc. Mr Bush has such a way of winning
people over…

Thanks to the Sandwichman over at Max’s.