Posts Tagged ‘Capitalism’

Ethics, Economics, and Eton

October 22, 2008

Just finished watching Newsnight, something I don’t do that often anymore as I think the quality has dipped of late. However this episode was fantastic. Three main things caught my interest. The first was of course the George Osbourne solicitation story. The second was the discussion of the Governor of the Bank of England’s statement that the UK is likely to be entering recession between Newsnight’s own shadow monetary committee of former Tory Chancellor Kenneth Clarke and two economists whose names I didn’t catch, and the last was the coverage of the US election.

However, for the sake of not having a totally ridiculously long post, and having missed the names of most of the shadow monetary committee, I’ll simply note Ken Clarke’s extremely effective – and I hate to say it, convincing – performance in a discussion that ranged across possible solutions and especially what role interest rates might have to play in attempting to attenuate the current crisis. I felt enlightened by the conversation. Similarly the report on the US election, which focused on what difference the change from Bush to either McCain or Obama might have on US relations with the world and for the rest of the world. I have deliberately being avoiding the US election, largely because I think that there will not actually be that much difference in US foreign policy no matter who wins. Certainly what it has become fashionable to call “the optics” of either of the two will be different from Bush and McCain’s would differ from Obama’s, but US strategic interests and policy will not change a great deal. I expect the US military presence in Iraq to be greatly reduced but not gone by the next election regardless of who wins. Obama may pull troops out at a slightly faster rate, but ultimately I think at most we are talking about timing. And as for Iran, the Middle East, (or Cuba, and the DPRK), let’s not forget Obama’s extremely belligerent statements about Iran, and complete lack of indication that he would be any more coercive of Israel to get the peace deal secured. I see again a change mainly in timing and rhetoric when it comes to foreign relations, not in policy and aims. Because of this conviction that one is not that different externally from the other, I’m not that interested, and don’t follow the thing as closely as many others (and besides, I preferred Hilary to either of them). For more detailed, and much more erudite commentary from a progressive viewpoint, see World By Storm’s many posts on the issues at Cedar Lounge Revolution.

So to Osbourne, Mandelson, and the richest man in Russia, Oleg Deripaska, another of those oligarchs who got rich on the backs of plundering the natural resources of the Russian people. Here we have an insight into the way politics works at the very highest level, and it is far from gratifying. The EU’s Trade Commissioner is staying at the (a?) holiday home of a leading financier, Nat Rothschild, a member of one of the world’s richest banking families, who introduces him to the billionaire trader in aluminium, the tariff on which Mandleson helps to set. Mandleson’s defence is quite simple – one cannot be involved in these types of negotiations with emerging economies like India, Brazil, South Africa and Russia without talking to important businessmen as well as politicians. The EU clears him, though as Nick Robinson of the BBC points out, should he do this now as a member of Cabinet, he would be in breach of the ministerial code. Given Mandleson’s track record, it is to say the least unsurprising that he would place himself in a questionable position. The Tories try to take advantage of the situation, with Osbourne briefing all and sundry about Mandleson badmouthing Brown.

Oops. Big mistake. Rothschild seemingly regards this as a breach of trust, and decides to punish Osbourne by publishing in an open letter to The Times the details of conversations involving Osbourne and the Tories’ chief fundraiser Andrew Feldman (who had been brought to the villa by Osbourne for this purpose) that were had about a potential illegal donation by Deripaska to the Conservatives, possibly using one of his UK-registered companies as a front. Rothschild says that Osbourne and Feldman asked Deripaska for money. The Tories deny this, and correctly state that no money was given, but have to admit that the Shadow Chancellor and their chief financier were party to conversations about possible donations, and that they met Deripaska on his yacht. In additional fuel to the fire, Deripaska lets it be known to the BBC that neither he nor anyone acting on his behalf initiated the discussions, while Rothschild has named a witness in support of his version of events. From The Times

Mr Rothschild issued his statement at 9pm in what appeared to be an escalation of hostilities between the hedge fund manager and his old friend from Oxford.
In it, he directly contradicted Mr Osborne’s suggestion that there had been no discussion of channelling donations through a British company. He went on to say that his witness, Mr Goodwin, a former adviser to President Clinton and a prospective non-executive director of Rusal, Mr Deripaska’s aluminium company, recalled that the subject of a donation arose briefly after they went to the Russian’s yacht “but the conversation gained no traction”. He added that at dinner later that evening the donation was again talked about “and Mr Osborne was interested in whether and how such a donation could be secured”.

I’ll come back to the presence of an advisor to a former US President, and the fact that Rothschild and Osbourne are old friends from Oxford. What we have here seems to be a clear case of, at the very least, The Tories at the highest level being prepared to involve themselves in discussions about illegal donations. And, quite frankly, I am not charitable enough to believe this most charitable version of events. The stench of corruption pervades this whole episode. It looks a hell of a lot like potentially the next Chancellor has been grovelling for illegal cash. How can we trust his, and his party’s, judgment, when it seems that he will be in hock to such powerful vested interests? How can we forget what this says about the likely corruption levels of any Cameron government?

And what does it tell us about the way politics still works in the UK at the highest level? First, the old boy network is alive and well, and incredibly strong in the Cameron Tory Party. Call me Dave was at Eton, as were a lot of the Shadow Cabinet. Osbourne compartively “slummed it” at St Paul’s. Rothschild and Osbourne are friends from Oxford, where they were both members of the Bullingdon Club, a perennially obnoxious drinking society for super-rich Oxford undergraduates who delight in vandalism and other petty criminality, as were Cameron and Boris Johnson. Feldman, the chief fundraiser, played on the same tennis team in Oxford as Cameron. Are we getting the picture yet? These elite networks that look after their own and protect each other’s interests even when laws are broken are the type of people who are running the UK – its politics, its government, its legal and financial institutions, and its media and cultural institutions, as was nicely quantified and analysed by The Observer earlier this year here and here. Given this culture, is it any surprise that politicians are open to undue influence from financiers and other vested interests.

But it goes much futher than that. The elite network is clearly not confined to the UK, but is an international phenomenon. Hence the significance of the EU Trade Commissioner and an ex-advisor to President Clinton on the richest man in Russia’s yacht. I am not – I want to stress – advocating a conspiratorial understanding of political and economic policy across the globe. Rather I am saying that if we want a vivid demonstration of how class, wealth and power remain inextricably interlinked – and act as posion to the democratic process and the decisions that affect and all too often sacrifice the interests of the ordinary citizens of numerous states – we need look no further than the holiday home of one hedge fund manager. Oh, and did I mention Rupert Murdoch dropped by too?

The Thatcher/Major government collapsed under the burden of its own inadequacies and corruption. Blair left office irrevocably tarnished by the corruption that surrounded him and other prominent New Labour politicians. It looks as though should Cameron, Osbourne, and the rest of their public school/Oxbridge nexus win the next election, we can expect more of the same, except more shamelessly and more quickly. All this though may have positive benefits. Brown’s handling of the financial crisis, and the credit he has been given in the US and the rest of Europe, has resulted in a Brown bounce. The Tories, without power to affect the crisis, are already beginning to look a lot less confident, and have lost some of their lead in the opinion polls. It looks as though this crisis will be more damaging, and I certainly hope so. “Two-Brains” Osbourne is suddenly looking a lot less clever, and the Tory Party’s claims to have reformed a lot less credible.

Nevertheless, the main lesson to be drawn from this is the need for democratisation and transparency. In the administration of government, in the financing of parties, in the taking of government policy, in our relations with other states, and in the control we must now assert over the financial institutions in whose interests the UK and much of the world have been run almost without challenge for the last thirty years by the elite nexus represented by Mandleson, Osbourne and their friends and international equivalents.


Trade Unions: Rubbish?

October 2, 2008

The European Trade Union Congress has issued this statement on the current crisis. The London Declaration comes from the ETUC summer school held on September 26 and 27. The document is a mix of strong and lilly-livered language. Attacking “Casino Capitalism”, the ETUC says that the current crisis must be a turning point, that the unfettered financial capitalism of the last 25 years has become unsustainable, and a threat to the real economy. The document rightly blames the greed and recklessness of senior executives at corporations for betting their future on high risk investments, and points to the costs to ordinary populations of the rescue packages across the world. “Never again can irrespnsibility by banks and hedge funds and the rest be allowed to come close to bankrupting nations.” All this is excellent stuff, especially as we can’t expect a social democratic formation to cut to the real heart of the matter, which is the very nature of the system itself.

What then of the recommendations the ETUC makes? After the opening, they are disappointing. More public influence in institutions that received public money – this is a far cry from nationalisation, or even a call for the public to become the dominant voice on the boards of the banks it has rescued. Influence is an extremely amorphous concept, and not a lot to ask for given the scale of the investment in these institutions. The ETUC also calls for European-level regulation, and help for affected workers, those threatened with eviction, pensioners, and entrepreneurs seeking investment capital, while also calling for public policy attention for income and wage inequalities, as well as government action to ensure that funds are available for investment in the real economy, for green jobs and sustainable development.

All this sounds good. But the average left-leaning person could have thought it up in about five minutes. Unlike the average left-leaning person, the ETUC represents millions of members, with thousands of workers, and vast resources. In short, this is a pathetic response for organisations that are supposed to be the first line of defence for workers. Why haven’t they got the facts and figures to back up what they say? Why do they not have more concrete proposals, costed and ready to go? It was clear that this crisis was coming, especially after the Northern Rock and other warning signs. What are the unions doing? A look at both the TUC and ICTU websites reveals very little beyond the London Declaration.

The bankruptcy of social democracy could not be clearer. This can be an historic turning point. But not without social democracy making clear demands to restore the role of the state in the strategic levels of the economy. Less talk about influence and ensuring capital is available. More marches and demands for higher taxes, nationalisation, and targeted public spending rather than giving blank cheques to bankers.

The God that Failed? Maybe Not.

September 26, 2008

Rowan Williams, the impressively bearded Archbishop of Canterbury, has once again demonstrated his flair for publicity and for alienating his own flock, by saying that the still more impressively bearded Karl Marx had it partly right about capitalism after all, in an article in the Spectator. In an often sharply-worded and perceptive article, Williams details how the trading of debt has been the motor of “astronomical financial gain” over the last number of years. But, even more than share prices, this wealth has been generated by a collectively sustained act of wilful self-delusion  – as he points out, the truth is that “almost unimaginable wealth has been generated by almost equally unimaginable levels of fiction, paper transactions with no concrete outcome beyond profit for traders”.

How has such a situation been allowed to come about? It is here that Williams turns to Marx – “Marx long ago observed the way in which unbridled capitalism became a kind of mythology, ascribing reality, power and agency to things that had no life in themselves”. In other words, especially since the fall of the Soviet Union, the belief in the power of the (ahem) “free” market has become unbridled, and this ideological commitment has both underpinned and justified the massive expansion of privitisation and debt that has lain at the heart of finance capitalism for the last decade and a half. US foreign policy under Bush has provided a clear example of this millenarian belief in the power of the market, but we should not forget that it could also be seen under Clinton (in attitudes to South Africa, Yugoslavia, and of course our own wee country) and the consistent attitude of New Labour and other European states, especially in eastern Europe. 

Williams’ article raises a number of important issues for the Left. In some senses we have been here before. In 1998, the growing understanding of globalisation and the collapse of the eastern Tiger economies 150 years after the publication of the Communist Manifesto led to much comment about the relevance of Marx’ critique of capitalism. And now we see the same thing. The question for the Left is how to ensure that a serious critique of the systemic instability of capitalism can emerge from the current crisis, and not simply wither on the vine as much of the critique of globalisation did in the 1990s. The recognition of the power of Marx’ analysis must be extended beyond rather brilliant but eccentric prelates. In order to achieve that, we must make the point again and again and again that this is not simply the result of an accident, or of bad choices, or of poor regulation. Rather, it is a result of the predatory nature of capitalism itself. A system based on exploitation will always seek ways around regulation, and seek to exploit the vulnerability of ordinary people in the face of powerful corporate and financial interests. What some historians have described as the “gentlemanly capitalism” personified in the City of London has once again shown itself to be purely piratical, just as it did in the imperialist madness that preceded the First World War.

The struggle for social justice is – more today than at any time since the 1930s and possibly ever – also an ideological struggle. We on the Left must take advantage of the opportunity afforded us by this crisis to promote our message clearly, in the language of today. The Republican Party in the US, in its initial rejection of the Paulson rescue plan, has posed the question in stark class terms – why should Wall Street be privileged over Main Street? Why rescue those at the very highest echelons of the elite at the expense of the ordinary citizen? This is a message that we on the Left can certainly get behind, and giving it our spin, turning it to our advantage is essential. In the battle to stop the Tories being elected in the UK, the Labour Party has a golden opportunity to introduce radical progressive measures such as are (remarkably) being discussed in the States, for example a government-enforced ban on foreclosures. A new language and a new vision for new circumstances should be offered by the Labour Party. Electoral interest points towards it, as do the instincts of many of its members. The only thing that can stop is the belief in the necessity of the market that has been driving New Labour. In its own struggle for survival, we can hope that it will be driven back towards the left. We must consistently point out the reality of free market ideology, of corporations and merchant bankers – leave us free to profiteer when times are good, but bail us out when our own stupidity and the contradictions of our system overwhelm us. Arguments about the ineffectiveness of the state are no longer sustainable. We must push forward our message of the state as an agent of progress. The welfare state is a minimum for socialists, and now we have a chance to reverse some of the damage done to it over three decades if we act boldly enough.

That is the task for the Left. To mobilise our resources, physical and intellectual, behind not only a critique of the faults of capitalism, but a vision of a different future. We may not get a better chance for decades.