Saturday, January 10, 2009

Greed, Privatization and the Financial Crisis

News clips of shoppers fighting each other to reach the bargains at post Christmas sales remind us that greed is not confined to financial wheeler dealers. Our annual end-of-year shopping frenzy is not a consequence of shortages, as might have been the case in post-war Germany or communist Russia, but of surpluses. Stores are laden with unsold goods for one reason alone: because no one really needs them. That, in a nutshell, is how our economic system works: namely by inducing people to buy things they don't need.

Few better examples exist than New York mayor Rudolph Giuliani's post 9/11 plea for people to return to New York and shop. Commerce, in the end, was more critical to the city's health than the loss of a couple of iconic buildings and a few thousand lives. Shopping - constant, unremitting acquisition of material goods - fuels our way of life. If our lust for new cars, new clothes, new refrigerators, new houses, falters - capitalism falters too. Wall Street's recent scandals - greed written large - are merely a wide-screen version of a soap opera played out daily in every high street in the hemisphere.

If our political leaders are to be believed, the way to resolve the current crisis is to inject a few billion dollars into failing corporations, throw some ne'er-do-well hot-shots into jail, and tinker with the financial regulations. Then we can all go back to buying and selling, and all will be fine in the best of all possible worlds. Right?

Well, maybe not.

For the first time in decades, dissenting voices are beginning to question the consensus. Doubts are being raised about the long-term viability of our economic system. Marx is finding new advocates and not without reason.

Marxist theory tells us that for the system to work, most of us must spend our lives enriching the owners of capital. This seems to be precisely what has occurred.

Those hundreds of thousands, maybe millions who took out mortgages that were beyond their means are a direct reflection of increasing inequality and - yes - poverty. People were promised the dream of home ownership and then found - too late - that carpet-baggers, corporate directors, and feckless politicians had placed it beyond their reach.

Hence why the response of Western governments to the current crisis gives cause for alarm. Effectively, the corporate sector that got us into this mess is now proposed as the only viable means of getting us out of it.

A more bizarre solution could hardly be imagined. If we turn from the current crisis to a more fundamental one, like global warming, the absurdity stands out, perhaps, more clearly. Without "incentives", industry will do little or nothing to help clean up our environment: such is the message from Washington and Westminster. Yet expecting global warming to be resolved through the same greed that created the problem - and that creates periodical economic crises too - is like inviting a thief who's just stolen your purse to burglarize your house as well. Capitalism isn't concerned with social welfare - and the notion so beloved of neo-liberals that individual selfishness promotes the general good is almost too easy to refute. That it continues to hold sway over Western governments and their economic soothsayers probably reflects the familiar human difficulty of owning up to error.

Though government trust in the private sector to do things better remains unswerving, like gospel it rests less on fact than on faith. Let's take the UK as an example. In addition to building the National Health Service and an education system that has produced more than our fair share of Nobel prize winners, the state runs military, police and fire services, and has developed almost all our transportation infrastructure. It created most of our utilities and ran them superbly until they were practically given away to the private sector. Along with allies, it helped to orchestrate the defeat of fascism in WWII. In the past 100 years, the state's achievements on behalf of the citizenry have been nothing short of spectacular.

Still, we are told that if most public services were subject to market discipline, they would be more efficient and cost-effective. It is a baseless argument. In the commercial sector, the consequences of inefficiency are bankruptcy or closure -- and there are no public service obligations such as delivering mail to remote "unprofitable" areas or treating impoverished patients. Unfortunately, water and electricity supplies, rail schedules and rubbish collection can't be closed down if the companies that run these services are poorly managed or unprofitable. Instead, they go cap-in-hand to the government for subsidies or price increases. In place of market discipline, we get licensed extortion -- often accompanied by a net reduction in the quality of service. My water, gas and electricity supplies have not improved since privatization, they have simply become more expensive.

This does not mean, of course, that the public sector always gets things right. Incompetency is a human failing - and an ubiquitous one. But the idea that it is, by definition, blundering, inefficient, and unresponsive is not based on evidence but on ideology riding on a cloud of woolly thinking.

Deaf both to the lessons of history and to the cries of public unease, ministers nevertheless continue to shed state assets and the responsibilities that go with them. In the UK, the latest divestiture has been of our remaining participation in the Aldermaston Atomic Weapons establishment. Next to go will be a handsome share of Royal Mail. Details of such transactions, of course, remain secret, in order - so we are told - to protect "commercial confidentiality". This repellent phrase now stands on a par with the Official Secrets Act as one of the UK government's prime tools for evading public scrutiny. And this despite the obvious - and obviously inconvenient - fact that publicly-owned facilities belong to the tax payer (a.k.a. you and me) and that, as shareholders, we should have a right to know what deals are being struck on our behalf.

Kropotkin pointed out that the price of a house in Paris, which only a rich man could afford, lay not only in the bricks and mortar and the patch of earth on which it stood, but also in the city itself with its roads and sewers, theatres and museums, schools and hospitals all constructed - just like the house - with the sweat and toil of labourers too poor to rent the meanest of its rooms. Public investment in social infrastructure constitutes the bedrock of economic activity without which private enterprise could not function. Taxpayers are by definition investors in private enterprise, and privatization is, therefore, largely a transfer into private hands of the means of producing what Marx called "surplus value" - publicly-generated profits.

If, as I suspect, our current economic arrangements are inadequate to meet the future needs of humanity and of the planet - then our first question must be to decide whether or not we care.

Assuming we do, then the challenge that faces us - and that sooner or later we will have to confront - is how to develop an alternative economic model geared to the general welfare rather than individual enrichment, to meeting need rather than stimulating greed, to preservation of the environment rather than its exploitation. Exactly how such a model could work is open to debate; but it's a sure bet that greed, superfluous consumption, and privatization of public assets won't be in the plan.

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