Join the Socialist Party Join us today!

Printable version Printable version

Facebook   Twitter

Link to this page:

From The Socialist newspaper, 2 October 2008

Profit system failing

Market madness!

Defend workers' living standards

The world economy, already in turmoil from the credit crunch, was swept further into an abyss by the thunderbolt news that the US congress had rejected a 'blank cheque' $700 billion bailout of failing banks. US government leaders and treasury chiefs had dramatically warned of dire consequences if the package was not passed, so the congress vote was followed by US stocks going into freefall, with shock reverberations worldwide.

Judy Beishon, editor, The Socialist

The capitalist economic gurus of the world reeled in astonishment and were unable to predict what it would mean and what would come next. "Panic grips world's markets" headlined the Guardian; "World of pain" was on the front of the Mirror, "Sell! Sell! Sell!" screamed the Independent and "Blackest Monday" was the verdict of the Sun.

Banks are now viewed universally as unsafe and the entire global economy is toboganning towards recession. Jeremy Warner, writing in the Independent, quoted the old saying: "It's always darkest just before the dawn", but then gave a warning by quoting a perversion of the saying: "It is always darkest before it is completely black".

The US congress members who rejected the package are in the main the ones who face difficulties being re-elected. Fearful of their own prospects, they were forced to reflect the outrage of ordinary American people at having their taxes handed to the greedy 'Fraud Street' fat cats - this was a major revolt of 'Main Street' against Wall Street.

The Wall Street 'bank robbers' have enriched themselves many times over at the expense of working class and middle class people. Yet they now expect those same people, who are struggling in many cases to buy food and keep a roof over their head, to keep them living in luxury and to rescue the economy from the consequences of their excesses. There is widespread abhorrence and aversion to wealthy wheeler-dealer financiers and their instruments: hedge funds, private equity, futures markets and so on.

The emergency rescue plan concocted by Treasury secretary Hank Paulson and backed by George Bush, was for the $700 billion to be used to buy 'troubled assets' from anyone at any price. If eventually implemented in some form, it will mean American working people funding the largest corporate bailout in American history, with the money being dished out by the least trusted administration in US history to benefit the richest in society.

George Bush's remnants of authority have now completely vanished as he has proved obviously impotent and incompetent in front of the financial hurricane. Previously damaged by his horrifying war on Iraq, the current economic turmoil is in many ways even more terrifying to ordinary people in the US and worldwide.

TO PUSH the huge $700 billion bailout package through the US congress, its promoters argued that the state would not end up losing the money; it would merely be investing it in sorting out the financial system, with returns gained at a later stage. But this was far from convincing.

The American people could foresee an escalating state debt that would lead to further cuts in welfare and services, at the same time as facing growing unemployment and cuts in living standards as a result of the recession.

A few concessions were made in an attempt to make the package more palatable. These included a staggered release of the money, the setting up of an 'oversight board', and placing restrictions on executive pay in banks being assisted. But these crumbs were not enough to win over the rebel congress members.

Ironically, at present, it is not the Socialist that is at the forefront of implanting the word socialism in people's minds; inadvertently it is right-wing politicians who are raising the spectre of socialism in clumsy attempts to ward people away from it.

For instance Texas congressman Jeb Hensarling condemned the Paulson rescue plan as "the road to socialism". Financial Times commentator Chrystia Freeland pointed out that: "Socialism is probably stretching it", but noted that it is part of "the end of a long era of US laisser-faire capitalism and the beginning of a period of government intervention and reregulation".

The failure of the Paulson package does not reverse that trend. In the weeks before the congress rejected it, billions of dollars had already been committed to failed financial institutions, ending 25 years of bowing down to free markets and reduced government intervention and regulation.

As stock markets crashed downwards in response to the congress vote, US government chiefs had no other choice than to start cobbling together a new package of public money to try to stave off economic meltdown.

On the same day as the shock rejection in the US congress, banks were being bailed out in seven countries of the world. In Europe, the financial institution Fortis was given 8.8 billion by the Belgian, Dutch and Luxembourg governments, action described as 'partial nationalisation' by the Financial Times.

This is the largest bailout yet of a European financial institution in the current turmoil. Fortis is Belgium's biggest private sector employer, it handles the bank accounts of half the population and has assets that are several times the size of Belgium's gross domestic product.

In the UK, the nationalisation of Northern Rock bank has been followed by nationalisation of Bradford & Bingley bank (B&B), with the government taking on its 42 billion worth of toxic mortgages. Outrageously and almost unbelievably, the government has immediately 'sold' B&B's 21 billion worth of savers' deposits, 197 branches and 141 agency outlets, to Spanish company Santander, that has paid just 612 million to exploit these assets.

The 21 billion of deposits handed over to Santander consists of around 3 billion cash in B&B's accounts that it had not loaned out, plus around 18 billion of British taxpayers' money in the form of loans and guarantees - money that may never come back. The nationalisations of Northern Rock and B&B have given every British taxpayer an extra burden equivalent to a 5,500 debt.

The global crisis of the major banks has led top proponents of deregulation to completely change their tune. Many are now saying that voluntary regulation by private financial institutions does not work and so state regulation is necessary. Even the managing director of the International Monetary Fund has called for greater regulation of financial institutions and markets, a considerable departure from the 'liberalisation' enforcement carried out by the IMF for a long period of time.

Right wing French president Nicolas Sarkozy has called for a world summit to rebuild "regulated capitalism" and has condemned the "law of the jungle", while German finance minister, Peer Steinbruck, said: "We must civilise financial markets".

Blaming each other

It is true that deregulation has a lot to answer for. At the Tory party conference, shadow chancellor George Osborne berated Gordon Brown for presiding over an economy based on debt, saying it is a credit financed variant of "casino capitalism". But guilty as Brown clearly is, the Tories are equally blameworthy; the high debt levels of today go back to the 1980s era of Tory prime minister Margaret Thatcher and her deregulation of the finance markets along with Reagan and Clinton in the US.

In the UK, past encouragement of 'friendly' mutually owned building societies to demutualise, becoming aggressive banks driving for shareholder profit, has played a large part in the downfall of companies like Northern Rock and Bradford & Bingley.

But the calls for regulation are like asking the bank robbers' gangs to keep a check on the bank robbers. What is urgently needed is popular control of the major banks and finance houses, not 'oversight' by unelected quangos and elected capitalist politicians, whose allegiance is to big business. The books of major US banks have been opened up to the US congress, what about opening them up to all American people?

The same goes for Britain; let there be trade union and mass scrutiny of the books of banks like B&B, and the decisions be taken out of the hands of capitalist politicians, so that bank workers' and other workers' jobs can be saved and mortgage holders threatened with repossession can keep their homes.

If the trade union leaders were doing their job properly, they would spearhead the setting up of popular committees to examine the real state of affairs in collapsing companies, and also the taking of whatever action is necessary to safeguard workers' interests. The multinational corporations that are forcing us to pay ever higher energy and food prices should also be subjected to mass scrutiny through the creation of popular committees - if the trade union leaders do not act to organise such bodies, then others will have to step in to do so.

Major companies that increase the price of basic necessities and/or sack their employees should be immediately taken into full public ownership, with working class participation in controlling and managing them so that their anti-working class policies can be reversed. Compensation to shareholders should only be paid on the basis of proven need.

Such measures would form part of a transformation to a completely different way of organising society - that of genuine socialism. Capitalism is openly proving that it is a system with inbuilt crises. Whether it is deregulated or regulated, booms and slumps are inevitable. As well as the steps mentioned above, many others would be necessary, including working class control over the import and export of capital.

Socialism would not only end economic cycles of boom and slump for ever, but would also open the door to a rapid elimination of poverty, and to decent living standards for everyone.

Why not click here to join the Socialist Party, or click here to donate to the Socialist Party.

In The Socialist 2 October 2008:

Socialist Party editorial

Market madness!

Credit crunch

Bradford & Bingley: We need real nationalisation

The bishop and the 'bank robbers'

Russia: economic crisis looms

What is short-selling and will the ban have any effect?

Short-sellers back Tories

Another nail in New Labour's coffin

Socialist Students

Student debt soaring

Lots of new recruits for Socialist Students

Global Warming

Climate change calamities: Socialist planning needed

Cuts and privatisation threaten new floods

Socialist Party workplace news

Local government pay dispute in Scotland: solid support for strike

Unison goes to arbitration - a strategy or surrender?

Union calls ballot over health pay

Unions must fight to defend Ford jobs

Lincoln - fight council cuts plan

Workplace news in brief

Socialist Party campaigns

Jean Charles de Menezes


Conditions in China

Socialist Party review

Liberty by Glyn Maxwell at Shakespeare's Globe


Home   |   The Socialist 2 October 2008   |   Join the Socialist Party

Subscribe   |   Donate  

Related links:

Profit system:

triangleHistoric demonstration in Barcelona in support of refugees

triangleChile: general strike threat as pensions protests grow

triangleWhy the Socialist Party opposed the EU

triangleBSE crisis - the madness of the profit system

triangleProfit system exacerbates flooding

Bradford & Bingley:

triangleMadoff with the money!

triangleBradford & Bingley: We need real nationalisation

triangleMarket meltdown

Bradford & Bingley:

triangleNationalise Bradford & Bingley


triangleSwansea Socialist Party: Mother Jones - A US labour pioneer


triangleHousing crisis: Corbyn's positive measures blanked by Labour's right


triangleWest London Socialist Party: Young people need socialism!


triangleThe end of the Tories?


triangleNasty party out the Tories


triangleTower Hamlets Socialist Party: "You can't have capitalism without racism" (Malcolm X)

News and socialist analysis

News and socialist analysis



The end of the Tories?



Nasty party out the Tories


Black history

The fight against racial discrimination is tied to fighting against capitalist austerity



Housing crisis: Corbyn's positive measures blanked by Labour's right


Universal Credit

Major attacks 'Universal Credit', half a million more face poverty


Them & Us

Them & Us



NHS meltdown - fight the Tory cuts



IMF helps cause inequality it slams



Tories wreck our NHS



Monarch abdicates responsibility to workers



Capitalism and human progress



Bending the knee v Trump



The Tories must be driven out



Labour Party conference: Action against establishment sabotage still needed



Anti-austerity opposition needed to seize on Tories' weakness

triangleMore News and socialist analysis articles...

Join the Socialist Party
Subscribe to Socialist Party publications
Donate to the Socialist Party

triangle13 Oct The end of the Tories?

triangle11 Oct Nasty party out the Tories

triangle11 Oct CWU fights court attempt to stop national strike

triangle11 Oct The fight against racial discrimination is tied to fighting against...

triangle11 Oct Catalonia: Workers can finish what Puigdemont won't

triangle6 Oct Boeing bust-up threatens thousands of skilled jobs

triangle4 Oct The nasty party turns on itself... but the Tories must be driven out

More ...

triangle16 Oct Teesside Socialist Party: After the party conferences

triangle17 Oct London: TUC lobby & rally; and London march

triangle18 Oct Warrington & St Helens Socialist Party: 1917-2017; the October Russian Revolution

triangle18 Oct Hackney Socialist Party: 100 years ago - the Bolshevik-led revolution

More ...

Socialist Party Facebook page
Socialist Party on Twitter
Visit us on Youtube



October 2017

September 2017

August 2017

July 2017

June 2017

May 2017

April 2017

March 2017

February 2017

January 2017





















Platform setting: = No platform choice