I have tried to give an outline account of the cause of the crisis. It is no doubt
debatable in some of its details. The treatment of the Bretton Woods system is
impressionistic at best. I have said very little about the campaigns to break the
power of labour in the 70s and 80s. There is much more to be said about the
warnings that were made in the years before 2007. You are welcome to revise
the text and forward it with changes if you feel so moved.38
And if you’d rather have your economic analysis from someone with a little more
in the way of a grounding in, well, in economics, here’s Joseph Stiglitz, Nobel
laureate and former Chief Economist at the World Bank:
One of the reasons why our economy is weak is that we have growing
inequality in our society. That means that people who would spend the
money don’t have it. We sustained their consumption by lending but that
lending was unsustainable and so unless we do something about the
underlying inequalities both within our countries and across the world, it
may be difficult to restore the global economy to the kind of prosperity
that we would hope.39
Whether you want to listen to me, or some Nobel Prize winner, it is impossible to
deny that the problems we now face emerge from the deep structure of the
global system. It follows that lasting recovery will only be possible if we reform
that deep structure.
There are a number of suggestions as to how we might do that. The New
Economics Foundation has worked with others to put together a Green New
Deal, which combines closer regulation of finance with moves to restart the
economy through investment in environmentally desirable projects.40 In the
United States Paul Krugman has outlined what he thinks Obama needs to do to
avert a 30s style slump.41 But the work of constructing a more just, and therefore
more stable, economic settlement is only just beginning. Given the record of the
experts who were in charge I can’t see any convincing reason why you shouldn’t
be part of that work.
It is certainly time for us to assert the public interest over the needs of private
capital. Deregulated capital has failed and must now be returned to conditions of
close supervision. This means, amongst other things, the end of the offshore
system of unregulated tax havens, the imposition of controls on the international
movement of capital, and a much greater emphasis on productive investment as
against financial speculation and disordered and unsustainable consumption.
In Britain it seems that the financial sector is being taken over by the state. We
are now, as citizens, facing incalculable risks. If we can find a way back to
recovery, we must ensure that we are never again put in such danger by the
actions of financiers and their servants the politicians.
Given that both the British and the American banking sectors are effectively
insolvent, its seems that there is little that the ‘Anglo‐Saxon’ tradition of
liberalism in finance (more often than not a fifty dollar way of saying ‘predatory
lending’) can say about a thorough reform of the structure of national, regional
and global economic arrangements. Having insisted on sound money the banking
interests are now angling for the inflating away of their reckless debts. Their
ideas have no more credit and they have lost any right to be taken seriously.
The recent example of the mixed post‐war economies shows that we need not
listen to those who will call for authoritarian solutions to the turmoil that is to
come. The question becomes – how do we reconstitute the system that restored
global prosperity in the forties and fifties on a more stable basis?
To argue against unfettered finance is not to argue for state socialism, or any
great expansion of state activity in the economy over the long term.
The choice is not simply between state control and private capitalism, whatever
the empire‐builders in the state and corporate bureaucracies would like to tell
us. The structure of companies has an important, a crucial, bearing on the
opportunities for financial speculation. Employee ownership reduces them to
zero. A system revised at the level of transnational capital flows must also be
reformed at the level of the enterprise. State bailouts should be followed by
employee buyouts as a matter of course. It is only a kind of intellectual
exhaustion to insist that once the economy has been nursed back to health it
should be returned to the supervision of its tormentors.
As Richard Wolff points out, employee ownership and control, with oversight of
management being seen as normal part of working life, will make a reformed
global financial system more durable, by giving knowledge and economic power
to those with an interest in defending it. Financial engineering gives way to, well,
to engineering, and other materially productive activities, since owners who are
also workers and future pensioners will have little interest in accelerating the
balance sheet by selling assets and loading up on debt.
Employee ownership ensures a more even distribution of wealth within
companies and in the wider society. And, by offering workers an alternative, it
forces companies that remain privately held to pay their employees better.42
Trade unions need to be given enhanced powers to ensure that workers are able
to secure a greater share of the wealth that they, after all, create. They can also
play an important role in balancing the inevitable asymmetries of information
and expertise that exist between management and the bulk of the workforce.
The post‐war settlement collapsed because those who benefited from it were
successfully estranged from it, in part by appeals by narrow self‐interest, but in
part because they felt unqualified to defend it. Industrial democracy has many
benefits in its own terms. But by providing the means to understand the world of
work more fully, it provides the means to expand and deepen political
democracy. After all, active engagement in the management of an enterprise will
make the citizenry less easily deceived by those who pretend to possess arcane
knowledge of statecraft and high finance.
The state needs to be more thoroughly democratised, in ways that may or may
not require constitutional change. The assumption that professional civil
servants and the national political classes are competent to manage the global
economy has been shown to be unsafe. It is not a matter of leaving these same
groups to decide on a new set of policies. Rather the public must inform them of
the steps that are required.
Public institutions, like private companies, should be thoroughly reformed. The
outsourcing, the public‐private partnerships, the whole discredited flim‐flam of
‘market discipline’ must be seen for what it was: a raid on tax‐payers’ funds by
operators who wanted nothing to do with the rigours of actual market activity
and preferred the warm bath of government contracts. Everything that depends
for its prestige on the supposed success of the private sector, from management
and management consultancy to ‘social marketing’ must be re‐examined. We
must now surely entrust information technology projects in the public sector to
people who understand the technology and who can be trusted to act in the
public interest. More generally, our public sector should like more like that
which fought and won the Second World War. Those who tried to transform it
through it into a parody of a market system should be sent to seek their fortunes
in the actually existing private sector.
The economic crisis has not only bankrupted large chunks of the financial sector.
It has bankrupted an entire intellectual establishment. Voltaire once wrote that
the aim of satire is to decapitate its victim without their becoming aware of it.
Events have decapitated much of the Anglo‐American commentariat in the last
few months, though many of them continue to walk and talk, for all the world as
if nothing untoward has happened. We have been in the past perhaps too
trusting and too easily daunted. It is important now that we gently shake these
apologists for the old, discredited order, until their heads fall off.
The free market right has now been thoroughly discredited. The story that they
tell – of state failure to regulate – cannot obscure the fact that this is a crisis
caused by the removal of controls on private capital. Having begged that the
money interest to be released from its chains, the Fay Wrays of the Adam Smith
Institute now gaze at the destruction and blame the politicians for listening to
And it is not only the free market right that has nothing further to say. There has
been an astounding surrender by many of the Left to the claims of finance and its
tame experts. So Nick Cohen can declare that socialism, ‘which provided the
definition of what it meant to be on the Left from the 1880s to the 1980s’ has
been ‘disgraced by the communists’ atrocities and floored by the success of
market‐based economies’. The Left is not defined in some simple way by
socialism, nor has it been ‘disgraced’ by the crimes of Stalin and Mao. And if leftwing
columnists were ‘floored by the success of market‐based economies’ we
have a right to ask why they didn’t keep their footing in a prosperity that was so
hollow and impermanent.
Left‐wing intellectuals who accepted that there was no alternative to a program
of deregulation and privatization must surely now give up any claim to be taken
seriously. For more than a decade they insisted that the Left must be responsible
and work within the confines of a world where the organization of the economy
was above and beyond the reach of democratic politics. Their maturity and
responsibility have turned out to be childish and reckless credulity at best.
If we want to understand the scale of the intellectual collapse we will have to pay
a sight more attention to our recent history, and to the remnants of the critical
tradition in political economy. Dan Atkinson and Larry Elliott’s The Gods that
Failed is a good place to start, if you are interested in how the postwar system
was dismantled43. I have also learnt a good deal from Ann Pettifor’s The Coming
First World Debt Crisis, and Graham Turner’s The Credit Crunch. In general we
should pay more attention to those who were concerned about income
inequality and unsustainable lending, less to those who thought everything was
As I write Barack Obama seems intent on hiring many of the financial
masterminds who presided over the crisis. Jonathan Weil, the man who rumbled
the long con at Enron, notes that ‘almost half the people on Obama’s economic
advisory board have held fiduciary positions at companies that, to one degree or
another, either fried their financial statements, helped send the world into an
economic tailspin, or both’44.
They will not jump, these people. They cannot easily accept that they are
presiding over a system that must be replaced. They will not give way willingly
to new ideas and a new reckoning with the economic and political crisis we now
I am not saying that we should push those responsible out of tall buildings to
their deaths. I am not saying that. They will, if properly directed, do what is
necessary to create another world.
But we do have to push them.
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