Posts Tagged ‘United Kingdom’

John Lanchester on the financial crisis

July 7, 2018

John Lanchester

The financial crash of 2008 was worldwide, and the failure of governments to address the causes of the crash also was worldwide.  Because the same thing happened in different countries under different leaders, the reasons for failure are systemic, not just the personal failings of particular leaders.  The solution must be systemic.  A mere change in leaders is not enough.

John Lanchester, writing in the London Review of Books, wrote an excellent article about the crash and its aftermath.  I hoped to call attention to it in my previous post, but, as of this writing, there has been only one click on the link.

I know people are busy and have many claims on their attention.  If you don’t want to bother reading the full LRB article, here are some highlights.  If you’re an American, bear in mind that, even though so much of what he wrote applies to the USA,  his focus is on British policy.

The immediate economic consequence was the bailout of the banks.  I’m not sure if it’s philosophically possible for an action to be both necessary and a disaster, but that in essence is what the bailouts were. 

They were necessary, I thought at the time and still think, because this really was a moment of existential crisis for the financial system, and we don’t know what the consequences would have been for our societies if everything had imploded.  But they turned into a disaster we are still living through.

The first and probably most consequential result of the bailouts was that governments across the developed world decided for political reasons that the only way to restore order to their finances was to resort to austerity measures.  The financial crisis led to a contraction of credit, which in turn led to economic shrinkage, which in turn led to declining tax receipts for governments, which were suddenly looking at sharply increasing annual deficits and dramatically increasing levels of overall government debt.

So now we had austerity, which meant that life got harder for a lot of people, but – this is where the negative consequences of the bailout start to be really apparent – life did not get harder for banks and for the financial system. In the popular imagination, the people who caused the crisis got away with it scot-free, and, as what scientists call a first-order approximation, that’s about right.

In addition, there were no successful prosecutions of anyone at the higher levels of the financial system.  Contrast that with the savings and loan scandal of the 1980s, basically a gigantic bust of the US equivalent of mortgage companies, in which 1100 executives were prosecuted.  What had changed since then was the increasing hegemony of finance in the political system, which brought the ability quite simply to rewrite the rules of what is and isn’t legal.

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Ten years after the financial crisis

July 6, 2018

Canary Wharf financial district in London. Source: Quartz.

Ten years after the financial crisis of 2008, the U.S. government has failed to do anything necessary to avoid a new crisis.   I just read an article in the London Review of Books that says that the U.K. government’s policies are just as bad.

Like the U.S.-based banks, the British banks engaged in financial engineering that was supposed to create high profit on completely safe investments—which, as experience proved, couldn’t be done.

The British government had to bail out the banking system in order to save the economy.  There probably was no alternative to that.  But it then proceeded to put things back just the way they were before.

John Lanchester, the LRB writer, said there was no attempt at “ring fencing”—what we Americans call firewalls—to split up investment banks, which speculated on the financial markets, and retail banks, which granted small business loans, home mortgages and other services to the real economy.

The UK, like the US, engaged in “quantitative easing”—injection of money into the banking system through buying bonds.  The basic idea was that if banks and corporations had more money to invest, they would invest more, and the economy would grow.

This didn’t happen.  Instead banks and corporations bid up the prices of existing financial assets and real estate, which added to the wealth of the already rich.

Ordinary Britons faced austerity.  Their government cut back on the social safety net and public services.  British life expectancy, like American life expectancy, has actually fallen.

The British, like us Americans, had 10 years to fix their financial system.  Like us, they wasted the opportunity.  Now it may be too late to avert the next crash—even if the UK and US governments wanted to act.

LINK

After the Fall: Ten Years After the Crash by John Lanchester for the London Review of Books.  Well worth reading in detail.  Hat tip to Steve B.

Brexit: the revolt of the losers

June 28, 2016

The dominant neoliberal economy sorts people into winners and losers.  Brexit is a revolt of the losers.

The winners are the credentialed professionals, the cosmopolitan, the affluent.  The losers are the uncredentialed, the provincial, the working class.

Losers are revolting across the Western world, from the USA to Poland, and their revolt mostly takes the form of nationalism.

The reason the revolt takes the form of nationalism is that the world’s most important international institutions—the World Bank, the International Monetary Fund, and the European Central Bank—are under the control of a global financial elite that does not represent their interests.

17149339-Abstract-word-cloud-for-Neoliberalism-with-related-tags-and-terms-Stock-PhotoI don’t fully understand the decision-making process in the European Union, but looking at its web site, my impression is that public debate is not a part of it.

The only vehicles for exercising democratic control, at the present moment in history, is through democratic national governments.  I am in favor of international cooperation, and I don’t know how I would have voted on Brexit if I had been British, but I certainly can understand Britons who don’t want to be at the mercy of foreign bureaucrats and the London governmental, banking and intellectual elite.

Democratic nationalism is the only form that democracy can take until there is a radical restructuring of international institutions.  Without a strong progressive democratic movement, the only alternative to neo-liberal globalization is right-wing anti-democratic populism as represented by Donald Trump, the United Kingdom Independence Party, Marine le Pen’s National Front in France, Greece’s Golden Dawn and others.

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The United Kingdom is still united

September 18, 2014

The Scots voted against independence by a ratio of roughly 55 to 45 percent.

My old editor, Bill O’Brien, used to tell me that a vote margin of more than 10 percentage points is a landslide.

Click on Scottish independence for coverage of the referendum by The Guardian.

Scotland votes on independence: Links 7/18/14

September 18, 2014

_70049016_royal_mile_ivonSomebody once pointed out that the United Kingdom is not a nation, in the way that France, Germany and Italy are unified nations, but a union of three nations (England, Wales and Scotland) and a colony (formerly Ireland, now Northern Ireland).

Today the people of Scotland will vote on a referendum on becoming an independent nation.  If they vote “yes,” Scotland will become an independent nation.

Pro-independence Scots object to the right-wing policies of the UK government.   It is even more interlocked with corrupt City of London financiers than Washington is with Wall Street, and deindustrialization and financialization have gone even further than in the USA.

Scots tend to be pro-labor and supporters of the National Health Service and the welfare state.   They oppose London’s policies of austerity and privatization, and they would like to get control of North Sea oil.  But as a smaller nation, Scots would be a weaker entity in a world of superpower nations and giant corporations.   The rump United Kingdom would also be weaker.

British political leaders have promised Scotland greater autonomy – maximum devolution of authority, or “devo-max” – if they stay in the United Kingdom.  If that happened Wales and Northern Ireland would want greater autonomy, too.  England itself might demand home rule.

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British exceptionalism: royalty and divine right

March 13, 2014

The United States was the first country of which I know that is organized on the basis of a social contract.  All political and legal authority stems from the U.S. Constitution, which was ordained and established by “we the people.”

The legal basis of authority in the United Kingdom are different.   Legal authority stems from the monarchy, based on the divine right of kings, and the powers that the monarch over the years has ceded to Parliament.  The UK has no written Constitution and no Bill of Rights, only royal charters and grants of privileges.

American patriotism is defined as the obligation to uphold, protect and defend the Constitution of the United States against all enemies, foreign and domestic.  British patriotism is true allegiance to Her Majesty Queen Elizabeth, her heirs and successors, according to law.

Does this matter?

I recently happened to come across an odd but interesting book, THE ENCHANTED GLASS: Britain and Its Monarchy by Tom Nairn, which says that it does.  Nairn argues that the British monarchy is not a mere anachronism, but the core of what gives Great Britain its particular social structure and its identity as a nation.

In the first part of the book, Nairn documented the intense interest and love the British people, especially working people and the lower middle class, have for the British royal family.  It is not quite like the reverence the Japanese have for their emperor or the Tibetans for their Dalai Lama, but it is more than mere celebrity-worship.  To the British, the royal family are simultaneously superior beings on a higher plane than they are, and also “just like us.”

What harm does this do?  As far as Nairn is concerned, a lot.  It creates a habit of deference to authority instead of the suspicion of unchecked power appropriate to a free people.  And it creates a habit of deferring to the upper classes, of regarding their manners and their speech patterns as the standards to be followed.

Nairn pointed out that the royal family was not always worshiped as it is now.  In the 17th century, the British be-headed King Charles I and replaced him with a short-lived republic. Later, in what was called the Glorious Revolution, they drove out King James II and invited the Dutch William of Orange to rule as a partner with Queen Mary.

The Glorious Revolution, according to Nairn, put in power a ruling elite that continues to these day — an alliance of landowners, bankers and merchants who have a talent for imperial rule, but not for managing an industrial economy (which didn’t exist in 1688).

The cult of the royal family was consciously built up by politicians and aristocrats as a bulwark  against popular sovereignty.  The British people came to not only revere the royal family, but to regard their upper-class lifestyle, manners and accents as marks of superiority.

It is not happenstance, Nairn said, that Britain was one of the last western European nations to adopt universal suffrage.  On the other hand, he wrote, the British monarchy is perfectly compatible with the rise of the Labor Party.  The existence of a party that represents the working class does not threaten the British class system.

If anything, the system was threatened much more by Margaret Thatcher’s Conservatives, who reduced everything to questions of money and gave the ruling elite a rationale for abandoning any sense of social responsibility.

As I read the book, I thought of how the British system as described by Nairn facilitates abuses of power — growing inequality, an out-of control financial elite hiding behind government, an out-of-control surveillance state hiding behind secrecy.  But then I thought about how our American system, based on a very different history and theory of government, is just as bad or maybe worse.   So I’m not sure to what degree Nairn’s claims of British exceptionalism are true.

We Americans, with our written constitution, our separation of powers and our creed that “all men are created equal,” ought to be able to better resist authoritarian government and the rule of a hereditary aristocracy of wealth.   We who believe in liberty and democracy at least have a standard to which we can appeal.  Whether this will mean anything in  practice remains to be seen.

An important positive aspect of allegiance to the royal family is that it is a form of unity not based on race or ethnicity.  The United Kingdom came into existence before the rise of nationalism based on common ancestry and language.

The royal family was the focus of loyalty for three nations, England, Scotland and Wales, and the ruling class of a colony, Ireland.  Later the royals became the focal point of the British Empire which, at its height, encompassed one quarter of humanity, from India to Nigeria, the Falklands and the Yukon.   Even today loyalty to the crown binds together a diverse people — which is a good thing, not a bad thing.

Without loyalty to their 16th century monarchy, the British would have no basis of unity or identity, just as we Americans would have no basis of unity or identity without our loyalty to our 18th century Constitution.   It is possible for nations to reinvent themselves.  The Germans did after World War Two.  But I am unable to imagine what new basis there could be for either British or American nationality.

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The Enchanted Mirror was first published in 1989, with new editions in 1994 and 2011.

Click on A Republican Monarchy? England and revolution for Nairn’s foreward to the 2011 edition.