ATTAC: Let’s shut down the financial casino
October 16th, 2008 · AlternativeRegionalisms, Democratisation, Europe, EuropeanUnion, FinancialArchitecture, FinancialCrisis, ParticipatoryEconomics
ATTAC Europe has released a statement analysing the financial crisis and demanding changes “towards another paradigm, where finance has to contribute to social justice, economic stability and sustainable development.” They condemn current proposals as ones that will perpetuate the problems. “We cannot allow to return to the status quo ante in the years to come.”
The statement calls for a series of systemic changes that aim to “break down the pillars of neoliberalism, in particular the worldwide mobility of capital.” ATTAC puts forward a whole raft of measures which include:
- setting up a regulatory framework for financial capital under the auspices of the UN,
- prioritising social and environmental justice in international agreements,
- introducing taxes on national stock transactions and international currency transactions,
- putting limits on sizes of international financial conglomerates,
- closing down offshore banking centres
- supporting social and environmental public investment,
- Making the EU and the European Central Bank democratically accountable
- along with various measures for putting financial sector under public control
The Depression: A Long-Term View
October 15th, 2008 · CorporateGlobalisation, FinancialArchitecture, FinancialCrisis
Immanuel Wallerstein says that the belief that we are just in another cyclical swing and will soon bounce back hides the fact that three basic costs of capitalist production – personnel, inputs, and taxation – have steadily risen as a percentage of possible sales price, which makes it impossible to obtain the large profits from quasi-monopolized production that have always been the basis of significant capital accumulation.
“We can assert with confidence that the present system cannot survive. What we cannot predict is which new order will be chosen to replace it..This will not be a capitalist system but it may be far worse (even more polarizing and hierarchical) or much better (relatively democratic and relatively egalitarian) than such a system. The choice of a new system is the major worldwide political struggle of our times.”
The depression has started. Journalists are still coyly enquiring of economists whether or not we may be entering a mere recession. Don’t believe it for a minute. We are already at the beginning of a full-blown
worldwide depression with extensive unemployment almost everywhere. It may take the form of a classic nominal deflation, with all its negative consequences for ordinary people. Or it might take the form, a bit less likely, of a runaway inflation, which is simply another way in which values deflate, and which is even worse for ordinary people.
Of course everyone is asking what has triggered this depression. Is it the derivatives, which Warren Buffett called “financial weapons of mass destruction”? Or is it the subprime mortgages? Or is it oil speculators?
This is a blame game, and of no real importance. This is to concentrate on the dust, as Fernand Braudel called it, of short-term events. If we want to understand what is going on, we need to look at two other
temporalities, which are far more revealing. One is that of medium-term cyclical swings. And one is that of the long-term structural trends. [Read more →]
→ No CommentsTags: capitalism·depression·financial crisis·Kondratieff·wallerstein
Debt crisis and the credit crunch
October 15th, 2008 · FinancialArchitecture, FinancialCrisis
What’s the difference between a credit crunch and a debt crisis? About $2 trillion worth of political will. Jubilee Debt Campaign has sent out a briefing, which coincides with their annual Global Debt week, to remind people of the international debt crisis that still affects millions of people around the world. They point out that:
- The current financial crisis is the result of reckless lending by private banks, just as the ongoing developing country debt crisis was the result of reckless lending by the rich world in past decades.
- The total debt of all developing countries is $2.9 trillion – around the same amount as has been pledged by rich country governments to bailout the banks in recent weeks.
- It would take only $375 billion – with the cost spread out over many years – to cancel 100% of the debts of the world’s 49 poorest countries.
- Haiti, the poorest country in the Western hemisphere, has faced four hurricanes in a month and continues to suffer the effects of the global food crisis. But the World Bank and IMF have announced that its debt cancellation has been delayed by six months.
More Casino Capitalism, Or Radical Restructuring?
October 15th, 2008 · CorporateGlobalisation, FinancialCrisis
Praful Bidwai, journalist and TNI fellow, argues that the recent crisis has led to an unprecedented crisis and delegitimation of the Anglo-Saxon neoliberal model, dominated by finance capital. The resulting policy debate must include radical demands for structural changes in the global financial system, including strict public regulation, controls on capital mobility, coordinated monetary policies, and a plan to restructure banking along equitable and accountable lines as part of an economic reconstruction programme.
When the United States investment bank Bear Stearns was bailed out from collapse by the Bush government this past March 14, the Financial Times’ chief neoliberal commentator Martin Wolf lamented this as “the day that the dream of global free-market capitalism died.” The Western world’s self-regulating financial system indeed broke down. The cause was what economist Paul Krugman described as “an epic crisis” in the global financial markets. Many others admitted the crisis might be “the most wrenching” since World War II.
Six months on, the US government undertook much larger rescue operations. It seized America’s two largest housing mortgage companies, Fannie May and Freddie Mac, committing $100 billion to each. Then, the US’s fourth largest investment bank, Lehman Brothers, filed for bankruptcy; and the redoubtable financial management company, Merrill Lynch-with the famous logo, “We are bullish on the future”-was sold at bargain basement prices. With what metaphors beyond dead dreams and nightmares would Wolf describe today’s meltdown? [Read more →]
→ 4 CommentsTags: Bank Bailout·financial crisis·Martin Wolf·Neoliberalism·New Deal·Praful Bidwai·subprime crisis
When old dogmas die, there is room for all kinds of radical new thinking
October 15th, 2008 · CorporateGlobalisation, FinancialArchitecture, FinancialCrisis, ParticipatoryEconomics
Jonathan Freedland in the Guardian reiterates the need for blogs like these by saying that the financial crisis gives us a chance to review how we organise our economy and society. He highlights the work of the New Economics Foundation who on their website, Triple Crunch, argue that the crisis combined with the climate crisis requires a Green New Deal. What do you think? What radical new thinking needs to be put on the table for debate?
The revival of the markets has postponed the sensation that violent revolution is imminent. No longer are the sages telling us the entire system is minutes away from total collapse. The first aid, devised by Gordon Brown and hailed and emulated from the US to the eurozone, seems to have soothed the fevered brow of the moneymen. For now at least.
Still, even if the mob is not about to storm finance ministries from Paris to Washington, few doubt that we are witnessing an epochal event, living through one of those moments on which history pivots.
A new Washington consensus?
October 14th, 2008 · FinancialArchitecture, FinancialCrisis, InternationalInstitutions
John Cavanagh, Director of the Institute of Policy Studies and TNI fellow, goes behind the scenes at the World Bank/IMF meetings and finds the Washington Consensus now seems to coalesce around the idea that governments can’t intervene enough in financial markets.
I just came from a surreal scene at the World Bank/IMF annual meetings. Two things made it surreal:
1. The scene: I got “civil society” credentials to go to the World Bank and IMF meetings. We had to be approved ahead of time, and I bet about 200 were. The thing that was most surreal was that the several blocks around the meetings were all blocked off with high level security and metal barricades.
I have no idea if this came from the DC police or the IMF and World Bank security. But, it was absurd, even more absurd given that local governments need to be saving every penny for schools. If they have phoned me, I could have told them that the only protest planned was 20 people doing a photo op press event on
Friday. Otherwise, there were no protests planned and none occurred.
There were none planned because our movements largely feel they’ve marginalized the Bank and Fund, and their anger is much more steered at the Bush administration and Wall Street. Any of a number of us could have told them this, but instead they spend millions on security. I was stopped 3 times going in and out of the perimeter today. The cops looked totally bored and they seemed to know that nothing was going on. [Read more →]
The Wall Street collapse and its implications for Europe and Asia: the view from civil society
October 14th, 2008 · FinancialCrisis
The Wall Street meltdown is not only due to greed and to the lack of government regulation of a hyperactive sector – it stems ultimately from the crisis of overproduction that has plagued global capitalism since the mid-seventies. The neoliberal free-market policies, which got us into this mess in the first place, will not provide the answer, argues Walden Bello in his presentation at the 7th Asia-Europe People’s Forum, Beijing.
>Download the Power Point presentation
Links to analysis – 13 October
October 14th, 2008 · FinancialCrisis
Richard Murphy from Tax Research UK makes some practical proposals for radically reforming the banking sector now that they have been semi-nationalised by the UK government. “Those activities that undermine the state, whether they be tax haven operations, private wealth management divisions or structured finance arms ….must be shut. The political signal must be sent that the world has changed and the bank model that was designed to undermine the state (as it was) is now history.”
Joseph Stiglitz in Vanity Fair says that the US economy is likely to remain in bad shape for some time to come, and warns against listening to those who are responsible for the crisis for the solutions to get out. Instead there needs to be a push to strike a new balance between the market and government.
Mark Weisbrot, from CEPR, argues that it is no surprise that the bailout is not working, because it doesn’t address the core of the crisis: which is the collapsed housing bubble. Overpaying banks for bad loans is not the answer: “steps to help homeowners, to minimize foreclosures and evictions” are.
The Indypendent have done their own useful primer: “Everything you wanted to know about the biggest economic meltdown since the Great Depression but were afraid to ask.” It’s a good introduction to the intricacies of the sub-prime debacle.
Al Jazeera asks five prominent US economists if the crisis spells the end of US-style capitalism. The short answer is “No.” Noam Chomsky on Znet says “capitalism can’t end because it never started. The system we live in should be called state capitalism, not just capitalism.”
¿Hay alguien ahí?
October 13th, 2008 · Español, FinancialArchitecture, FinancialCrisis
Jesús Maraña publica en su blog de Público una reflexión sobre la crisis y la izquierda con el sugerente título ¿Hay alguien ahí? Maraña sostiene, entre otras cosas, que ante el embate neoliberalista de las últimas décadas, no es “que la izquierda intelectual se quedara muda, sino que no había forma de escucharla. No ha estado muda, pero sí a la defensiva. Y acomplejada”. Y es que, según el autor, “para imponer las reglas de juego del libre mercado, la desregulación casi total y el individualismo a ultranza, a la derecha siempre le ha sobrado lo que le ha faltado a la izquierda: unidad de acción y recursos casi ilimitados de proselitismo”.
→ 1 CommentTags: crisis financiera·globalización·izquierda·neoliberalismo·think tank
Lecciones de la crisis financiera
October 13th, 2008 · Español, FinancialArchitecture, FinancialCrisis
Dos artículos destacan hoy algunas de las lecciones que hemos aprendido con la crisis financiera:
*) El economista peruano Oscar Ugarteche escribe en Alai (Agencia Latinoamericana de Información) que, a diferencia de lo que sucedió con la crisis de México en 1995, o la de Tailandia y Asia poco después, catalogadas como “contagio”, cuando de lo que se habla es de una crisis bursátil colosal en los Estados Unidos, no hay contagio alguno, sino “crisis global”. También hemos aprendido que cuando todos los mercados están interconectados, todos los mercados se caen juntos y los sistemas nacionales que redujeron la irracionalidad del mercado mayor, se caen más bruscamente que los otros. Más lecciones en el artículo completo.
*) En un artículo publicado en Página 12 y reproducido en Rebelión, Atilio Borón señala que, entre otras cosas, hemos aprendido que la tan cacareada “independencia de los bancos centrales” es una falacia, que el papel del Estado sigue siendo fundamental y que, en un mundo donde el proteccionismo se acentuará al compás de la crisis, es imprescindible contar con una estrategia de desarrollo orientada hacia el fortalecimiento del mercado interno y a salvo de las violentas oscilaciones que registran los mercados internacionales. Más lecciones en el artículo completo.
Culpables, millonarios e impunes
October 12th, 2008 · Español, FinancialArchitecture, FinancialCrisis
Ramón Muñoz publica en el diario El País un excelente retrato de los directivos y consejeros de las grandes empresas:
“Cuando nace un brahmán, nace superior a la Tierra entera, es señor de todas las criaturas, y tiene que guardar el secreto del dharma. Todo lo que existe en el mundo es propiedad privada del brahmán. Por la alta excelencia de su nacimiento, él tiene derecho a todo. Esto es, es él quien goza, quien viste, quien da a otros, y es a través de su gracia que otros gozan”, se dice en el Libro de Manu. Las leyes de Manu están contenidas en un antiguo manuscrito hindú que estableció el sistema de castas en la India hace más de dos mil años. El brahmán es la casta superior. Sólo unos elegidos pueden pertenecer a la misma y, como dice la cita, gozan de todos los derechos y su única labor es instruir en el conocimiento del mundo al resto de castas (salvo a los parias o intocables, que no gozan de ningún derecho).
El capitalismo moderno ha emulado este sistema de castas. Sus brahmanes son los directivos y consejeros de las grandes corporaciones. Gozan de privilegios y prebendas por doquier: sueldos estratosféricos, planes de incentivos, vacaciones, jet privados y club de campo a costa de la empresa… Y no tienen casi ninguna responsabilidad. Si las acciones suben, ellos son los que más ganan gracias a los programas de opciones sobre acciones que premian la revalorización bursátil. Si la cotización se derrumba o incluso si las firmas quiebran y los accionistas pierden todo lo invertido, ellos también ganan. En caso de despido, cuentan con cláusulas que les aseguran indemnizaciones multimillonarias, conocidas como paracaídas de oro (golden parachute), de las que no disfrutan los trabajadores, los parias de este orden económico.”
→ 1 CommentTags: capitalismo·corporaciones·crisis financiera·directivos
The politics of bailout
October 11th, 2008 · FinancialCrisis
“The debate about the bailout deals with decisions about the fundamental features of our social and economic life, even mobilising the ghost of class struggle”, writes Slavoj Žižek in the London Review of Books… “There is no ‘objective’ expert position that should simply be applied, one has to take a political decision.”
Critiques of shadow banking and private equity
October 11th, 2008 · FinancialCrisis
Two publications in process have just been posted to Cornerhouse’s website:
A (Crumbling) Wall of Money: Financial Bricolage, Derivatives and Power
by Nicholas Hildyard
Financial entrepreneurs created a ’shadow banking system’ over the past 30 years to circumvent regulation and to offload risk onto others, relying on ‘derivatives’ and ’securitisation’. They generated easy credit that fuelled a boom in corporate mergers and acquisitions across the United States and Europe, and that enabled companies involved in mining, biofuels, private health care, water supply, infrastructure and forestry to expand their activities signficantly. When the pyramid of deals came tumbling down, however, the public had to bear the costs.
Taking it Private: Consequences of the Global Growth of Private Equity
by Kavaljit Singh
Private equity has become an integral part of the world’s financial system, creating a new type of corporate conglomerate that is reshaping the way business is conducted. It poses new challenges to labour unions, NGOs and community groups because of its influence on taxation policy, corporate governance, labour rights and public services. These challenges are especially clear in Asia, which private equity firms are targeting since the “credit crunch” took hold. Private equity’s vulnerabilities, however, may provide opportunities to address public concerns.
→ 1 CommentTags: financial crisis·Private Equity·Shadow Banking
Time for a critical glossary
October 11th, 2008 · FinancialCrisis
The BBC has a layman’s financial crisis glossary on its website, that helps to explain some of the jargon that is now filling the airwaves. But looking at some of the explanations, you can’t help wondering if it is creating more confusion than clarity.
Take their definition of Hedge Funds, for example: “A private investment fund with a large, unregulated pool of capital and very experienced investors. Hedge funds use a range of sophisticated strategies to maximise returns – including hedging, leveraging and derivatives trading. ”
Mmmmm… How about this for an alternative: “A private investment fund with large unregulated pool of capital run by reckless highly overpaid investors who are completely divorced from the real economy. Hedge funds use bizarre secretive strategies based on speculating on speculation to rake in billions of dollars. They have so far escaped the focus given to investment banks but played a key role in building up a financial bubble that has finally burst which will have real costs for ordinary people.”
OK, not very succinct. But post your suggestions. It must be time for a critical glossary of most of the terms on the BBC website – and you can help us draft it!
Nature loss ‘dwarfs bank crisis’
October 10th, 2008 · CarbonTrading, ClimateChange, EnvironmentalJustice, FinancialCrisis
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There is an interesting piece on the BBC, based on a EU-commissioned study, that suggests that the global economy is losing far more from the disappearance of forests than the banking crisis. |
The research puts annual cost of forest loss at between $2 trillion and $5 trillion, which is based on adding the value of the various services that forests perform, such as providing clean water and absorbing carbon dioxide.
The implications of the article that suggest that pricing forests and encouraging markets in forest protection, need to be read in conjunction however with some of the warnings of Larry Lohmann in an excellent interview on TNI’s website who argues that carbon trading allows industries who buy pollution rights to avoid making the difficult investments that wean our economies off fossil-fuel use. Oscar Reyes gives further analysis on drawbacks of the green-sound initiative ‘Reducing Emissions from Deforestation and Degradation’ (or REDD) here.
Economist Jeffrey Sachs has also just come out in favour of carbon taxes rather than Cap and Trade mechanisms as the best way to tackle the climate crisis. ” “Having a lot of people engineer financial instruments for carbon when there are much more direct ways to do this strikes me as not really a great investment,” Sachs said. “I think the kind of (financial) meltdown we have right is a little bit of an example of how we’ve taken a generation of young people and put them in tasks that don’t really solve social problems.”
Finally, Kevin Smith from Carbon Trade Watch, in a comment piece on the Guardian calls for regulations of the financial sector to be tied to an end to funding fossil fuel expansion. He notes that the Royal Bank of Scotland’s funding of fossil fuel expansion is equal to the total carbon emissions of Scotland.
“There’s a real danger that the recent global economic turmoil will edge out mounting concerns over climate change, when it should really be encouraging a move towards more joined-up thinking towards the environment, money and the market,” Smith comments. “New forms of regulation shouldn’t just be limited to the relatively cosmetic business of capping executive bonuses. They should cut to the heart of the climate damage being inflicted by RBS and other banks through their expansion of the fossil fuel frontier around the world.”
→ No CommentsTags: Carbon Trading·Climate Crisis·Larry Lohmann·Oscar Reyes·REDD·Royal Bank of Scotland
Islandia: se agudiza la crisis y nacionalizan el principal banco
October 10th, 2008 · Español, FinancialCrisis
Publica hoy el diario Clarín la noticia siguiente:
Por: Reikjavik. AFP, ANSA y DPA. La crisis financiera sigue golpeando a Islandia. Ayer el gobierno nacionalizó el principal banco del país, Kaupthing, días después de haberlo hecho con las otras dos entidades bancarias más importantes, lo que en la práctica produjo un “corralito”. Al mismo tiempo, la bolsa islandesa suspendió todas sus operaciones hasta el lunes a causa de las turbulencias.
El fin de una época
October 9th, 2008 · Español, FinancialCrisis
Claudio Katz analiza hoy en un (breve) artículo del diario electrónico La Haine las similitudes y diferencias de la crisis actual con otras predecentes, y no acaba de coincidir con las voces que equiparan la caída de estos días con el desplome de 1929 y la consiguiente depresión de los años treinta. Vale la pena:
Muchos analistas buscan en las crisis precedentes una guía sobre el posible devenir del actual desplome financiero. Las primeras analogías con el desplome bursátil de 1987 o con el estallido de la burbuja tecnológica de 2001 han quedado totalmente superadas. En ambos casos los activos en juego eran acciones y no viviendas y ninguno de esos temblores desembocó en colapsos bancarios. Sólo precipitaron recesiones de acotadas duración e intensidad, que fueron remontadas por la reactivación del consumo en un plazo relativamente breve.
Descartada la semejanza con estos declives de poco alcance, se ha impuesto una generalizada comparación con la Depresión del ‘30. Numerosos economistas resaltan los puntos de coincidencia con este clásico antecedente del desplome general. Pero se equipara la eventual profundidad de la caída y no las modalidades de la crisis. Si la intensidad de la regresión productiva y social alcanzará esa magnitud es por el momento una incógnita. Pero la dinámica del proceso en curso presenta numerosas diferencias con el sendero que desató 1929.
The Financial Crisis and Sustainable Security
October 9th, 2008 · FinancialArchitecture, FinancialCrisis
The current crisis has three main characteristics:
- It is global. While most emphasis was initially on the sub-prime market in the United States, the crisis has spread rapidly through the UK and across Europe, has resulted in a 60% fall in the Shanghai stock market in a year, steep stock market falls across much of Latin America and bank crises in Australia and New Zealand.
- It has initially been a crisis of liquidity and confidence in the financial sector rather than a decline in industrial and retail activities, but it is expected to have a substantial effect on industrial and commercial output as sources of investment finance diminish.
- It is likely to last at least two years, with several more years for recovery.
Writes Paul Rogers in the Oxford Research group briefing
