This week: the banks, the big corporations and the coronavirus
All in this together?
Bankers, CEOs and company directors emerged from the 2008 Global Financial Crisis (GFC) better off than before it. This was true in the US, the UK and Australia. They walked away unscathed from the financial catastrophe which they had created but all of them were a whole lot richer. They belonged to the 1% who then owned and controlled the private corporate state.
If you remember, they demanded that their politicians, federal treasuries and central banks nationalise their immense debts using public money. Overnight, they had become socialists.
And it came to pass in all three countries that private banks teetering on bankruptcy were nationalised on the grounds that they were “too big to fail”. It was argued that if they collapsed, the whole financial system would collapse.
When they realised that public money was protecting them from insolvency, financial ruin and possibly jail, they threw themselves into grabbing as much cash as possible for themselves. There would be no “trickle down” – except into their salaries and bonuses.
Every major financial crisis since the Wall Street Crash of 1929 has seen bankers and major investors profit while the overwhelming majority of the population suffer unemployment, poverty, homelessness, marriage break-up, suicide and the rest.
This is not my view. These are historical facts that can verified by reading accounts of capitalism’s repeated crises over the past 100 years.
Against the background of the COVID-19 catastrophe, another financial crisis is fomenting. Fearing an assault on their profiteering and immunity from prosecution, the much-hated 1% mentioned in the GFC of 2008 have inflated their own numbers to a supposed 10% in 2020. There is a twisted PR logic to the increased size of the target of super-rich oligarchs: in 2008 the public easily targeted the reviled 1% but in 2020 a “new narrative” was needed to focus on a broader number, so 10% was selected.
This was accompanied by an unscrupulous PR campaign claiming “we are all in this together”. It is so catchy that Rupert Murdoch has adopted the slogan in media platforms in the US, the UK and Australia. Fox News in New York even has a network slogan while President Trump has told Americans: “We are all in this together. We must put politics aside, stop the bipartisanship, and unify together as one nation and only family.”
In Australia, it is impossible to escape the mantra on TV, radio or in the print. But is it true?
Declare a truce or not?
If you believe that Donald Trump (Republican), Boris Johnson (Tory) and Scott Morrison (Conservative) have suddenly become public benefactors who want to unload lots of cash on the public in a display of unfettered generosity, then you will support them.
If you believe their philanthropic intention is to pay the unemployed their salaries while they stay at home, and give companies tax holidays and special funding to stay afloat, then you will support them.
If you think the economies of the US, the UK and Australia – battered by trade war, fires, floods, cyclones, tornadoes and the coronavirus pandemic – have the money to pay for all the aforementioned handouts, then you will support them.
However, the editors of America’s National Interest don’t think so. In an editorial published this week they say: “The US is broke. Before the coronavirus made its malign appearance, Washington was set to run trillion-dollar annual deficits this year, at least, as a result of the sharply contracting economy. And Congress is proposing to pass a $1 trillion [sic] ‘stimulus’ package on top.” A similar diagnosis could be given to the desperate state of the UK and Australian economies: they are broke too and the outlandish spending sprees, if they ever occur, will only lead to an inflationary nightmare and recession, or both.
Will history repeat itself? Will bankers, CEOs and the professional boardroom loungers be richer after the 2020 economic and pandemic catastrophe?
If you are a sane and rational person you will realise that “all that glitters is not gold” and you will refuse to be conned by the likes of Trumpo, Bojo and Scomo.
And just maybe you will agree with Melbourne writer Marlee Jane Ward, 37, who reacted scathingly to Scott Morrison’s inept handling of the COVID-19 pandemic saying: “If capitalism can’t last two weeks without completely falling apart, maybe it’s time to look for something a bit fucking better.”
As India’s foremost writer-activist Arundhati Roy wrote this week: “The richest, most powerful nations in the world have been hit hardest thus far. They’ve brought the engine of capitalism to a shuddering halt. Temporarily perhaps, but at last long enough for us to examine its parts, make an assessment and decide whether we want to help fix it, or look for a better engine.”
Chomsky’s dark vision
Noam Chomsky, the celebrated philosopher, linguist, political activist and social critic, has blamed the advent of neoliberalism for the global coronavirus pandemic.
In a lengthy interview, 91-year-old Chomsky said that “Big Pharma” was too busy making “body creams” for extra profits when it should have been allocating money and research on the imminent danger of pandemics. “It was known for a long time that pandemics are very likely … Labs around the world could be working right then on developing protection for potential coronavirus pandemics. Why didn’t the drug companies do it?
“We have handed over our fate to private tyrannies called corporations, which are unaccountable to the public, in this case, Big Pharma. And for them, making new body creams is more profitable than finding a vaccine that will protect people from total destruction. Vaccines could have been developed but the neoliberal plague has blocked that. We should bear in mind that highly authoritarian vicious states are quite compatible with neoliberalism.”
Referring to US President Donald Trump as a “sociopathic buffoon”, Chomsky said the world was racing towards the threat of nuclear war and the growing danger of global warming. He predicted an eventual “recovery” from the COVID-19 pandemic but warned of “no recovery” if nuclear war or the impact of global warming became a reality. “There won’t be any recovery (from them), it’s finished.”
Asked about the post-pandemic future, Chomsky said the world faced the installation of highly authoritarian brutal states or the radical reconstruction of society based on human need and not private profit.
World’s biggest cash splash
Congress has just passed a US$2 trillion Bill to rescue the US economy. The bailout Bill was passed on the voices in the Democrat-controlled House of Representatives and by 96-0 in the Republican-controlled Senate.
The US economy is now drowning in debt. Just add it up: billions of dollars spent on industry bailouts following the 2008 GFC (Global Financial Crisis) and regular dollops of QE (Quantitative Easing) which involved flooding the system with newly-printed paper money.
As Rolling Stone columnist Matt Taibbi wrote: “We’re about to find out that the American economy has been living off dying, dysfunctional, or hyper-leveraged markets for more than a decade.”
The statistic worrying most economists and commentators is the one that estimates 16% of American companies are “zombie companies” i.e. they don’t have enough revenue to even pay interest on their debt.
With many businesses closed by the coronavirus pandemic, floods, fires or tornados, Washington’s unprecedented cash splash of US$2 trillion won’t reach businesses or out-of-work Americans for at least a year. That means another nation-rescuing Bill is on the cards. After all, this is presidential election year and spending money means popularity.
Meanwhile in the UK Rishi Sunak, Britain’s sleek Chancellor of the Exchequer, delivered a “cash splash” Budget too. On 11 March Sunak announced that tax receipts as a share of GDP will rise to their highest level since 1969, borrowing will increase by AU$254 billion, debt will top AU$4 trillion for the first time and, by 2024-25, public spending will be 40.7% of GDP.
Faisal Islam, the BBC’s cautious economics editor, commented: “The priority was the immediate coronavirus challenge and the threat of a recession. Both engines – monetary and fiscal – are on full power.
“The [Tory] Government has enacted its central manifesto offer – rather spectacularly – to borrow a huge amount of money to fund public services. The numbers are eye-watering. They are historic. Rishi Sunak was not even 10 when we last had a Budget that pumped so much money into the economy. But much of the fine details of where this money will actually go – in terms of department, region and type of public service – is not settled. ‘How is all this paid for?’ is the question posed.”
Islam concluded: “This is a government with a lot on its plate. Driving all this through – with the coronavirus emergency, post-Brexit negotiations, preparing for a trading relationship with the European Union and running a significant deficit of near 3% – is not without risks. This is one of the most consequential Budgets in a generation.”
Scott Morrison starts spending too
Australia’s PM Scott Morrison made a faltering start in February. Firstly, he appeared to treat the menacing pandemic as a climate change “scare story”. But when Washington and London changed their tune, so did Morrison. He had the added pressure from Australia’s own scientists and doctors who drew wide public support when they criticised Morrison’s misguided inertia.
Morrison’s faithful batman, Josh Frydenberg, announced a “spend-at-any-cost” Budget aimed at rescuing capitalism and halting the coronavirus pandemic. Canberra’s armchair generals and admirals had their grubby fingers in the mix as well. They cynically weaponised the pandemic crisis and launched a propaganda campaign for greater war spending and pushed for US soldiers, airmen and navy personnel to establish bases on Australian soil and start war games against an unnamed northern neighbour (take your pick – China or Indonesia).
But behind the cover of intense propaganda, the Australian economy is broke. The share index and the Aussie dollar are both being propped up by interventions from the Reserve Bank of Australia (RBA), the Commonwealth Bank of Australia (CBA) and the superannuation funds. All told, they have spent billions of dollars to create the fantasy of “we’re doing well” and “we’re better off than lots of others”. In fact, the economy is plunging deeper into a quicksand of debt.
With minor, cavilling criticism, Labor has supported all of Morrison’s initiatives. Predictably, his popularity has increased in “opinion polls” which must have been taken at a Liberal Party fund-raising dinner sponsored by the US Embassy.
Quote from the past
“Banking was conceived in iniquity and was born in sin. The bankers own the Earth. Take it away from them, but leave them the power to create deposits, and with the flick of a pen they will create enough deposits to buy it back again. However, take it away from them, and all the fortunes like mine will disappear, and they ought to disappear, for this world would be a happier and better work to live in. But if you wish to remain slaves of the bankers and pay for the cost of your own slavery, let them continue to create deposits.”
- Sir Josiah Stamp, later Baron Stamp, Director of the Bank of England from 1928, chairman of the London, Midland and Scottish (LMS) railway, industrialist, economist, civil servant and banker. In 1935 he became a founder-member of the pro-Nazi Anglo-German Fellowship, he made visit to Nuremberg in 1936 to meet Adolf Hitler and the following year attended the Nazi Party Congress with the support of the then British Foreign Secretary, Lord Halifax. Aged 69, Stamp was killed by a direct hit on the air raid shelter at his home in Kent in 1941 but locals gossiped that he was blown up by British Military Intelligence because his pro-Nazi ravings had become an embarrassment to the war effort.
News item of the week
“In New York City, the epicentre of the COVID-19 outbreak in the US, prisoners from Rikers Island are being offered US$6 (AU$9) an hour to help dig mass graves.”
- John W Whitehead, American constitutional lawyer in an article for Mint Press titled ‘The Attack on Civil Liberties in the Age of COVID-19’
Headline of the Week
- Chichester Observer, main newspaper of the cathedral city in West Sussex, England