What's Behind The Global Finance Crisis?

international | anti-capitalism | feature

Tuesday September 30, 2008 20:54

by original by Kieran Allen - SWP

An Analysis of what is happening

War of Wealth (CC image from Flickr)

Kieran Allen has just written an extensive article on the current global financial crisis. Here is his opening sentences on it.

Most people are amazed to witness a new Wall St crash, when the spectacle of the 1929 crash was supposed to have vanished forever.

For the past thirty years mainstream economists claimed that the market worked perfectly provided there was no state interference or strong trade unions. ‘You cannot buck the market’ was repeated like a mantra against anyone who dared to ask for higher wages, better environmental controls or a more developed welfare state. ‘Market forces’ were seen as wise spirits who knew best about how to run an economy. No one knew who or what they were but they appeared to work anonymously behind the scenes to make everything right. In almost every country, people were told to leave matters to these ‘market forces’ and not to seek too much regulation. In reality, these ‘market forces’ were gigantic financial houses which could move money around the globe at will.

Today this mythology has been shattered.

Here is the introductory text of an article written by Kieran Allen of the SWP which analysis the dramatic events currently taking place in the global financial markets. And in it Allen provides some context to what it means for Ireland too. Given that Ireland officially entered recession last week, it is timely in terms of what lies ahead in our near term futures.

The US government is being asked to provide a $700 billion blank cheque to bail out the finance houses. This follows a series of other bailouts in recent weeks – amounting to another $400 billion. To put those figures into perspective, simply compare how this money could be used to solve world hunger. Each night 850 million people go to bed hungry. If the $700 billion blank cheque had gone to them rather than the finance houses, this dire level of hunger would be wiped out. If the combined package of more than a trillion dollars had been used, the 2 billion of the world’s 6 billion people could be lifted out of chronic poverty. In brief, the trillion which is being handed out to the speculators could have wiped out malnutrition and extreme poverty in the world for ever.

The power to use the latest $700 blank cheque will be handed over to Henry Paulson, the US Treasury Secretary. Paulson is the former CEO of Goldman Sachs, whose salary package in 2005 came to $36 million. As Treasury Secretary he has surrounded himself with former Goldman Sachs executives and will use US taxpayers’ money to save his former company which was a big player in the world of speculation. Meanwhile the 10,000 US citizens who face foreclosure each day will watch as the banks - which caused the speculation are saved – but they lose their house! Instead of a free market, we are witnessing the "socialisation of losses and the privatisation of profit".

The same will happen in Ireland quite shortly. Up to recently, an unholy alliance of the banks, Fianna Fail and the construction industry hyped up a property bubble. It is now estimated that Irish banks have about €7 billion of bad debt on their books. If they are faced with bankruptcy, these banks will look for the same type of handout that was given to AIB in 1985. After the AIB got their fingers burnt in speculation in the London insurance market, they demanded ‘corporate welfare’ from the Irish state. Legislation was quickly rushed through the Dail to give the bank over €127 million. Yet, later, economists from Goodbody Stockbrokers – the speculative arm of AIB - would lecture the population on the need for ‘restraint’ on wages and social welfare, without showing the slightest sign of embarrassment.....

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