Who's to Blame?

The ConDem Government is rewriting history. To protect the guilty, they are attacking the innocent. To protect the comforts of the affluent elite that secured their victory, they are planning to attack the most vulnerable in society.

We are being led to believe that feckless spending on welfare and social projects by the Labour government caused the current economic crisis, the crisis they use as justification for a crippling round of public service cuts. The shrill and deceitful voices of the popular press are telling us there is an army of scroungers out there, who have stripped the cupboard bare.

Is our collective memory really so short that we have forgotten the events of 2008? Have we forgotten already about the collapse of Lehman Brothers, of Bear-Stearns? Forgotten about top financiers’ outrageous bonuses? That is what Mr Osborne, Mr Cameron, and Mr Clegg would like us to do, as they stand poised to slash our public services in order to shore up our ailing economy.

Let us take a very short step back into history. To quote Wikipedia: “The late-2000s recession [or the Great Recession] was an economic recession that began in the United States in December 2007.” The recession that has dragged the word economy down began in the land of the free market, minimum regulation, private social provision, minimum government. In other words, the political and economic model that the ConDems want to emulate here caused the global financial meltdown – not government spending on social projects or poverty relief.

Those economists who have not swallowed ‘free market’ dogma completely agree that the roots of the crisis lay in too easy credit leading to a boom in demand, leading in turn to a rapid rise in asset values, including housing. This asset inflation supported more borrowing and credit to produce more consumption and a further round of asset inflation, an economic house of cards.

The crisis was not inevitable. It was driven by US ideology, a belief that resources were inexhaustible, that the world could and would underwrite American debt, that debt could be turned into an asset to create more wealth and consumption, that unfettered market forces solved all problems. As former BBC economics editor Evan Davies said, “It was a result of a system heavily grounded in bad theories, bad statistics, misunderstanding of probability and, ultimately, greed.”

We do remember what happened. The markets panicked, asset values fell, un-payable debt [“toxic assets” – remember debt had been turned into an asset!] grew and led to major company collapses. Banks began to fail. Small ones were allowed to go to the wall, but when the big boys felt the chill, they panicked governments into believing that they were too big to fail. So with a speed that deceived the eye, governments across the developed world bailed out their banks. Public money was used to prop up private business, business that had been, to say the least, imprudent. The lead to bail out was set in the home of the ‘free market’. As Paul Reynolds, BBC World Affairs correspondent observed after the events of 2008, “The American free-market creed has self-destructed while countries that retained overall control of markets have been vindicated.”

Still the free-marketeers resist financial regulations. The ConDems promptly proposed scrapping the Financial Services Authority. They are turning a deaf ear to calls for windfall taxes on Bankers’ bonuses. There is no discussion on a financial transaction tax [Tobin Tax]. They lead us to believe that it is we, the people who use social services like health and education, who are to blame.

We must not accept the blame – we must ensure that blame is laid and remains at the door of those responsible. Joseph Stiglitz is in no doubt where the blame lies, and he is well qualified to know, better qualified than the proprietors or editors of the right wing media, or our puppet politicians: he holds the Nobel Prize for Economics. This is his observation:

“This band of greedy oligarchs have used their economic power to persuade themselves and most others that we will all be better off if they are in no way restrained—and if they cannot persuade, they have used that same economic power to override any opposition. The economic arguments in favor of free markets are no more than a fig leaf for this self-serving doctrine of self-aggrandizement.

Worse still, much of the money flowing into the banks to recapitalize them so that they could resume lending has been flowing out in the form of bonus payments and dividends.”

Joseph Stiglitz, Fear and loathing in Davos, The Guardian, February 6, 2009

No, do not accept the blame. Fight the cuts!

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