Tuesday, February 14, 2012

Do nations exist for capitalism or their citizens? [updated]

William Wall in his Guardian column provides an interesting way to think of the daily choice global policymakers are making between the Japanese and Swedish models for handling a bank solvency crisis.

Under the Japanese model, regardless of the damage it does to the real economy, losses on financial excesses are only recognized as quickly as banks can generate the earnings to absorb them.

Under the Swedish model, the real economy is saved as banks recognize today the losses on the financial excesses and subsequently rebuild their book capital through retention of future earnings.

In essence, this crisis is a failure of the EU states to show solidarity in the face of an onslaught from the financial markets. 
At first glance this seems to be a very simple fight. In one corner you have nation states, which have the wellbeing of their citizens as their raison d'être; in the other you have global capitalism as represented by the financial markets, which has the wealth of a tiny few as its raison d'être
But the nation state has, for a considerable time, identified itself with those same markets. States have agreed to see themselves as economies rather than societies. 
More recently we have been led to believe that the market alone can provide everything the citizen needs and much more efficiently than the structures that the citizens normally rely on and which they have, over generations, erected as protections against the revenge of the market.
This is the triumph of capitalism, that it has persuaded the world that capitalism is the world. 

Or at least that nation states should defend the meaningless bank book capital level regardless of the cost to their societies.

By choosing the Japanese model and preserving high bank book capital levels, nation states are inflicting the losses on the financial excesses on their societies.

By choosing the Swedish model and its low or negative bank book capital levels, nation states are preserving the well-being of their citizens and inflicting the losses on the financial excesses on an accounting construct.

Since the Wall Street rescues Main Street blueprint is a Swedish type model, your humble blogger clearly believes that it is better to inflict losses on an accounting construct and preserve the well-being of the citizens.]
It has led to the undoing of 200 years of struggle between ordinary people and the super-rich. 
Trade unions didn't appear overnight, they were a response to exploitation. Their defeat has led to the ubiquity of precarious, and now free, labour. Workers are not protected in their workplace by capitalists, they are protected by the laws won by struggle against the capitalist. A sweatshop in China is a direct assault not just on the rights of the Chinese worker but on those of workers in, for example, the UK. Socialist internationalism and solidarity were conceived as a way of defeating that ploy. 
Old people do not die in the streets not because charity has saved them but because 200 years of struggle has brought us the old age pension and public health. The privatisation of those services is a return to the 19th century. 
None of this public good would have been won if people had identified with the super-rich of 1812. Now that we have been brought to such an identification, we stand to lose them all over again. 
Now we see capitalism at its most triumphant. Greek police beat Greek people in order to impose the will of the banks and hedge funds. The EU member states, including Ireland, are the middleman, the quislings of capital. Rather than reach out a hand of solidarity, we say, "better them than us". As if the global markets will choose to pass on Ireland once Greece has been destroyed. 
Solidarity is not just compassion for one's fellow man; it is also materialist self-interest. One for all and all for one. We stand or fall together. There is strength in unity. 
Instead we have decided to sacrifice the Greek people to the market in the hope that our sacrifice will appease the gods of speculation. We condemn them to misery and poverty to keep Standard & Poor's off our backs....  
It seems to me now that Greece will withdraw from the euro and default on its debt. Who knows what will happen to it then, but it can hardly be much worse than what we want from them, and at least it will be something of their own choosing. 
The speculators will then take a little time to consider which of the other economies to bet on. Perhaps then the Irish government will regret its lack of solidarity. Whatever happens, our behaviour and that of our EU compatriots has been shameful.
The nation state that cares for its citizens pursues the Swedish model for dealing with a bank solvency crisis.  Admittedly, this solution is probably bad for banker bonuses, but sacrificing banker bonuses to appease the gods is preferable to sacrificing countries.

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