The Bank of England has shelled out £375 billion in ‘quantitative easing’ since the 2008 crash. It has, quite literally, created electronic money out of nowhere and used it to buy up financial assets held by the banks. The idea has been to pump ‘liquidity’ – lendable money – into the economy. But the financial system is loaded with debt, austerity has deflated demand and the real economy is stagnant. Instead of lending, the banks have used the new government money to pay down debt and fund a new round of speculation.
Jeremy Corbyn, shadow chancellor John McDonnell and others are proposing an alternative approach: ‘people’s quantitative easing’. Rather than using public money to re-finance casino banks, the idea is for the government to create money for direct investment in jobs, homes and public services. The objections being raised to this have nothing to do with economics. People’s QE is eminently sensible and do-able. The problem is political: it poses a clear and present danger to the wealth and power of the 1 per cent.
Let’s have a go at unpicking some of the complexities.
A Greek Lesson
The Greek economic crisis is no longer headline news. It should be. The destruction by European finance-capital of the Syriza government in the first six months of last year – a triumph of debt over democracy, of profit over people – has plunged the country into an economic death-spiral.
Unemployment stands at one in four. Among the young, it is one in two. Wages have fallen by about a third. So has employment in education, health and other public services. Overall, the economy has contracted by about 25 per cent since the 2008 crash. As a direct consequence, the Greek debt burden has increased from about 130 per cent of GDP to about 180 per cent. Deflation is choking off revenue flows and reducing the country’s ability to pay its way, forcing it to take out new loans to roll over old debts. Greece is trapped in an austerity-induced depression from which escape seems ever more distant.
The raw statistics represent untold human suffering. Yet the Greek economic crisis – unlike the Greek refugee crisis – has dropped from view. The reason is simple: it is the elite that decides what counts as a ‘crisis’, not the poor. When the Syriza government was challenging the wealth of the 1 per cent, it was a ‘crisis’. Not any more: democracy has been trampled, the rule of the bankers restored, and the rich are again sucking the lifeblood out of the Greek people to sustain their parasitic existence.
Class and Power
And here we approach the kernel of the economic crisis that confronts humanity in the early 21st century. Economics is not neutral. It is inseparable from questions of class and power. We live in a class society ruled by the 1 per cent. The banks and the corporations are run by a small class of the super-rich. In the end, the reason banks are bailed out, public services privatised and the poor screwed is very simple: it makes the rich richer.
All the bad things – monopoly prices, zero-hours contracts, Wonga-type loan sharks, the bedroom tax, the refugee children teargassed by riot police, the hospitals sold to profiteers, unaffordable rents, incarcerated asylum-seekers, student fees, the bullying supervisor, the tears in the toilet, the fear, the stress, the despair – all of it is happening to make the rich richer.
The class interest of the 1 per cent forms the hard wiring of the political response to the crisis. A pathological form of neoliberal capitalism based on debt has imploded, and it is the greed of the rich that drives every attempt to shore it up. These efforts are contradictory and self-defeating. But they cannot contemplate the only rational alternative: public ownership of banks and money, and the dispossession of the global financial elite.
The lesson of Greece is that half-measures will not do. Either we end the rule of the 1 per cent and the corporations or they will crush us. To understand why, we have to grasp the inner logic of early 21st-century capitalism. And in this respect, much of the left is woefully behind the curve.
One part of the left is trapped in a 1970s sectarian time-warp. I have heard people argue that finance does not really matter – it is just ‘froth’ on the surface – and that what is happening in production remains decisive. These are usually the people who also argue that exploitation is always rooted in the workplace, and that ‘real’ class struggle must always be union-based.
On the other hand, there are people on the soft left who kowtow to bogus Tory economic arguments because they feel under pressure from New Labour spivs and the Daily Mail. The result is a half-baked commitment to anti-austerity economics without the understanding, policies, and boldness to give us even a fighting chance of avoiding a Syriza-style car crash.
The challenge posed by the economic crisis does not boil down to simply putting right ‘ideological’ distortions, correcting ‘imbalances’ and injecting some ‘demand’ into the economy. The challenge is nothing less than this: to stop the current process of capital accumulation in its tracks; to begin the dismantling of the bank-run, debt-based, hyper-exploitative system of neoliberal capitalism that has us in its coils; and thus to begin confiscating and redistributing the wealth of the speculators and oligarchs. Here’s why it is that serious.
The Rise of the Corporations
We haven’t tumbled into a world of growing corporate power and social inequality by accident. We’ve arrived here because the system was remodelled in the great crisis of the 1970s and 1980s. The result is best described as ‘global financialised monopoly-capitalism’. This is a mouthful, but it captures what has happened.
On the one hand, we have the rise of the corporations to the point where they burst the national shell and, operating globally, are able to dictate terms to nation states. Take the example of Walmart. By 2014, it had annual revenues approaching half a trillion dollars; had it been a country, it would have ranked as 25th largest in the world, ahead of 157 smaller countries.
Among the other giants in the 2014 top 25 were oil majors such as Exxon Mobil and Chevron, banks such as Bank of America and JP Morgan Chase, motor manufacturers Ford and GM, electronics firms General Electric and IBM, and the private health conglomerate UnitedHealth Group. All these had annual revenues greater than those of, for example, Iraq (about $80 billion). These corporate giants manage the market, create the demand and set the price. Their power in relation to workers, consumers, and nation states is at an unprecedented level. The result has been a massive shift of surplus – thanks to reduced wages, rip-off prices and soaring profits – in favour of capital.
The system has therefore faced a widening ‘scissors’ crisis, with ‘over-accumulation’ by capital on one side and ‘under-consumption’ by labour on the other. In other words, the corporations are awash with profit-seeking capital, while union-busting, rising unemployment, the squeeze on wages, and falling public and welfare spending have drained the economy of demand. This has strengthened the inherent tendency of big capital to be risk-averse. Faced with a choice between building a new global-scale production facility – a risky long-term investment – and fast profits in the money markets, the industrial corporations have turned to financial speculation.
So financialisation is not just to do with banks. The whole capitalist system has become a debt junkie, since debt offers a ready solution to the twin problems of over-accumulation.