June 10, 2010
Yes, I do understand that rioting does not come naturally to us Brits. In this, as in all other matters, we remain steadfastly reserved. Not given to public displays of passion. We are not normally roused beyond a strongly worded letter to the editor of The Times or a call to the BBC to firmly express our views on domestic and World affairs. When the British do step out onto the streets we tend to go in more for peaceful protest like the huge demonstrations all over the country against the Gulf War a few years ago. And we did take exception to the poll tax in 1990, although that demonstration turned into what the press continue to refer to as ‘the poll tax riots’. This situation came about when the police cornered a section of the crowd, pressing them into a small side street, a procedure known to the police as ‘kettleing’, and matters got out of hand when that section of the crowd took exception to this rough treatment at the hands of the men in blue and attempted to break out. I dare say you would feel the same in those circumstances.
Peaceful demonstration isn’t what it used to be back in the days when the CND organised peace marches in the nineteen fifties. In those days young people with beards and duffle coats, plus a few left wing politicians like Michael Foot and Tony Benn, marched to Aldermaston carrying banners saying ‘ban the bomb’, and got themselves on the telly because nothing of the sort had ever been seen before.
But things are very different now. Riots are turning up in Athens and Madrid and other places over Europe where people are saying ‘enough!’ They are shouting and screaming, ‘ENOUGH!’ And as usual nobody listens, which is why they have to take to the streets to make themselves heard in the first place. Their frustration is boiling over and ordinary people are moved to smash and burn. The anger is mighty, and it’s powerful. Public sector workers are being told that their wages are to be cut. Once again the little guy pays.
And the fat cats look down from their ivory towers with contempt. For them its business as usual. They’re bullet proof.
Earlier in the year we heard that federal prosecutors in the US are examining whether Goldman Sachs, the World’s largest Investment Bank, have committed securities fraud. The Securities and Exchange Commission (SEC) in the States, has already pressed civil fraud charges against the firm and its chairman, Lloyd Blankfein. The SEC alleges that Goldman deceived investors in a complex mortgage-backed derivative called Abacus 2007, which worked in favour of the hedge fund Paulson & Co, which made a $1bn profit from the transactions. In the first quarter of 2010, Goldman set aside a pot of $5.5 billion for pay and bonuses for staff, equivalent to $165,000 each.
So where does all this money come from in the first place? Simple. It comes from us. Each and every one of us. How does that work? Let me just remind you of how this new form of capitalism began a mere thirty years ago.
Back in the dark ages of the nineteen seventies the UK economy was based largely on manufacturing industry where the majority of employees were paid their wages in cash. Relatively few people at that time had a bank account, or owned their own house, or got into debt beyond an occasional small purchase on the ‘never-never’ so very little of their money was going into the financial services industry system, and the players had little to play with. Bankers, brokers and fund managers at this time were seen as grey, dull people typically identified by a bowler hat and rolled umbrella.
By the nineteen eighties many more people had opened bank accounts, were being paid ‘salaries’ and were aspiring to become part of the burgeoning middle class. Then Thatcher (and in the USA, Reagan) persuaded these people to become part of ‘the stakeholder society’. She encouraged people to become home owners, including tenants buying their council houses, to take out bank loans and open credit card accounts, to buy into private pension schemes, to put their surplus money into savings accounts, and then to play the stock market by investing in shares, initially in the privatised industries like British Telecom and British Gas. So millions of people put small amounts of money into the system, here a few hundred, there a few thousand, and very soon many billions of pounds became available for the new generation of city slickers to play with. And play with it they did, with cavalier abandon. These young bucks were identified by their sharp suits and expensive cars, and also by their late night drunken stumblings through the city streets. “We work hard and we play hard”, they slurred.
The industry was deregulated around the world as many of the World’s financial capitals followed Reagan and Thatcher’s lead, and a new and potentially out-of-control industry suddenly exploded onto the World’s economic table. Global economies, as well as governments, quickly bought into this system and soon became wholly dependent on an industry for whom the word ‘panic’ is a perfectly acceptable descriptive of their modus operandi.
Large manufacturers soon came to realise that they would earn more money by capitalizing on their assets than by actually making the product that made their name. So the manufacturing base was shifted to countries where labour was cheap in their relentless race to maximise profits and satisfy their hungry shareholders. And of course it was western factory workers who were losing their jobs. The idiocy of such a process is clear to see, as the inevitable conclusion can only be that with such a large proportion of Western workers thrown onto the dole, and workers in The East on such poor wages, who will be left to buy the products?
But such long term considerations as this cannot be allowed to get in the way of the greed driven process as it stumbles blindly on, and as a result the economies of the entire World soon became dependent on the continuous movement of money instead of on trading in goods and products. But in this system it is essential that the money never stops circulating for the whole thing to work. When, for whatever reason, the movement undergoes a sudden slow down then a crash of some degree is bound to follow. (Remember the dot com fiasco?)
So when a crash happens, who loses? We do, of course. Every time. Our pension fund is cut in half. Our house values plummet. Our jobs are threatened. Our public services are cut, as are our wages. We struggle to pay our mortgages and the bank threatens to repossess. Our small businesses that have become dependent on support from the bank to fund expansion or to see us through periods of cash flow problems, suddenly find the bank’s support withdrawn. People stop spending, and consequently much loved high street stores close and our town centres fall silent.
And what happened to the banks? Nothing much. Their share price took a brief dip but soon recovered. They dusted themselves off and carried on as before.
Meanwhile the politicians, whose main objective is to maintain the status quo, take advantage of the situation to push through unpopular legislation that would not be possible without a major crisis. So this week we’ve heard our shiny new government trot out the usual warnings of tough times ahead. “Things are much worse than we thought”, they say, “Major cuts in public spending can be expected.” Today we heard that university tuition fees are to rise. And not once have we heard this government, or the previous one for that matter, say that the banks must pay up.
So there you have it. Our money was used to fund the excesses of these people in the first place. It was our money that disappeared with the crash. It was our money that was used to bail out the banks two years ago. And now, once again, it’s our money that is being used to fill the enormous void in government funds.
The time has come for us to rage against this malfunctioning machine. All that is available to us is to take to the streets. We have to demand that the self serving banks and the other major financial institutions pay full reparation for the massive damage that only they have caused to our lives. If we don’t do this now the system will simply continue forever.