After a brief period of destabilization, self-justification and the occasional mea culpa, the very people and institutions that plunged the world into crisis have re-emerged unscathed, as the fount of truth and all reasonable policy.
Remember how the doctrines of market omniscience, infallibility and self-regulation and the dangers of state interference in the financial industry were suddenly revealed as treacherous myths? How investment bankers stopped telling people what they did for a living? How public fury at massive bailouts and bonuses seemed for a moment ready to explode in unpredictable directions?
The public was right. Thanks to two Bank of England officials, we know that by the end of 2009 the UK, US and European governments had handed over 14 trillion dollars ($14.000.000.000.000) to the banks in a variety of support packages. In the cases of the UK and US, this largesse showered upon reckless and irresponsible financial institutions amounted to nearly three-quarters of their GDP.
What, then, have the people of the UK, the US and Europe received in return for these colossal bailouts which did not fall from the sky but were taken from citizens’ pockets? Calls for more sacrifices. Government deficits ballooned largely because of spending and borrowing to save the financial system. It had to be saved, yes, but not at the expense of ordinary, mostly poor and middle-class people.
Citizens are now paying a second time and governments have proved that they govern on behalf of that tiny fraction I call the Davos Class—the financial, economic and political elites who meet each January in the Swiss ski resort to take stock and discuss their next moves.
Ordinary people, however, are subjected to austerity programs involving deep cuts in public services, higher taxes, slash-and-burn measures applied to salaries, pensions and benefits; longer working lives and growing unemployment.
All but the most privileged children will suffer as national education systems are subjected to stringent cutbacks. Inequalities will continue to rise. Promised investments in science, clean energy and a greener future are placed on hold. Ecological gridlock today means no guarantees that humans can continue to survive, much less thrive, in tomorrow’s climate.
So can we trust the banks this time? Will they start paying their fair share? Don’t count on it. There have been some gestures, but as the Financial Times recently headlined, “Osborne’s levy is not all that taxing”. The banks that were “too big to fail” before the crisis, have become even more so. Many hold dangerous amounts of sovereign debt. Serious regulation and restructuring are not on the cards. The financial sector still poses grave systemic risks but governments have accepted virtually all its demands. In 2008-2009, the panic-stricken G-8 and G-20 emitted a few positive reformist noises but have now retreated into self-satisfaction and business as usual. We have, in short, the perfect recipe for another major casino crash. National and international officials will have to intervene again in the wake of future financial follies.
What could be done if governments showed some backbone; if citizens forced them to act? The world is awash in money but policy-makers are not going after it where it is. Take the recent annual World Wealth Report from the brokerage house Merrill-Lynch which announced a satisfying rebound in the total liquid assets of some ten million “High Net Worth Individuals” worldwide. These select few enjoy collective wealth of $39 trillion, about three times the GDP of the United States or the European Union. They are also mobile enough, and rich enough, to protect themselves against taxation.
Closing down tax havens would provide at least $250 billion in extra tax revenues to various States. A small tax on all financial transactions at a rate of one per thousand could provide up to $600 billion a year—quite enough to repair our social benefits systems in the North, pull the South out of endemic poverty and convert to an entirely green economy. Banks that wouldn’t be here but for citizens’ contributions should be at least partially socialized and obliged to lend to small and medium enterprises, especially those with a viable social or ecological project, now starved for credit.
Such proposals are practical, not utopian, and the techniques to implement them are well-known. The prospect of a greener, fairer, richer world lies before us and the quickest road to get there will be the one that citizens take together, realizing that the interests of any number of seemingly disparate groups—small farmers, workers and trade unionists, small/medium businesses, women, ecologists, pensioners, students, NGOs – are actually the same. Once they realize this and act upon that understanding, policies that punish the innocent while rewarding the guilty will no longer be an option.
The English version of Susan George's latest book "Whose Crisis? Whose Future" is now available, (published by Polity Press).
Susan George is one of TNI's most renowned fellows for her long-term and ground-breaking analysis of global issues.