The other day I happened to hear an interview on the BBC with a US investor who had some pretty awful things to say about the UK economy, and why he wouldn’t invest a red cent in this country.
To paraphrase, ‘you don’t manufacture anything, your banks, from which you make most of your wealth, are bankrupt, and all your North Sea Oil has gone, so what do you have to offer an investor?’
The BBC interviewer, in a futile attempt to head him off at the pass, accused him of creating a panic to which he replied, ‘I don’t have any investments in the UK so I have nothing to gain’, in other words it’s not his problem that the UK economy is broke.
He didn’t mention the fact that around 70% of Britain’s GDP is consumer spending, but of course it only exists because of a financial sector shoveling out loans as fast as it could print the money. So in effect, a good chunk of consumer spending is actually part of the financial sector’s income, take that away and it collapses and that is exactly what has happened.
It’s the Worm Ouroboros, where the financial sector, by siphoning off vast chunks of capital using often illegal, ‘financial instruments’ of one kind or another to hide the theft with, has chowed the institutions it used to commit the grand theft with in the first place!
But as Michel Chossudovsky says in his piece ‘Obama Inauguration: Slide on Wall Street. Where have all the Creditors Gone?’. Yes, where has the dosh gone?’ And although Chossudovsky is describing US banks and financial institutions, an identical question has to be asked of UK banks (which in any case, are joined at the hip to the US).
“Over the years, the financial establishment has set up private hedge funds invariably registered in the name of wealthy individuals. Large amounts of wealth have been transferred from the large financial institutions to these privately owned hedge funds, which largely escape government regulation.
“Why are the banks indebted? To whom? Are they the victims or the recipients? Are they the debtors or the creditors?
“America’s largest banks have, over the years, sifted off part of their surplus profits to various proxy financial outfits, hedge funds, accounts registered in tropical offshore banking havens, etc.
“While these billion dollar transfers are conducted electronically from one financial entity to another, the identity of the creditors is never mentioned. Who is collecting these multibillion debts which are in large part the consequence of financial manipulation?”
It’s not an exaggeration to describe British capitalism as totally parasitic in that the bulk of its ill-gotten gains are based not on the production of real wealth but on financial speculation and loans, essentially because the City of London not only by virtue of its history that has made it the centre of banking, investment and global trade, but because through these ancient and ‘venerable’ institutions, it has controlled the circuit of capital (along with its US ‘allies’, though methinks the ‘special relationship’ days are numbered).
British capitalism has degenerated into that of a ‘middleman’, creaming profits off the global circuit of capital without contributing anything to real wealth creation and once the inevitable speculative bubble burst, as per usual, it’s the working class that pays the bill.
But this is unlike any previous crisis of capital in that having exported virtually all of our manufacturing to China and other parts East, once the income from speculation in shares and currencies, interest on credit cards and mortgages dried up, the UK economy is revealed as essentially a hollow shell, bereft of substance. Banks lent consumers the money to purchase ‘cheap’ goods and as long as speculative profits flowed into the banks, all was okay, for the banks. With an average family debt of around £60,000, for the borrowers it’s a very different story.
The state, in its ‘wisdom’ has, like its US counterpart decided to bail out these bankrupt institutions by creating yet more debts, only made possible by printing even more (devalued) money, with the bill being sent to the British taxpayer. The proof of this is the dramatic slide in the pound. So even if the media and the state want to hide the reality of a bankrupt British capitalism from its citizens, those in ‘the know’ are pulling their investments from the UK.
And short of abolishing capitalism, there is not a damn thing the British state can do about it. Capital flows to wherever the returns are the highest. Would nationalizing the banks reverse the situation? Only if the government decides to become the primary lender, that is to say, uses its collateral and monopoly on printing money to guarantee loans, not to banks but to the consumer. It could do this simply by declaring the major banks bankrupt and taking over their physical and financial assets in lieu of payment and reconstituting them as ‘peoples banks’. Interest rates, who gets loans and so forth would then be geared toward assisting those hardest hit by the economic meltdown, working people.
Dream on! To do this it would have to admit that ‘free market capitalism’ is a complete and utter failure and as the state’s primary function is to defend the interests of private Capital, the chances of this happening are next to nil. For this is not merely about defending the interests of the capitalist class but about maintaining the fiction that there is no alternative to capitalism. This is why it describes nationalization of the banks as a ‘temporary measure’, that as soon as they are solvent once more, the assets will be returned to the shareholders.
Of course none of this addresses the fact that ‘UK Inc.’ doesn’t produce anything of worth to anyone aside that is from weapons. Having deindustrialized in the pursuit of maintaining profits, it’s tall a order to reindustrialize and in any case, where’s the profit?
If on the other hand, the state became the primary investor into for example, sustainable technologies, utilizing our valuable intellectual capital before it too, vanishes (dies, retires, emigrates), then we could actually set a benchmark for the transformation of the economy into one that not only serves our citizens but also the entire planet. Hey, but don’t they call that socialism?