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The Economic Crisis and the left: Bail Out or Nationalisation?

by Dave Riley

There's some chit chat in the blogosphere (as you'd expect) about the US Bail Out.

See here and here. The argument is now being advanced that the "left" should not oppose the Bail Out.

That makes me very uncomfortable because I have no confidence in the Bail Out -- despite its massive bill -- to turn the tide on this matter.

As I wrote elsewhere:
Why support the bailout when there is no guarantee in Hades that the money will ‘tickle down’ to the working people trying to survive a mortgage or what have you.

Why not argue that IF you are going to expend that amount of money to bail out anyone — spend it on the most deserving while nationalizing finance capital “to the nails in the soles of their boots ” (as Castro once said).. The feature you miss is that the Bail Out only addresses the symptom. That’s all — and at that there’s not one guarantee that it will deal with that in way of flow on…or it will work because there’s no supervision built in.

As Wanda Sykes has wisely noted: “Poor people are bailing out rich people…It’s welfare for the rich!”

So do you then argue that this ‘left’ should oppose the protests and mobilisations around the (USA) country dedicated to demanding “no money for Wall Street!”. Don’t you think that’s a good and progressive perspective? Don’t you think that’s the way to proceed?

The Bail Out is only an answer relative to all the other loses on the finance market because that’s capitalism’s preferred fix at the moment. Foreclosures, bankruptcies and the like are embedded in the system and happen every day of the week. The Bail Out is a quick fix to salve the consequence of a diseased system of capital management.

To campaign FOR the Bail Out would be a disastrous political tactic because it will obscure who is at fault. Anyway the Bail Out will proceed because thats’ the one option the system has at its disposal –so let it stew in its own contradictions.

(I fear you are a touch shallow on your understanding of Marxist economics as this snippet of fact may enlighten you in regard to the burgeoning mountain of Fictitious Capital: In 1980, world financial assets (bank deposits, government and private securities, and shareholdings) amounted to 119% of global production; by 2007 that ratio had risen to 356%. Even in the 1980s, the US Treasury spent $124 billion on rescuing the savings and loan industry . So shouldn’t you also argue , that this sort of intervention should become standard for managing US finance capital? That what we need is a return to Keynesianism or something –as that’s your logic.: Capitalism with fetters.)

“The current crisis is a perfect organizing platform for the left” because it had to come to this not because it is something to be welcomed as a bit of system management but because the system had no choice in the matter because thats’ its usual way of doing business — bailing out its mates.

The same argument could be also advanced in regard to Iraq & Afghanistan: [Obama:]“We’ve spent $750 billion on these wars but to save the effort from ruin we need to spend another $700 billion.”

Or down at the local Casino — “Shit! I lost $700 billion on the poker machines, give me another $700 billion so I can keep on playing otherwise my kids will starve.”

Or consider the confessional:” Bless me father because I have sinned and squandered billions of the family estate. Please don’t give me penance — just give me another go and see if I can do better next time.”

And while you’re at it why not bail out the banks in Ireland, Germany and Iceland who are also going under…Hell! why don’t we just give em all a bit of cash so that they can all end their year in the red. Neo-Capitalism relies on the state to do it anyway anyhow so let’s cut through the crap and pay the money up front and in the open this time around.

So, rhetoric aside, it has to come back to a nationalisation clause -- about the government controlling the finance sector for our benefit. I cannot see another way to proceed. It's no good as Andy Newman argues:
The so-called toxic debt has already been valued by the banks at just 20 cents in the dollar, and the bill approved by Congress authorises the government to raise $700 billion by selling US treasury bonds on the financial markets which will then be used in public auctions to buy the debt. No taxpayers money is involved.

The US treasury bonds will be an attractive secure investment, and buying the banks’ debt at 20% of face value is probably good business – not all of the debts will go sour, and they will return interest, and once the housing market stabilises the government can sell the debts again at a profit. What the US government is doing here is using the fact that it cannot itself go bankrupt to underpin confidence in the market.

In exchange for the debt, the US government will take a non-voting holding in the banks’ stock, so that if the banks’ share prices recover, then the public purse will financially benefit.

It's no good because it dodges the key question of what sort of finance system we should have. At some point in the argument you have to defer to the likelihood that the whole system of finance capital is unsustainable and is doomed -- more so because of government neoliberal policies these last 30 years.

While that may seem like occupying the high moral ground (while Rome burns) the problem is that the very seeds that sponsored this disaster are not being addressed by the Bail Out at all. They merely -- in a sense -- reward it.

While we have to concede that working peoples' houses or superannuation or what have you need to be protected -- the protection should be activated at that level rather than in the boardrooms of the finance barons. If there is to be a foreclosure of a person's home then thats' where the protective measure should be activated. If some battler's life savings are at risk then let's protect those. To some degree we need to adopt the position that the banks are the enemy and to mobilize people in support of the Bail Out -- as is being argued in some forums -- disengages them from the underlying dynamic of the economic process and in effect hands the reins freely and unconditionally back to the cowboys.

Even the British MP spokesperson who fronts Respect, George Galloway, has enough of a feel for such a platform when he argues:

“First, the government needs to ban greedy bankers from looting the people’s money in multi-billion pound bonuses. They must be forced to lend to small businesses, to consumers and for mortgages again. The government does have the power to do this. The last three decades of myths about states having no economic role have just been swept away in this financial maelstrom.

“Secondly, the government money will have to come from somewhere – that should be from the record corporate profits of the last decade and the wealth of the richest.

“Thirdly, any investor would want a say over what happens to their money. The government has now invested massive amounts of our money in the banks. We, the public, should have a big say in what gets invested in, whose debts get called in and what mortgage foreclosures take place.

“Despite the bail out today, we still face a very serious recession, a massive rise in unemployment and businesses collapsing, which will threaten a further financial crisis and a much bigger demand on the taxpayer - unless more is done to pump prime our collapsing economy now.

“That means a dramatic cut in interest rates and ensuring that investment finds its way into production and the good of society. An immediate programme of house building, insulation and public transport improvement will not only preserve jobs, it will truly modernise this country.

So it's not true to pretend to cry wolf as though the left should be ashamed of itself because its wallowing in the fall out from a massive disaster. It's obscurantism to suggest that because we aren't talking "Bail Out". We're talking "Nationalisation."

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