robthill’s posterous

A picture is emerging that is not quite the same as we have been given over the last few months. There are some straws which point towards an alternative landscape. Consider the statement from a Commons committee querying why some banks have survived and others have not and the complaint from the secretary of the British Bankers Association that it is not right to tar all bankers with the same brush. In other words, was it really the case before the rush to rescue the banks that the world financial system was in meltdown.

Is it possible perhaps that the directors of the banks in real trouble hyped up the seriousness of the situation? Some British politicians with Scottish interests and a realisation after the floods of the previous summer that the Prime Minister appears at his best in a crisis were only too willing to go along with the exaggeration. After all it was the only two major Scottish banks which were in trouble. It is then quite natural to rush to the banks aid pouring in billions of pounds that the country could really not afford.

The said bankers have not changed their spots and are busy mending their capital and improving their share prices but without the shame of causing their companies to go bust. In some senses for the individuals involved it has been a win win scenario, a rescue of much of their asssets and pension arrangements and a chance for the Prime Minister to strut his stuff on the world stage. And so far the bluff has worked. People are bitter about the banks and about the money hurled at them but very few are suggesting that the rescue by governments was unnecessary.

But what about the USA? Bush was in the dying days of his term of office and saw a last chance to do his big business pals a favour. Obama has had to go along with it because calling the banks bluff at this stage would really be far too risky.

In both America and the UK the really big money has gone to the financial sector and very little comparatively has been spent on attempting to reduce the job losses amongst ordinary men and women. In fact the UK government has reduced its capital spending whereas an increase in social house building and other quickly realised schemes could have made a difference.

I have been meaning to post to my blog for about a week but events come so thick and fast at the moment that each topic seems out of date before I get to writing it up.

On Broadcasting House on Radio 4 last Sunday, Diana Rigg used the phrase “ spiralling down” talking about our present national situation. It would appear that way.

It would seem that for several years more and more people have been consumed by greed. Bankers, members of the House of Lords and of the Commons and ministers of the crown, even senior civil servants have experienced an overwhelming desire to leap on the gravy train or to change the metaphor get their snouts in the trough. None of them have probably broken the law or the regulations most of which they drew up for themselves, but they all stand terribly guilty in the eyes of ordinary men and women on modest incomes. None of them are trusted and it is all very well to say the public is becoming cynical, encouraged by the media, but it will take a very long time for any semblance of trust to be re-established.

Politicians ask for our support and yet happily enter into dubious practices with lobby firms or massage the meaning of second home. Of course they should be compensated for having to stay in London during the week, but not if they live within normal commuting distance and not to provide themselves with massive capital gains. Hundreds of thousands of commuters could make an equally justifiable claim.

But it is the government that most appals me. As far as I can see, headless chickens would be too kind a comparison. Every revelation in the media or set of statistics brings a new spur-of-the-moment solution. The banks were all private concerns fully committed to the capitalist ideology. Why should they and their shareholders be bailed out by every man and woman in this country? I have read that British banks have something of the order of £4 trillion worth of debt which they mostly cannot cover. The few hundred billions they have received from the bank of England is but a drop in that ocean of debt and obviously has done no good at all nor is likely to in the future. Yet it will mean higher taxes, poorer services and fewer benefits for the whole nation for years to come. Let them go bust and then let the government help those people who are really damaged by the collapse excluding the fat cat managers. It is not every bank that will collapse by any means. In receivership there will be no talk of bonuses and the bankers who are so brilliant that we cannot afford to lose them will be free to apply for jobs elsewhere. The receivers will be able to sell off potentially safe and profitable bits of the businesses to more responsible banks and the creditors can form an orderly queue.

The banking fiasco is bad enough but now there is talk of bailing out the PFI firms. They are also capitalist organisations who contracted to run schools and hospitals for 30, 40 or even 60 years. The government was not taking sweeties from children when the contracts were signed; more likely the other way round. And what is more there will be few buyers for the schools and hospitals in receivership so why should the government not buy them at knock down prices?

Over the last 60 or so years we have seen ever bigger economic and financial bubbles burst and governments everywhere pick up the pieces. Let this be the time when the bubble bursts and stays burst instead of ministers bleating that they really want the banks to go on lending. Ministers show as much credulity as a small child trying to re-inflate a burst balloon. Carry on Lending could easily be the title of a new film if it were not so serious for all of us.  To suggest a return to pre-bubble amounts of lending is to add petrol to the fire. Instead let Capitalism reign.