Running out of road

James Turley looks at the G20 and continued US-UK domination

Over the weekend, finance ministers and officials from the G20 group of industrialised states met in London, ahead of a summit of G20 leaders in Pittsburgh later this month.

The result of the meeting is, to say the least, very telling. The main talking point was a set of proposals from the French and German governments which amounted to an absolute upper limit on bankers’ bonuses. Arrayed against that position, to the surprise of absolutely nobody, was the old Atlantic alliance of the United States and Britain. Still more predictably, America got its way – the meeting agreed instead to “explore” unspecified “means” to limit bonuses. “The bankers,” quipped an apoplectic George Monbiot, “must be quaking in their Gucci boots” (The Guardian September 7).

Most media attention was focused on the headline issue of City bonuses. As anybody who paid any attention to the political discourse of the last year and a half will know, it threw up no end of vigorous denunciations of the ‘greedy bankers’ whose wanton irresponsibility sent the world into financial meltdown. Apparently it had nothing to do with capitalism’s cyclical crises, leading to overproduction and the reliance on fictional capital.

Even as he was engaged in scuppering plans to punish the bankers, Alastair Darling insisted: “We are determined to take action to stop banks or other financial institutions getting themselves into a situation where their pay and reward practices actually encourage people to take risks which bring their institutions into a situation where they could be brought down with catastrophic results.” Gordon Brown even denounced bonuses that encourage “unacceptable” risks as “offensive to the general public” (The Observer September 6).

However, Darling and Brown called the Franco-German proposals ‘unenforceable’ – which, to an extent, is true. It is just as true that tax on wealthy individuals and corporations is inevitably avoided, since the money it takes to hire a small army of accountants is nevertheless dwarfed by the sums of money that can be saved on tax bills – capital finds ways to subvert obstacles to its valorisation. Yet it remains the case that a certain amount of corporation tax – even after three decades of open neoliberalism in power – is collected. And there are historical precedents for serious curbs on the freedom of movement of high finance, notably following the Wall Street crash and subsequent depression.

The repeal in 1998 of the Glass-Steagall Act, which barred American banks from operating in both investment and retail sectors simultaneously, was widely cited as an indirect cause among many of the recent economic convulsions. The flipside of that, however, is that until 1998 American banks faced genuine obstacles combining investment and retail banking, without that resulting in any particular flight of capital.

Even if an upper limit on bonuses is impracticable, should we not expect from Brown and Darling some more readily enforceable measures – something like the Glass-Steagall Act, for example? None are forthcoming – our dynamic duo instead tout the findings of the Walker report, produced by an investment banker-turned-regulator, recommending some utterly cosmetic changes to shareholder voting, the relative power of board members as opposed to executives, and so on.

Then there is the Basel committee of central bank governors and financial regulators, which has suggested that banks be barred from borrowing more than 25 times their asset value, and some new rules in terms of how much of that asset value must be composed of solid holdings, as opposed to derivatives.

So what is the real reason for Brown’s and Darling’s lack of enthusiasm for imposing stricter regulation on the banks? One natural reaction, particularly among liberals, is to consider Brown as simply cowardly, or fanatically pro-business, unable or unwilling to take on the City. This is Monbiot’s argument: “The political establishment is in thrall to the financial establishment.” Even some on the right take this tack – particularly in criticising the scale and nature of the bailouts and nationalisations of the last couple of years.

Undoubtedly, there is an element of truth to this. Brown, in particular, has a record of being peculiarly obsequious towards the Square Mile. Monbiot cites some rather wince-inducing statements from the then-chancellor, who declared to an audience of financiers that “in budget after budget I want us to do even more to encourage the risk-takers”.

Yet this view underestimates the objective dynamics at work. In the early days of New Labour, it is worth noting, the noises from the top were those of the most timid reformism. ‘Triangulation’ – finding a middle ground on any given issue acceptable to Middle England, without too drastically alienating core support – was the basic tactic. The change of emphasis as the years draw on is coterminous with the unwillingness of the capitalist class to grant even the minimal reforms desired by New Labour without loud protest from lobbyists and the rightwing press.

As New Labour ran out of road for reforms, so it began simply to identify with the real programme it thereby offered – a brand of Thatcherism even more intense than the original strain, precisely because the reconstruction of the economy and the political landscape of which Thatcher is both a symptom and a symbol was, by then, that much further entrenched.

Now, that political consensus – that any concession to ‘socialism’, even in its most moderate social democratic definitions, has become impossible – has been brutally shaken even in the heartlands of finance capital. Any proposal that Gordon Brown, in his days as chancellor, nationalise large parts of the banking sector would have been met with laughter, shock and derogatory rhetorical references to the Soviet Union. In America, with its domestic history of the most swivel-eyed anti-communist paranoia, the idea would look even loopier. The actual history of the last few years has thrown bourgeois politics into disarray. The effect is far greater at those points in the global system which have been hit hardest, and faced domestic political meltdown.

Yet in the case of Brown, Darling and business secretary Peter Mandelson, the identification of ‘British interests’ with those of the City does not appear to have broken down. There has been no dramatic sea-change in the politics of high finance – simply a litany of banal denunciations of the greedy. The bank nationalisations have not involved any serious curbs on financial activity. On the contrary, they are plainly enough just a way to prop up the sector until it can stand on its own again. Every public spending budget – even most of those previously ‘ring-fenced’ – has to be cut to keep this going.

In the background, of course, are accumulating indications that the crisis has, in the immediate term, bottomed out, and the much-touted ‘green shoots of recovery’ have finally arrived. Never mind the caveats – that recovery is likely to be slow, with years of stagnation and no serious drop in unemployment – this moment of optimism is enough to allow economic policy to return to that ‘business as usual’ we were all assured had been buried with Lehman Brothers.

The reality is that, whatever it has changed, the crisis has not opened up any serious alternatives for the development of the global economy; neoliberalism has not been shattered like the Keynesianism of the long boom was shattered by the 70s crises, or ‘roaring 20s’ laissez faire was demolished by the great depression. This is because the possibility of that kind of realignment is fundamentally a political question, and has to do with the balance of class forces in the political sphere. In the 1970s, a combative working class – in the context of the cold war – presented an objective need for capital to go on the offensive; in the 1930s, the rapid growth of mass movements forced concessions where it did not provoke the bourgeoisie’s doomsday weapon, fascism.

Today, in the metropolitan countries, the workers’ movement is comparatively impotent. Many far left organisations expected, almost by birthright, to reap political rewards as the crisis began to develop. Yet it just has not happened – and that is because only those organisations which have already built serious roots in the working class can hope to truly make an impact – be that forcing concessions or effectively resisting attacks – when capitalism inevitably runs into crisis.

Above all, the G20 wranglings underline that this crisis is another episode in the long-term decay of capitalism as a system. This is particularly clear in Britain. The political legacy of Thatcher is the gutting of the workers’ movement, by successfully facing down the unions and destroying what local democracy existed when she took power. New Labour has busily engaged in completing this in some ways suicidal project, gutting itself of any kind of accountability of representatives to the membership. Capitalism has, in the short term, destroyed Labour as the ‘party of crisis’ it once was.

A serious shift in economic policy is thus rendered most difficult when, by most accounts, it was most necessary. At the base, it is clear who will suffer for all this – the working class. We will have no shortage of attacks to defend against in the coming period.