Market Happiness

Even though the banks and the markets caused the financial crisis that has been running since 2008, what we hear over and over again in the media is that both must be kept, well, happy. There is no price too high to pay for market and bank happiness. George Osborne, the Chancellor in the UK coalition government, repeatedly justifies the necessity of his austerity programme by telling us he must keep the markets happy, otherwise they will, essentially, punish the government and the rest of us. For market happiness Osborne is willing for unemployment to rise, for 100,000 more children to fall into poverty, for wages to stagnate, for pensions to be cut, for university tuition fees to be raised substantially, for frontline police numbers to be reduced, for one in seven business on our high streets to be boarded up, for libraries to close, for legal aid to be slashed, for the welfare net to be radically reduced, for homelessness to increase, and on and on. Apparently, no price is too high to pay for market and banking happiness.

There are the ocassional voices of protest. Seumas Milne commenting on the strikes held around Britain on November 30, 2011 wrote:

[T]oday's strike and whatever action follows it isn't just about pensions. It's also about resisting a drive to make public service workers pay for a crisis they have no responsibility for – while the bloated incomes of those in the financial and corporate sector who actually caused the havoc scandalously continue to swell.

When real incomes are being forced down for the majority, as directors' pay has risen 49% and bank bonuses have topped £14bn, that's an aim most people have no problem identifying with. Across the entire workforce there's little disagreement about who's been "reckless" and "greedy" – and it isn't public service workers.

It is much the same in the US. Robert Johnson wrote in the New York Review of Books:

Many citizens are so disheartened that they do not believe government has the capacity to be responsive to their needs. Although our transportation systems, schools, and other infrastructure are in a sad state, these citizens have no faith that their tax dollars will be used to repair them. In short, while America is rapidly deteriorating, there is a widespread fear that Washington, D.C., is indifferent to its plight.

Many Americans see government as an insurance agency for rich and powerful people and corporations, who deploy lobbying dollars and campaign contributions to take care of their interests but not those of others. Faced with the choice of having their tax dollars spent for the benefit of elites or demanding that taxes be radically reduced, they see cutting taxes as the only rational course of action. [1]

Given the magnitude of the financial failures beginning in 2008 you would think governments would have to take some action to regulate the financial industry with the hope of preventing a repeat in the future. While politicians of all stripe had to elbow each other out of the way to get air time to declare the unacceptability of the banks’ and the markets’ behaviour, legislation in the US was questionable and in the UK almost nonexistent.

When President Obama signed into law the Financial Regulation Bill it was heralded by Reuters as the “most comprehensive financial regulatory overhaul since the Great Depression...” Others point out, however, that the bill did not go near far enough and will not prevent another similar crisis in the future. Time will tell.

In the UK, Project Merlin which was to reduce bank bonus, reveal bank salaries and increase bank lending to UK business, largely failed. The Telegraph called it a “PR trick” and even Vince Cable, the Business Secretary, said the project had failed in its main aim. And when policies were actually established to respond to the divide between the 99% and the 1%, it is often delayed or kicked into the long grass. Two examples:

Osborne in rhetorical flare promoted the "Learjet tax" saying, “The wealthiest should not escape the tax the ordinary holidaymaker has to pay.” The Learjet Tax would, if enacted, demand those flying in private jets pay the same travel taxes the rest of pay flying on commercial airlines. Unfortunately the government has delayed the tax saying that the jet companies need time to make the transition. But of more importance is the delay of nine years in implementing the Vickers Report on reforming the banking system. While some insisted the report failed Britain, others praised it. However, the government, while accepting the reforms, delayed any implementation for nine years.

Politicians have been called front men and women for the 1%. One article I read referred to them basically as entertainers whose job it is to keep us distracted as the wealthy get on with their lives. Of course, many politicians are part of the 1% themselves and it comes as no surprise they would protect the rich and create and nurture an environment for them to thrive. Twenty-one of the UK’s government cabinet are millionaires or multimillionaires. In the US, however, a real coup by the rich, led by the Koch brothers, has been to convince the middle class and the poor that their responsibility is to protect the wealthy. Thus we have the Tea Party protecting billionaire tax breaks while the middle class dwindles and the poor suffer.

David Cameron made it perfectly clear that his aim in last week’s EU summit in Brussels was to protect the UK financial industry. According to some in that industry he was less than successful, but his priorities were clear. Larry Elliott writing in The Guardian rarely pulls his bunches concerning the Square Mile. He wrote following the summit:

British governments for the past three decades have had an aversion to the idea of picking winners, with the one exception of the City of London. That "winner" proved to be the biggest loser of the lot, yet David Cameron decided that defending the interests of this tarnished special interest group should be Britain's priority at last week's summit.

In an earlier column he even suggested Cameron let “the City fend for itself (something it is perfectly capable of doing) and devoting some tender loving care to Britain's manufacturers.”

Cameron repeatedly said that protecting the City of London was in the national interest. While it is obvious the financial industry is important to the nation, just how important is up for debate. Aditya Chakrabortty, in an article entitled Britain is Ruled by the Banks, for the Banks, points out that in the areas of jobs and taxes, manufacturing contributes more to the British economy than banking. And even when the banks were making money like never before, the amount they paid in taxes was considerably less than that which the state paid to the banks to keep them open. One would think that somewhere someone would have suggested that annual bank bonuses be used to pay off the debt owed to the taxpayers for saving the banking industry. However, that is such a seemingly ridiculous idea, it is unimaginable that any politician would suggest such a programme. Reflecting on the relationship between the financial sector and politicians, Chakrabortty wrote:

In a poorer country, the cosiness of relations between bankers and politicians would be scrutinised by an official from the World Bank and disdainfully pronounced as pure cronyism. In Britain, we need to come up with a new word for this type of dysfunctional capitalism – where banks neither lend nor pay their way in taxes, yet retain a stranglehold on policy-making. We could try bankocracy: ruled by the banks, for the banks.

An iconic symbolic image demonstrating just how confident are the markets and the banks and how protected they are showed up on You Tube. During the first march of demonstrators along Wall Street, members of the 1% came out unto their balconies, poured themselves classes of wine, beer and Champaign,  and laughing at and mocking the marchers, held their glasses high. Remember, these are the people who caused the crisis. These are the people whose jobs were saved by taxpayers money. Their arrogance was breathtaking. At least demonstrators in the US could march along Wall Street, however. In the UK, demonstrators were stopped before they could even enter the London Stock Exchange. Paternoster Square was protected by the police and demonstrators had to settle in front of St. Paul’s Cathedral, thus turning media attention to the Church of England and not the financial industry. Paternoster Square, Broadgate and Canary Warf are all protected by court injunctions, the police and our elected officials. 100,000 more children sliding into poverty isn’t going to change that.

Copyright © 2011 Dale Rominger

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[1] Johnson, Robert. Obama: A New Beginning? The New York Review of Books, Bolume 58, Number 15, October 13, 2011, http://www.nybooks.com/articles/archives/2011/oct/13/obama-new-beginning.

Comments

[Kate Gray]

This is a great and awful read...interesting. I wonder what you now make of the possible takeover of Lloyds Banking Group by The Co-op Bank...which has largely been unaffected by much of the banking crisis due to how it acts with its customers money - ethical investments and all that. It would be the 7th largest high street bank if that takes place.