Last week a debate on the Occupy movement took place on Newsnight between former Goldman Sachs partner Richard Sharp and activist/journalist Laurie Penny. It was revealing largely because of the ideological parameters within which the debate was conducted. Only a couple of years ago, it would have been considered inconceivable to have a discussion in the mainstream media over alternatives to capitalism . Thanks in large part to the Occupy movement, such debates are increasingly becoming the norm.
The Newsnight debate was also interesting in that it demonstrated what form the capitalist response to such challenges is taking. Certainly there are reformist positions - witness Vince Cable and Ed Miliband calling for a 'more responsible capitalism' (whatever that actually means). But from more reactionary segments the ideological backlash has quite remarkably involved summoning the spectre of socialism. On Tuesday Tory MP Elizabeth Truss suggested that soaring inequality was a result of too much government regulation of markets. And Richard Sharp (a former partner in a company that received a government bail out to the tune of $1.1 billion) suggested that the Occupy protesters should be protesting against socialism:
The Newsnight debate was also interesting in that it demonstrated what form the capitalist response to such challenges is taking. Certainly there are reformist positions - witness Vince Cable and Ed Miliband calling for a 'more responsible capitalism' (whatever that actually means). But from more reactionary segments the ideological backlash has quite remarkably involved summoning the spectre of socialism. On Tuesday Tory MP Elizabeth Truss suggested that soaring inequality was a result of too much government regulation of markets. And Richard Sharp (a former partner in a company that received a government bail out to the tune of $1.1 billion) suggested that the Occupy protesters should be protesting against socialism:
According to Sharp, massive government spending (oddly equated with socialism) of the British and US governments (among others) is the reason that we are in are now confronted with austerity, the implication being that 'the markets have nothing to do with it'. And thinking about it, from purely a rhetorical point of view, blaming socialism is an ingenious ideological sally, for it at once deflects attention from the real problem, while also precluding any socialistic imagination of alternatives.
The problem for its proponents is that it such an argument patently nonsense. Even putting aside claims that the crisis was caused by the systemic tendencies of capitalism, it is relatively easy to demonstrate that the markets do have something to do with sovereign debt crisis.
The problem for its proponents is that it such an argument patently nonsense. Even putting aside claims that the crisis was caused by the systemic tendencies of capitalism, it is relatively easy to demonstrate that the markets do have something to do with sovereign debt crisis.
Back in May 2010, just after the UK General Election that had brought the Con-Dem coalition to power, the deficit stood at £145 billion, including financial intervention. The amount George Osborne seeks to save over the course of the parliament is around £83 billion, which, when added to Labour's own brief period of deficit reduction, amounts to a £110 billion austerity programme. The cost of the bailout in simple cash terms was just under £124 billion (excluding guarantees and indemnities, as well as quantitative easing, which if included, would stand at over £1 trillion). Now I've never been that good at maths, but those figures of 145 billion, 110 billion and 124 billion seem pretty close to me.
So, despite the fact that financial markets demanded bail outs, plunging Britain into its currently unmanageable level of debt, and despite the fact that state owned shares have fallen in those same financial markets, allowing, in turn, markets to buy back government shares at a fraction of their original cost, the markets are completely innocent (according to the markets)!
There is of course, the argument that the £124 billion used to bailout the banks actually cost nothing, because the government now holds assets in the form of loans and shares which will be recouped when the banks are re-privatised. But it is becoming clear that British tax payers are set to make a massive loss from the bailouts. Earlier this month there was public dismay that Northern Rock was sold to Richard Branson's Virgin for £747 million pounds (rising to potentially £1 billion, depending on flotation or resale). The cost of Northern Rock's nationalisation was £1.4 billion.
Taking the further figures from the National Audit Office report, we find that the value of government owned shares is dramatically falling. The state bought 90.6 billion shares in RBS at 50.53p a share representing an outlay of around £45.8 billion. In March this year, the total value of these shares had fallen to £36.97 billion. At the time of writing (November 25th) one RBS share is worth 18.74p, meaning the government's stake is valued at around £17 billion - a fall of 62%. The state also owns 27.6 billion shares in Lloyds TSB, bought at a cost of 74.4p per share - an outlay of about £20.5 billion. By March this was worth £16 billion. Today one share in Lloyds is worth 22.16p leaving the government's stake valued at around £6 billion - a fall of over 70 %.
Taking the further figures from the National Audit Office report, we find that the value of government owned shares is dramatically falling. The state bought 90.6 billion shares in RBS at 50.53p a share representing an outlay of around £45.8 billion. In March this year, the total value of these shares had fallen to £36.97 billion. At the time of writing (November 25th) one RBS share is worth 18.74p, meaning the government's stake is valued at around £17 billion - a fall of 62%. The state also owns 27.6 billion shares in Lloyds TSB, bought at a cost of 74.4p per share - an outlay of about £20.5 billion. By March this was worth £16 billion. Today one share in Lloyds is worth 22.16p leaving the government's stake valued at around £6 billion - a fall of over 70 %.
So, despite the fact that financial markets demanded bail outs, plunging Britain into its currently unmanageable level of debt, and despite the fact that state owned shares have fallen in those same financial markets, allowing, in turn, markets to buy back government shares at a fraction of their original cost, the markets are completely innocent (according to the markets)!
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