A bankrupt system must be replaced, not bailed out!

Workers' Fight workplace bulletin editorials
13 October 2008

At the stroke of a pen, the equivalent of 41% of the NHS budget was handed over by Brown to 3 of Britain's "Big Six" banks. On the one hand the cost of keeping 24 million people in good health and on the other, the cost of keeping 3 banks afloat! The balance cannot be more blatantly tilted in favour of big capital. No wonder stock market operators expressed great satisfaction at such a giveaway!

But already their initial enthusiasm seems to be waning. Papering over a bankrupt system with public funds may help to conceal its failings for a while, but it cannot and will not make the system any more healthy.

Their national coalition behind capital

Significantly, the Tories and Lib-Dems fall over themselves to express their support for Brown's bailout of big business. All of a sudden Cameron forgot about his party's total opposition to "state interference" in private business. Gone was the claim (by both Tories and Labour) that the economy is better off in the hands of "private entrepreneurs".

When the said "private entrepreneurs" are in bad need of cash, because their frantic search for profit has pushed their own system into bankruptcy, all these politicians rally to present the sharks with a large chunk of public funds on a golden plate in the name of so-called "national interest".

Of course, they all claim that their enthusiastic support for Brown's bailout is motivated by their concern for the predicament we face in this crisis - the threat to our jobs, mortgages, houses, etc... But not one penny of Brown's mind-boggling £250 billion package designed to guarantee new loans over the next three years, will benefit the rest of us. Only loans to banks and sizeable businesses will be guaranteed by the government against default, not loans to the rest of us!

In fact, as the Council of Mortgage Lenders pointedly noted, the "promise" that Brown allegedly extracted from the banks to return mortgage lending conditions to what they were in 2007, is an "aspiration". The small print in the Treasury's official statement makes it clear: this "promise" only concerns "credit-worthy" borrowers - i.e. not the majority of us who are on low incomes and certainly not those in real difficulty!

In the politicians' book, "national interest" does not extend further than the narrow circle of rich capitalists who own and control everything in this society, even though they keep making a catastrophic mess of it!

Taking over control from capital?

A Tory paper's hysterical headline described Brown's plan as "bank nationalisation". If only! But there is no question of the state taking control of the banks' operations. Public funds will make up 60% of RBS' capital and over 40% of Lloyds-TSB-HBOS', but the state will only appoint 2 or 3 "independent directors" to their boards - i.e. state-sponsored representatives of big business.

Nothing will keep the banks from embarking on the very same speculative folly which led to the present crisis - that is blind lending of money they do not have, for the sake of earning fat interest.

This was how the banks made such huge profits in the past - by lending to very profitable high-risk speculators, at proportionate high interest rates. When this risky speculation crashed, the chickens came home to roost, leaving the banks with huge losses. What they treated before as "assets" - but it was really "funny money" - became worthless. So they hiked up interest rates and cheap credit dried up, thereby threatening the whole economy.

Nothing in Brown's "plan" stops the banks from returning to such profit-driven practices. As Darling was at pains to point out, these banks will continue to be "commercial operations", just like Northern Rock, which has one of the highest rates of repossessions among mortgage lenders. In fact, they will still be allowed to lend 10 times more than their actual capital!

Of course, things would be different if the state was really nationalising failing banks, that is expropriating their big shareholders, with the aim of using the banks as a conduit for channelling wealth into projects designed to meet the needs of society, rather than satisfy the greed of a handful. Such nationalisations would not change the system, but they would at least bring some sanity into it.

However, sanity is not on the fat cats' agenda and therefore not on Brown's. Even such an elementary move is beyond the ability of this bankrupt system. And this is why we, the working class, will have to replace it with another kind of social organisation in which the interest of all takes precedence over the interests of the privileged few.