10 Years On From the Financial Crisis it Remains the Defining Issue Of Our Time
Ten years ago last week, the levees burst. On September 15th, 2008, while many of us were in the cinema enjoying the then just recently released Coen Brothers movie, Burn After Reading, a crisis in the world’s financial markets three decades in the making came to a head. Over the course of a few long days and weeks the unthinkable would happen as America’s toxic mortgage market imploded with spectacular force, threatening to take down everything with it in the process. Titans of the financial industry, previously thought to be omniscient and unassailable, would either disappear beneath the waves of the flood caused by their own hubris and corruption, or they would be bailed out with a raft made up of trillions of dollars of taxpayers’ money. Burn After Reading was a screwball comedy that followed a bunch of pompous egos running around Washington DC, doing damage largely just to themselves, thanks to their cluelessness and stupidity. The crash of 2008 bore some similarity to the Coens’ farce—at least in as much as the titanic amounts of ego involved. But that’s where the likeness ends, as the crash was characterised by a heady cocktail of avarice, shortsightedness, and—there really is no other way to put this—evil.
When the death rattle of the gigantic American financial services company Lehman Brothers sounded in the early hours of September 15th, 2008, it set off a chain of events that would quickly begin to look like a full-on apocalypse. A few years after that initial flashpoint, then-Fed chief Ben Bernanke would be quoted as saying of the crisis:
Out of maybe 13 of the most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two.
Indeed the immediate aftermath of Lehman’s fall would see either the bankruptcy or bailout or buyout of giants like AIG, Merrill Lynch, Bear Sterns, Royal Bank of Scotland, Fannie Mae, Freddie Mac, HBOS, Bradford & Bingley, Hypo Real Estate, Fortis, and Alliance & Leicester. As Lehman’s went under and a domino effect began, politicians and commentators looked on with disbelief as 778 points—$1.2 trillion—were wiped off the Dow Jones in a matter of hours and an entire orthodoxy seemed to crumble in a crisis of global capitalism such as hadn’t been seen since the Great Crash of 1929 and the Depression that followed. Like that awful benchmark, the cataclysm of 2008 would lead to mass deprivation and economic misery for millions of working people—disproportionately affecting the elderly and minorities, especially in the United States. Its after-effects would touch nearly every level of society and spread to nigh-on every corner of the globe, helping to set the stage for the horrifying ascendancy of the far right in international politics that we are seeing today, including the rise of Donald Trump.
Saying that it touched nearly every level of society is the crucial detail here of course. Perversely, yet all too predictably for those who followed such things, it became very quickly apparent at the time that those who actually caused the crash would be those least affected by it. The crisis of ‘08 would be dealt with in much the same way as so many others before and since—by following the template of the political model increasingly favoured by the West over the past forty or so years: Socialise the losses, privatise the rewards. In other words, ‘socialism for the rich, capitalism for the rest of us.’ Probably the first use of that remarkably apt description comes from a 1974 New York Times op-ed concerning New York State’s decision to spend $500 million on buying two half-finished power plants from Consolidated Edison Co., rescuing the corporate giant from financial troubles with public money. The process is always the same: Private enterprise takes a big gamble, and when it all goes up in smoke it is the public’s money that buffers their crash-landing back to earth. In capitalism, just as successes are meant to be rewarded according to a functioning market feedback mechanism, so too are failures meant to be allowed to fail. That’s the theory anyway. In practice things often happen very differently.
Thus was the fuse lit by bankers in their quest to reap greater and greater profits, but when the bomb finally went off in 2008 they would be the ones least touched by the blast, suffering minimal fallout and not even being required to help in repairing the damage. While the world burned, they danced. To the masters of the universe, atonement would remain a foreign, quaint concept.
Instead, barring a minor few blips and sacrificial lambs, the banks would remain unrepentant, unpunished, and unchanged. It would be the millions of ordinary people who lost their homes, jobs, and even lives, who would pay the price for the crimes of the men in gleaming towers. In 2008 alone, nearly 900,000 Americans lost their homes. By 2011 that number was up to over 11 million. The banks meanwhile would go back to doing exactly what they had been doing before, in some cases to an even worse degree. Ten years after that fateful day in September, thanks to a spineless and complicit political class unwilling to take corrective action against those who torched the world’s economy, we now find ourselves staring down the barrel of yet another impending crash, this time foregrounded against an even more fraught and fragile global political order. The consequences could be unthinkable.
We should be fucking angrier with these venomous parasites. We can’t be made to forget that they are still out there, doing exactly the same shit as before and expecting us to not pay attention.
It certainly seemed like we were angry and paying attention at one point, in the immediate aftermath of the crash. After all, that rage had been bubbling for decades, as financial firms and big capital were given ever greater slices of the pie while we were robbed from, mistreated, and lied to and told that it was in the name of a greater good. Trust in the system, they said. It might seem occasionally unfair to you from down there but up here it’s a slick, well-oiled machine run by Very Smart People. When we prosper, it’ll trickle down to you. Just let us do what we need to do without stifling us with needless regulation.
When Lehman Brothers went under it put the lie to all of this grade-A bullshit in dramatic fashion, exposing a gaping structural flaw and injustice in a system we had been told was flawless and just. Almost thirty years earlier, as the Cold War wound down and the systemic rot within Soviet Communism began to lead to its collapse, there was a huge amount of triumphalism in the air in the West. As the world watched the great ideological opponent to capitalism wither away, conservative American political scientist Francis Fukuyama coined the phrase ‘the end of history’ to describe the special moment that we were living in. We had reached the peak, went the thinking. The war of ideas had been won. Capitalism, as practiced by the Atlantic states and their allies and subservients, had proven the victor.
This formulation of the issue would prove to be exceedingly damaging in the years to come. Following the end of the Cold War the world’s politics would be shifted progressively rightward, dragged towards a free-market fundamentalist capitalism rife with deregulation and ever looser labour laws, and this notion regarding its ‘victorious’ nature—that it had simply proven to be the best system out there—would be used time and time again to justify its predominance. Let it do what it needs to do, they told us. Haven’t you seen how correct it is? Not only had it vanquished Communism, it did so without a clash of arms, winning purely by virtue of its inherent rightness, they said. It was rational! It was fair! And it hit that most American of propagandist sweet spots: It told us that underneath it, and only underneath it, would it be possible for anyone, no matter what start they might have in life, to achieve prosperity, all they had to do was work hard enough. The shifting of the Overton Window and cross-party political consensus towards the big business-friendly, labour-hostile side of things had been going on since the time of Reagan and Thatcher, but after the Cold War fizzled out the process went into overdrive.
The system’s brazen lies and pompous self-mythologising weren’t exactly universally accepted, but despite the crises along the way, and despite sustained protest by activists and labour movements, it nevertheless managed to coast along largely without challenge. As time went on it claimed more and more power, built up an illusion of greater intellectual heft, and in the process achieved stunning gains for itself. The market—and increasingly this fundamentalist, unregulated, predatory form of it—came to rule all. Nominally leftist parties abandoned any alternatives they might have once proposed and drifted ever-rightwards in an effort to chase their right-wing counterparts, who—propped up by an all-powerful corporate media and the disenchantment and apathy of voters who sought an alternative that wasn’t being offered—commanded what votes there were that were still to be had.
Gradually the major parties of the West became scarcely distinguishable from each other. They could differentiate themselves on social issues, with some paying lip service to—and even acting on—progressive policies while others behaved like regressive tyrants, but when it came to economics a consensus prevailed. Underlying assumptions were never questioned: Wall Street was a force for good; industrial capitalism with limitless growth was the new Manifest Destiny. An increasingly fluid revolving door system between the business sector and government helped make sure of that. Businesses, and entities of finance especially, embedded themselves deeper and deeper into the corridors of governance, and were thus given free reign to regulate themselves, and to set political agendas as they saw fit. Policy capture and regulatory capture ruled the roost. For decades, across party lines, appointment after appointment would show the revolving door in action. Just taking a glance at the roster of United States Treasury Sectaries since the eighties gives us a revealing look at this effect in action. Ronald Reagan made Donald Regan, ex-CEO of Merrill Lynch, his Treasury Secretary. Robert Rudin, former Goldman Sachs CEO, became Treasury Secretary under Bill Clinton. Another one time Goldman CEO, Hank Paulson, served as Treasury Secretary under George W. Bush. President Barack Obama brought in Timothy Geithner as his Treasury Secretary. Geithner now serves as president of Warburg Pincus, a private equity firm with $40 billion in assets. If the role of government could ever have been described as keeping capitalism’s worst excesses in check then by the turn of the new millennium this notion had been completely thrown out in favour of letting capitalism itself be deeply involved in creating the legal and regulatory framework under which it would operate.
As wages stagnated and executive pay soared, as jobs became less and less secure while corporations were subject to less and less regulation and the wanton destruction of the environment continued apace, we were told this was all a part of the plan. Part of the divine order of globalised capitalist logic. And they managed to hold this edifice together quite well, despite setbacks and scandals along the way—the savings and loan affair, the East Asian crisis, Enron, to name just a few—occasionally threatening to tear off the mask and reveal the beast’s true nature. The truth being, of course, that this in fact was part of the plan. The system was working exactly as intended—amassing more power and wealth for the elites while leaving the rest of humanity scrabbling for what remained, and struggling to stay afloat in the stormy squalls of its regular crises.
It has been long understood that capitalism, left to its own devices, will go through periodic cycles of boom and bust. The less regulated it is and the wilder it is allowed to run with speculative, risky, destructive behaviour, the more severe the shocks of each crash. Regulation, lashed onto the bucking beast, helps tame the shocks, and protects the public and the working classes from the capricious vagaries of the market. So as our elected leaders genuflected lower and lower before the will of the corporate giants, gradually removing the reins, unshackling the beast more and more, it was clear that sooner or later a truly huge shock would occur.
And that’s perhaps the most tragic thing of all about the 2008 crisis—how painfully predictable it all was. The out of control mortgage market of the United States was a ticking time bomb, hiding in plain sight, yet there were plenty who tried to alert the world to its presence. Nouriel Roubini, professor of economics at New York University, warned in 2006 that falling house prices could trigger a recession. Steve Keen, Australian economics professor, started up a website to track private debt and specifically its role in the housing market in 2005, publishing a paper (PDF link) in late 2006 predicting a crash. Similarly, in 2005, Raghuram Rajan, governor of the Reserve Bank of India and at the time an economic counsellor at the International Monetary Fund, gave a speech loaded with dire—and very accurate—predictions about the excessive, risky behaviour that financial managers were being encouraged to take in pursuit of short-term profit, and of the bubble that was being inflated as a result, sure to burst with diabolical power sooner or later. Even the FBI had their ear to the ground and heard the rumblings before time, decrying the ‘liar’s loans’ of the mortgage boom, and warning of the ‘financial crash’ that would come if their preponderance was not seen to. That was in 2004.
Because herein lies the damming rub: Despite what some conservative and free-market commentators would like to have us believe, the 2008 financial crisis did not appear out of the blue. The warning signs were all there. They were read by those who knew how to read them, and they were broadcast to those who had the power to steer us away from oncoming destruction. And it was all ignored, derided, or swept under the rug. It was a recipe for disaster. Man-made, foreshadowed, preventable disaster.
Lehman falling to its knees was just the beginning of that disaster, but it was a biblical one indeed. When the colossal American investment bank filed for bankruptcy it did so with almost $700,000,000 (that’s seven hundred million) of assets on its books—the largest bankruptcy in history. More than double the size of the next largest (Washington Mutual, which folded shortly after Lehman), and six times the size of the next largest after that (WorldCom, which went under in 2002 when the dot com bubble burst).
If you look further back in time you notice this general trend continuing. The largest bankruptcies are all the most modern ones (with the top ten bankruptcies by asset size all happening in the new millennium). That’s not an accident. It’s all to do with the greater and greater deregulation that capital has demanded for itself. After the Second World War, as the shattered remains of the working classes returned home following the most destructive conflict in human history—and with the memory of the previous World War still fresh—they demanded a new world order. Millions of young people had laid down their lives in the fight against tyranny and they now expected that the society they would live in would be a fairer one than the one of their parents and grandparents. They wanted just treatment for all of their fellow citizens, with a welfare net spread out to catch any that might fall through the cracks. They wanted the excesses of capitalism to be reigned in, and harnessed in order to benefit society at large. In Britain this led to the creation of the National Health Service—now under critical threat from private interests—and the modern welfare state as a whole. The working classes’ immense will at demanding a better world, combined with the spectre of Communism giving people a glimpse of what a robust welfare state could look like and sending a shiver of fear through those in power at the thought that if they did not provide at least some measure of that security, ensured that for a few decades at least much of the West lived in what has been called the Golden Age of Capitalism. This was an era marked by a healthy regulatory framework lashed onto capitalism and big business, with remarkable and steady economic growth that managed to benefit a wide swathe of society, and which exhibited overall fewer and milder crises.
Like all good things, though, the Golden Age of Capitalism would eventually come to an end. After a series of economic shocks, the dismantling of the post-War Bretton Woods economic consensus model, and the surge in the popularity of right-wing think tanks and free-market economists such as Friedrich Hayek and Milton Friedman, the political consensus started to move away from the one that had defined the decades of steady growth. From the mid-70’s a vision of a different world was sold. One that claimed that deregulation and private enterprise were the paths to greater prosperity. At the same time and following this trend, the economies of countries like the US and the UK—the two main vanguards of this new world order—began to see their characters transformed from ones heavily founded on manufacturing and exports, to increasingly financialised ones. In other words, the proportion of the economic activity of these countries that was happening in sectors like banking, trading, and speculation shot through the roof as regulations that sought to protect the world from the more dramatic boom and bust cycles that the increase of such riskier forms of capitalist activity led to were removed. Financialisation is not just about volume of economic activity however. Power, prestige, and clout also play a part. Gerald Epstein, Professor of Economics and a founding Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst, has defined financialisation as:
[T]he increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies
In his book, ‘Financialization and the World Economy’, Epstein also digs into the figures at play, specifically their ballooning over the last few decades:
[A]ccording to the Bank for International Settlements, the daily volume of foreign exchange transactions amounted to more than 1.9 trillion dollars each day in 2004, in contrast to 570 billion per day in 1989.
[F]unds raised on international financial markets as a percentage of world exports rose from .5 per cent in 1950 to over 20 per cent in 1996.
(Graph courtesy of Positive Money)
Step by step, banks and financial services firms became true giants. Not just in terms of the pure sums of capital sloshing about their system, but in relation to their character too. These were now giants that revelled in throwing their weight around. With each new friendly bit of legislation, they became more cocksure. The Glass-Steagall Act of 1933, passed as a reaction to the horrors of the Depression, was designed to separate investment banking from commercial banking in order to prevent investment banks gambling with depositors’ money. Glass-Steagall was repealed by Congress in 1999 by the Financial Services Modernization Act and signed into law by President Bill Clinton. This transformed the nature of the banking world, emboldening it and making it far more brazen in its risk taking. As world-renowned economist Joseph Stiglitz put it:
The most important consequence of the repeal of Glass-Steagall was indirect—it lay in the way repeal changed an entire culture. Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people’s money—people who can take bigger risks in order to get bigger returns. When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risktaking.
This demand for higher returns on larger, riskier bets led to a rush for innovation. But not productive innovation mind you. Not the kind that enables people to live better, more enriching, freer lives. No, this was innovation aimed at maximising the amount of money that could be made with money. Even before the Financial Services Modernization Act was passed the financial world had been busy, restlessly dreaming up new ways to get capital to multiply into more capital. Hedge funds exploded in the late 80’s and sped through adolescence to become truly grotesque entities. The shadow banking sector, made up of a network of offshore tax havens centred around nodes like the Cayman Islands and the City of London, grew exponentially over the past few decades, to finally hide nearly $50 trillion by the mid 2010’s. And a whole slew of new, hyper-complex financial instruments was being created by the wizards on Wall Street. Regulation, meanwhile, would be running a losing race, when it was trying to win at all instead of acting as an enabler of its ostensible opponent. On December 21st, 2000, President Bill Clinton signed another bill into law that would further pave the way for the crisis of 2008. The Commodity Futures Modernization Act exempted ‘credit default swaps’—a new kind of financial transaction—as well as other such derivatives (basically betting on betting on betting on betting on betting) from regulation. Lobbyists from Enron pushed for this bill to be passed, as did Alan Greenspan—Fed chairman under three administrations and free market fanatic—and Larry Summers, Treasury Secretary after Rudin for Bill Clinton and director of the National Economic Council for President Barack Obama. Capital was getting freer and freer to do whatever the hell it wanted.
As the sums got more and more obscene and the complexity of the financial instruments became cartoonishly dense, the bankers became more full of themselves. The lie of meritocracy became so ingrained that they began to fully believe it. They started to see themselves as geniuses, fully deserving of the monstrous salaries and even more monstrous bonuses they were taking home for moving around numbers. Not only were the pay packets getting larger and larger, they were pulling away from the average worker more and more too. Bankers as a whole, belonging to the upper percentiles of earners, got to take home progressively larger wages, but it is the industry’s executive pay that truly reveals the scale of remunerative madness. In the 1950’s, a typical CEO took home a salary 20 times larger than the average worker. By 2017, CEOs at S&P 500 Index firms were raking in salaries in the range of 360 times larger than their average workers. And that’s not even mentioning the bonuses, which became so eye-wateringly stupid and unfathomable so as to beggar belief. All this led to a toxic, competitive, entitled, macho culture spreading like wildfire in the financial world.
Eventually all of these pieces started to come together. Like the cogs of some infernal machine all of these factors lined up to enable an entire industry, with the backing of a complicit government, to detonate a megatonne warhead above the world. The combination of ambition, deregulation, and complexity, as well as an obsession with short-term profit maximisation and a toxic, competitive macho culture, meant that when it came to the selling of mortgages around the turn of the millennium and later, all bets were off. Where once an application for a mortgage proved a difficult, laborious task that required an immaculate financial record, the process suddenly became a walk in the park. Risky, high-interest loans were being hawked left, right, and centre to people who had no business taking out such loans. It’s been said that at the height of the mortgage selling bubble it took longer to go through a car wash then to be approved for a mortgage. The cartoonishly sleazy and opportunistic men presented in Adam McKay’s The Big Short were barely caricatures. It became a competition between them to see who could offload as many garbage mortgages to desperate people and to bring home the biggest commission at the end of the day, never mind the long-term consequences. Long-term, as a whole, became an anathema notion.
Fly by night mortgage sellers targeted vulnerable communities; predatory lending with easy lines of credit became not just an accepted downside of the business but a celebrated norm; at the height of the madness, nearly $5 trillion dollars’ worth of nigh-on worthless mortgage loans were sloshing about the system; and through it all the banks that were underwriting these mortgages were fully aware of what was going on. Famously, Goldman Sachs were caught betting against these loans, netting billions in profits when the whole edifice came crashing down. They were not the only ones. The practice was rampant and chronic. Everyone was selling to everyone else, passing the hot potato further and further along what the Academy Award-winning documentary Inside Job termed the ‘securitization food chain,’ with many agents along the way being highly aware of the nature of things, and betting against them accordingly. Terrible mortgages were bundled together with high quality, low-risk ones, jumbling up multiple mortgage tranches that varied from triple-A rated to B rated into hyper-complex bonds; and through the use of complex financial instruments like credit default swaps and collateralised debt obligations an unbelievably dense web of bullshit was built along which these bonds travelled and on which a house of cards of immense profit was built.
The trouble was, all that profit was built on deception. On fraud. The terrible, fail-prone mortgages were hidden behind the safe ones, embedding a time bomb into the system’s architecture, but nobody gave a shit what might happen if they started to fail because everybody was either too busy getting paid, or even worse: Betting on them failing. What little regulatory framework there was turned out to be so deeply enmeshed within the same chummy high finance world so as to completely blur the line between ‘useless’ and ‘complicit’. The SEC never saw fit to investigate the grotesque bubble. Alan Greenspan refused to regulate the industry. And credit agencies—those bodies responsible for ensuring that bonds and securities are rated accurately according to their actual credit worthiness—proved as big a part of the problem as anyone else. These are the bodies that assign the all-important triple-A-to-B ratings upon which the whole industry operates and does business. Since the crisis of 2008 there has been more and more scrutiny being paid to The Big Three credit agencies—Moody’s, Fitch Group, and Standard & Poor’s—and their role in the creation of the crisis. Just last year, Moody’s agreed to pay out over $860 million in order to settle with US federal and state authorities over its ratings of the risky mortgage securities so prevalent in the crash. Standard and Poor’s went through a similar agreement two years earlier. These firms whose prime function is to provide an honest accounting of the quality of financial instruments did exactly the opposite: They helped to conceal the poison that would go on to infect the organism of the whole global economy.
And infect it it did. Sooner or later, as was always going to happen, the garbage bonds started to fail as people defaulted on their mortgages. More and more bonds went bad and the failure rate accelerated, snowballing until it reached a tipping point of apocalyptic proportions. The hyper-complex web of bonds and securities and derivatives that made up this house of cards could no longer sustain itself. The estate agents, bankers, and credit agencies that had successfully magicked colossal amounts of money for themselves were suddenly faced with the highly flammable nature of their paper colossus. They had convinced us all that house prices would keep rising in a never-ending boom. Then-UK Prime Minister Gordon Brown had famously said that capitalism’s boom/bust cycles were a historical relic—that we had transcended into a state of endless growth. It was all a pack of lies. Hubris, greed, and deception that would irrevocably wreck millions of lives.
The banks, meanwhile, would be just fine. Lehman Brothers may have been allowed to go under, but when George W. Bush signed the Troubled Asset Relief Program (TARP) in October of 2008, he made sure that the fundamental structure of the toxic industry that had proved so destructive to the world would remain unchanged. The rest of the main players would get the lifeline from the taxpayers they needed. TARP initially authorised a bailout package amount totalling $700 billion, later to be reduced by a few hundred billion by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Despite that, according to a study by the Levy Economics Institute, the final result at the end of the day would be:
[A] Federal Reserve bailout commitment in excess of $29 trillion.
$29 trillion that went to making sure the heart of the financial industry that ruled the world would go on ticking. The government and the industry would try to sell this as a method of staving off another Great Depression. A temporary, one-time act of charity to help the banks atone for an innocent mistake. The truth is this was anything but. It was a pledge of allegiance to a toxic industry by a craven government sector infiltrated top to bottom by agents of said industry. It said: ‘We are with you. We have your back. We will do this the next time you need it.’
Since then, some overtures at redress have been made. In 2013, JP Morgan settled for $13 billion for its role in helping to bundle toxic mortgages with high quality ones, acknowledging that ‘it made serious misrepresentations to the public — including to investors — about numerous transactions relating to residential mortgage-backed securities.’ A year later, Bank of America would reach a similar agreement, for nearly $17 billion, after admitting that it too had a hand in selling flawed mortgage securities and thus helping set the stage for the 2008 crash.
But these are blips. Minor drops in the ocean for an industry still understood to be made up of institutions too big to fail, too wedded to the power structures of the world. Fundamentally, nothing has changed. Those that caused the meltdown and impoverished millions are still around, and thriving. Goldman Sachs, Merrill Lynch, JP Morgan, the list goes on and on. These companies are made up of people, individuals with names that hold personal responsiblity for what happened, yet nobody has gone to prison for the supreme financial crime of the modern era. At worst, a few people left these companies, usually with grotesquely generous severance packages. Compensation levels in the banking sector have rocketed back up after a brief blip following the crash. Bonuses were back to normal after just six months following the start of the crisis. Goldman Sachs took billions of dollars from the taxpayer, but in 2009, just one year after the crash it helped cause, it paid out an eye-watering $16.7 billion in bonuses. Profits were at $35 million per day. And things have only gotten more obscene. According to author and activist Youssef El-Gingihy:
The appropriately named Institutional Investor’s Alpha Magazine revealed that combined earnings in 2014 for the top 25 all-male hedge fund managers were $11.6 billion. You might consider this sufficient recompense but Alpha magazine put it like this:- “How bad was 2014?”, describing this total as “paltry” in that it was around half of the previous year and the worst since 2008. You will be relieved to hear that the intervening years have not been so lean.
In government, the trend has been the same. Steve Mnuchin, Donald Trump’s Treasury Secretary, is a former hedge fund manager as well as a Goldman Sachs—there’s that name again!—alumni. Mnuchin is a passionate advocate of corporate-friendly tax reform and for reducing corporate rax rates—both processes that have accelerated even further under the Trump administration. There have been glimmers of hope in places like Iceland which actually jailed some bankers and nationalised a few of the key players responsible for the crisis that brought their economy to its knees and which has since stabilised in a relatively healthy way. In Britain, one of the last places one might expect a ray of sunshine to penetrate the oppressive gloom cast by an out of control financial sector, the surprising surge of Labour leftist Jeremy Corbyn has shown the world what an alternative to a world beholden to banks might look like. Corbyn and his Shadow Chancellor of the Exchequer John McDonnell have made no secret that they should they get into 10 Downing Street they intend to level the playing field by closing tax loopholes and bringing regulation to an industry that for too long has done only just what it wanted.
But again, these are blips. By and large, the grip of the financial industry on the world’s economy, and by extension its dictation of our future, is as firm as ever. Its risk-taking behaviour remains too. Ann Pettifor is a British economist and analyst of the global financial system. In 2006 she published a book called ‘The Coming First World Debt Crisis’ in which she predicted with unnerving accuracy the earthquake that was to come two years later. At the time, Pettifor said a crisis was imminent, and that:
[It] will hurt millions of ordinary borrowers, and will inflict prolonged dislocation and economic, social and personal pain on those largely ignorant of the causes of the crisis, and innocent of responsibility for it.
More recently, in her analysis of the crisis and its aftermath, Pettifor summed up the state we find ourselves in:
The small elite that controls the global finance sector has succeeded in capturing, effectively looting, and then subordinating democratic governments and their taxpayers to the interests of those who possess private wealth. Citizens who value democracy and its institutions have a duty to regain control over finance, and to render the sector servant, not master, of their economies.
Thanks to the growth of “offshore capitalism”—operating beyond government regulation or taxation, but simultaneously backed by almost unconditional onshore taxpayer guarantees and protection—the finance sector can now make massive speculative and almost risk-free gains. Because there has been no meaningful effort by governments to reform or re-regulate the global financial system, and given the systemic threat the global banking system continues to pose, financiers grip on democratic institutions and resources tightens.
Pettifor, alongside many other prominent figures, is now predicting another crisis. One that may be even worse than the last, and which has in likelihood already begun. Barring a genuine and viable left-wing alternative and solution to the problem, a predictable surge in right-wing nationalism will follow, as well as the scapegoating of immigrants, minorities, and other groups not responsible in any way for the trouble.
Much the same way as politics, finance can—especially in good times—seem like an abstract concept. That is the way those in charge want things to be. They desire the space to be able to do what they want to do, free from scrutiny. They play with astronomical figures, the shifting of which dictate the very landscape of the world the rest of us operate on. The realities of our economy, and how it relates different strata of society to others, put real, hard limits on the amount of progress that we can claim for ourselves. The masters of the universe make us fight for scraps. For a sliver of dignity. All the while they share in spoils we cannot even imagine. Money—its supply, its flow, its relative scarcity or abundance—doesn’t just sit at the centre of the web. In the world that we find ourselves in today, it is the web. Money is politics. Politics is money.
These days it seems as if more people than ever are engaged in some fort of politics. In dark, desperate times, this is often the case. Rarely a day goes by without some sort of battle raging. Each battle is important, and we move from one to another with dizzying speed. But we can’t ever be allowed to forget about this particular long war that rages in the background, often out of sight and out of mind, involving numbers that become surreal out of sheer scale. We didn’t start this war, but we have been the ones to suffer its catastrophic consequences, with those lower down on the chain of privilege—women, people of color, people with disabilities, transgender people—always suffering the most. We have been the ones made to bleed and squirm while those at the top danced. Because make no mistake: Despite what they tell us, profits do not trickle down. But crises, made at the top, rain down as destructively as cluster bombs.
Header Image Source: Paramount Pictures
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