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Random thoughts on an economic crisis… June 21, 2011

Posted by WorldbyStorm in Economy, European Politics, Irish Politics, The Left.

An unusually interesting piece by Madeleine Bunting in the Guardian last month where she engaged with the issue of the lack of response by the public over the banking/financial/economic crisis. She noted that:

… the biggest puzzle is the public. The enormous advertising campaigns of the banks must play a role; some say the total spend last year was around £30m. The cutesy animation and friendly “real” bank staff must work at some level to delude the public, to calm and reassure that all is as normal. It’s trading on some folk memory of banks as sober and reliable. Add to that the massive patronage – of the arts, sport and good works – in the last few decades designed to inspire shock and awe.

This public deference is also evident in how effectively the banks have used complexity and expertise to dodge accountability. “You wouldn’t understand” was the mantra provided to regulators, politicians and the public, just as priests in a cult might tell devotees. The complexity required a superior intelligence and skill, insisted the “masters of the universe”, as they recruited the sharpest minds. This is a version of the meritocracy against which Michael Young warned so presciently in 1958, using a phrase that has been stubbornly misunderstood ever since. He recognised that meritocracy was a form of elitism; it could be as ruthlessly exploitative as aristocracy and, in both, deference and patronage play integral roles. It’s worth remembering that Young predicted revolution by the disfranchised against the meritocracy – but not until 2033.

I think that the answers to this are to be found in the same area as those discussed recently in relation to the John Lanchester book. Simply put the orthodoxy is the overwhelming discourse, there is a sense that this orthodoxy is correct and crucially that it is pointless to explore alternatives. In a curious way it reminds me of the old trope about ‘there being no life outside the party’ for ex-CPers with perhaps the same sort of manichaean basis to it.

There are other issues at work in relation to banks in particular. Not that long ago the hierarchical relationship with banks was one of customers being near supplicants when making applications for loans. And that top down relationship I think goes beyond the idea of banks as ‘sober and reliable’. I think it feeds into an approach where the bank was not quite entirely, but to some degree almost unquestionable. After all the bank had something approaching the power of life and death.

And allied with that then there’s the reality that for many the bank was the repository – quite literally – of much of what they had, whether in terms of mortgages or savings. It’s very difficult to turn that around conceptually to being a relationship where the customer is giving something to the bank rather than that the bank is holding something over the customer. It’s almost as if the bank has an hostage – and perhaps explains why some of the talk of mortgage boycotts and such like has run into the ground.

All this is impressionistic and it would be useful to see something more empirical brought to bear on the topic. But widening this out it explains perhaps why public anger is so diffuse about the crisis.

What’s most curious about this is that up until even two decades ago the idea that states across the globe would adopt such essentially passive measures in the face of recession would have seemed wildly at odds with previous economic practice in the post-war period. The idea that ‘austerity’ was the sensible course of action in recessionary times would have been regarded as hugely counter-intuitive for the obvious reasons, that such austerity stifles the very growth which is needed to pull away from recession.

But again as touched on by Lanchester, the capture of social democratic parties intellectually by the neo-liberal right, or rather the retreat or surrender by such parties to nostrums of the impossibility or inadequacy of interventionism is perhaps the key issue. One can view this as a loss of heart or perhaps a poorly worked out economic foundation to their philosophies (in that they didn’t offer strong counter critiques) or whatever. One might also attribute it to a dynamic where winning back state power – even if once won they resiled from engaging with the potential of that state power was more important in the short term than demonstrating through work on political economy that state power [and by the way I’m not an out and out statist and have always believed that intervention should be across a spectrum rather than narrowly focused just on the state] had an efficacy in such contexts.

I’ve been listening to a lot of US politics podcasts, most notably, Left Right & Centre from KCRW, which take the view that the ECB and eurozone as a whole are replicating the worst mistakes of the US banking crisis by attempting to support the banking sector over the economy.

Their incomprehension at the policies being pursued here in particular is deeply disturbing and perhaps all the more so because it is generally positioned within a more rather than less orthodox approach. As Matt Miller said on the latest edition of LR&C:

“It’s also true that Greece took on tons of debt that was beyond their ability to pay… and that they’ve huge issues in their tax collection and public employment that are legitimate issues to be revisited…

But the real scandal, it seems to me, and this happened in Ireland… is that the entire effort of European politicians is to avoid having the private sector bank bondholders that are holding Greek debt from taking any reduction from 100% on the dollar of the debt that they’ve taken on and the pressure, and the idea that we’ll insulate banks because they don’t have enough capital to withstand losses, is really what got us into this mess in the first place, banks banks operating with very thin levels of capital whose losses end up becoming nationalized in this situation.”

And they point to the intrinsic problem of the eurozone itself preventing an orderly devaluation. This doesn’t sound good. And that’s beyond the capacity of the Greek – or this – polity to absorb what is being asked of it.

That thought in mind Constantin Gurdgiev makes an interesting point in the latest Village magazine in the front page piece on the economy. He notes:

…the periphery label attached to Portugal, Ireland, Italy, Greece and Spain. In 2010, its ‘periphery’ accounted for 35% of Euro-area GDP, 40.5% of its population and 40% of the total gross government debt. I doubt any US administration would ever be arrogant enough to call, say, the States west of the Rockies, the ‘periphery’…

Perhaps Gurdgiev is reaching a little in incorporating Italy into the PIGS acronym, perhaps not. But this surely feels like a crisis that the EU is remarkably unprepared to face up to. And even if we calibrate an intrinsic bias against the EU into the statements of those noted above that still leaves little room for comfort.

And that led to another thought. Last week I watched two films about the resistance to the Nazi’s, the interesting Flame and Citron, set in Copenhagen and following the fortunes of two nationalist resistance fighters and the equally interesting, but perhaps more harrowing, Army of Crime which followed a Paris based Resistance group which was largely but not exclusively made up of non-French nationals and Communists. I’d recommend both, but something very curious struck me during the latter. Throughout the film the narrative is interspersed by Vichy and occupied France radio announcements about the activities of the Resistance.

Listening to the radio announcers detailing the ‘crimes’ against the Nazi’s and the infrastructure there was an almost overwhelming urge to shout at the screen ‘but it’s an occupied country and they’re resisting and you’re pretending nothing has changed’.

Oddly familiar.

Another thought. I’m not a believer in conspiracy theories, though I find them fascinating. And I don’t believe this crisis was deliberately generated on behalf of anyone in order to suppress populations. That said I do think that it is proving to be an educative moment for some of the great and good as to how passive populations are and how much can be removed from them before there is serious unrest. I have little doubt that the lack of response is being filed away for future use – in much the same way as the response to the security measures taken during the visit of the Queen provided a not dissimilar educative moment for the Irish state.


1. Phil - June 21, 2011

I think there’s a tremendous amount of ill-feeling towards the banks – politicians can always get a jeer by mentioning “bankers’ bonuses”. It just doesn’t find any coherent political expression, for a number of reasons.

The ‘hostage’ point is important. Thing about the banks is, they’ve got our money and (for many people) they own our houses. Rebel against the boss and you could lose your job; rebel against the bank and you could end up on the street. The more immaterial banking becomes, the more real that atavistic fear of losing everything seems to be – it’s all numbers on screens, they could easily turn to zero one morning. So there are obstacles to anti-bank mobilisation; there’s also nobody leading it or advocating it. In terms of big party politics, anti-bank would also be anti-all parties (would the Greens even get behind it?) Lastly and most importantly, there’s no single demand, and it’s not clear what a good demand would be. Bonus payments are a good issue but necessarily a transient one – “banks, cut the bonuses you’re about to pay out” is good, “bankers, pay back the bonuses you’ve just had” is reasonable, but “bankers, pay back the bonuses you had in February” doesn’t really work. “Hands off Greece”? Nobody knows what would happen in Greece if the EU did drop the demands for repayment, and the chances are they’d be in crisis anyway.


2. CL - June 21, 2011

‘the capture of social democratic parties intellectually by the neo-liberal right, or rather the retreat or surrender by such parties to nostrums of the impossibility or inadequacy of interventionism is perhaps the key issue.’ Yes.
The hegemony of the neoliberal ideology was the result of a sustained political and ideological offensive beginning in the 1930s. The economic collapse due in large part to the neoliberal economic logic has resulted in a reaffirmation of policies based on it. This is the irrationality of the current conjuncture. An interesting piece by Dean Baker on IMF incompetence is relevant.


3. Garibaldy - June 21, 2011

Flame and Citron is a great film. Highly recommend it. Army of Crime is on the to watch list.


4. ejh - June 21, 2011

Lloyd George sent for the Labour leaders, and they went, so Robert told me, ‘truculently determined they would not be talked over by the seductive and eloquent Welshman.’ At this, Bob’s eyes twinkled in his grave, strong face. ‘He was quite frank with us from the outset,’ Bob went on. ‘He said to us: “Gentlemen, you have fashioned, in the Triple Alliance of the unions represented by you, a most powerful instrument. I feel bound to tell you that in our opinion we are at your mercy. The Army is disaffected and cannot be relied upon. Trouble has occurred already in a number of camps… In these circumstances, if you carry out your threat and strike, then you will defeat us. But if you do so,” went on Lloyd George, “have you weighed the consequences? The strike will be in defiance of the government of the country and by its very success will precipitate a constitutional crisis of the first importance. For, if a force arises in the state, which is stronger than the state itself, then it must be ready to take on the functions of the state, or withdraw and accept the authority of the state. Gentlemen,” asked the Prime Minister quietly, “have you considered, and if you have, are you ready?” ‘From that moment on,’ said Robert Smillie, ‘we were beaten and we knew we were’.”


Jim Monaghan - June 21, 2011

Similarly he did the same with our representatives in 1922. First he broke Griffith and then the rest. So a civil war in Ireland


FergusD - June 21, 2011

Yeah, a nasty piece of imperialist work was Lloyd George in my opinion, but he is not viewed like that in the UK. Same goes for Winston Churchill.

As for the banks and the crisis TINA rules supreme pretty much. As has been said, what is left of social democracy seems to have given up on a serious challenge. Some friends of mine want me to re-join the UK Labour Party, I see no point. Even as an “entrist” what would be the point? Are these parties now so hopeless that if there was a significant movement of popular opposition in the RoI or UK that they would lead it or be a part of it?


ejh - June 21, 2011

The reason for my invoking the Lloyd George/Smilie incident is the punchline.

I know that the seocial democratic parties have no altnerative, but how much of one do we have? One which we can get other people to believe?


5. Brian Hanley - June 21, 2011

You have to remember that popular culture is weighted hugely towards accepting that success in business/finance is the norm and the highest thing that can be aspired too. Look how programmes like the Apprentice or Dragons Den are hyped, and how some of the non-entities who feature on them are held up as experts on the economy or even, god help us, presidential candidates. Can you imagine a reality show featuring shop stewards trying to organise low-paid workers? Or a competition whereby people tried to organise strikes? I read an article recently about how class is presented on British television now, ‘chavs’ etc. There are almost no popular presentations of the idea of solidarity, the world of work etc. What you can do about it is another question of course.


6. Jim Monaghan - June 21, 2011

If the Greek government falls, then all bets are off. The Greek people are now in the firing line big time. Our thoughts should be with them. Blackmailed by the elites, betrayed by their own. After them us.


yourcousin - June 21, 2011



fergal - June 21, 2011

Sickened by the nationalist claptrap used by Noonan and the rest of them,and Jim you’re spot on,our thoughts should be with them.How many times have we heard we’re not Greece and never a hint of solidarity offered to the people of Greece.Better still Vol de mort himself B Lenihan openly boasted of us making money from the first Greek bailout in May 2010….on the backs of pensioners in Athens,how brave
How come we haven’t limked up with Lisbon,Athens and Madrid?Haven’t the elites here been preaching to us about European unity/solidarity for the last 40 years,what about it then?
In May 2010 Dany Cohn-Bendit informed the Euro parliament that Athens had bought nuclear/military hardware off Paris and Berlin to the tune of 3 billion euros in 2009,and has a standing army of 100,000(Cyprus/Balkans) who is telling the militarists to get lost?How come the EU can’t try to solve the Cypriot issue?


Pope Epopt - June 21, 2011

But is there any sense that the Irish will ever be capable of the sustained resistance demonstrated by the Greeks? I’d like to think so, but regrettably I don’t.

The Greeks, along with the Spanish, or possibly re-inventing democracy for us. The lessons learned by the powerful, as per the post, are that the Irish people will put up with anything.


fergal - June 21, 2011

+1, I have a friend who has what she calls “the quadruple theory of Irish history” which explains why we’re so passive
1 defeat of 1798 and rise of counter rev. forces,killed off radicals and made others emigrate
2 famine killed off the rural lumpens
3 slaughter of WW1 killed off another dangerous class
4 ongoing 20th century emigration
She claims these 4 events haved robbed us of our resisters
Question is what does it say for the rest of us ?


LeftAtTheCross - June 22, 2011

Fergal, I’m not so sure that the NI troubles fit with that model of passivity. Perhaps part of the picture is the distraction from social issues offered by ethnic division, the resulting violence and the passive support offered to the militarists by sections of the population, the capturing of radicalism by the nationalist stream, and in the aftermath of the GFA some mixed feelings about the effectiveness of struggle outside of mainstream politics. Not offering this as a complete answer either, but I’m inclined to believe that societal struggle-fatigue may be a part of the reason for passivity.


ejh - June 22, 2011

There has to be something in the emigration theory, though?

I’m sure this must have been discussed and debated many times. I’d wonder whether comparison gets made with other countries whose popuations undergo a great deal of emigration, particularly among young people. Which must be true of a lot of countries in, say, Central America, Africa and so on.


Earl Williams - June 22, 2011

Is ‘lumpen’ really an appropriate concept in the context of rural 1840s Ireland? fergal’s friend may have a point with the four factors she mentions, but looking at the famine, didn’t the memory of the famine play a major role in sparking the rise of the Land league and the beginning of the land war? If there is a connection between events like the famine and later passivity, it’s hardly a straight line.

Emigration definitely acted (and is acting now) as a safety valve, though.


7. Tomboktu - June 21, 2011

Brian Hanley in comment # 5: “You have to remember that popular culture is weighted hugely towards accepting that success in business/finance is the norm and the highest thing that can be aspired too.

Indeed. Joan Burton in Vincent Browne’s TV show the night Brian Lenihan died told how when she and Eamonn Gilmore were brought in to the Dept Finance as the banking (element of the) crisis was emerging asked about Anglo Irish and Quinn insurance and was (she says) basically told not to worry her pretty little head: Quinn and Fistzpatrick were serious business men who knew what they were about.


8. Pope Epopt - June 21, 2011

If you have 20 minutes, this presentation by Richard Koo on what can be learned from the Japanese balance sheet recession with zero interest rates is well worth spending some time on. For a decade the Japanese government spent consistently, while the private sector paid down it’s debts and failed to invest. Their deficit grew dramatically, but they did not repeat the experiences of the Great Depression. The Chinese have done a similar thing since Lehman with 17% of GDP injected.

Pretty much diametrically opposite to the ECB/IMF line.


Pope Epopt - June 21, 2011

Two decades, actually – and the property prices collapsed by 87% during this time.


Pope Epopt - June 21, 2011

The conclusion is that political economy is going to deepen the crisis of capitalism in Europe and the US at least.


Pope Epopt - June 21, 2011

And that an authoritarian model of capitalism rather than a nominally liberal democratic one is likely to prevail.


CL - June 24, 2011

Japan has been in the economic doldrums for 20 years because the massive stimulus the govt has injected into the economy is insufficient to compensate for the collapse of private demand.
The Irish situation is similar but also different. Japan’s govt. debt is equal to 200% of GDP, but its almost all owed internally. And unlike Ireland Japan has its own central bank and so can control interest rates and money supply.
And in Ireland the IMF/EU austerity policy is a deliberately designed ‘internal deflation’ to reduce wage costs.


9. make do and mend - June 22, 2011

“Ciudad Juarez is all our futures. This is the inevitable war of capitalism gone mad

Mexico’s drug cartels are actually pioneers of the global economy in their business logic and modus operandi”


It may be as simple as the beliefs we accept, whether we like them or not, and the superficial stories we come to understand which capture us, and eventually immobilise us.

Capitalism says we do as we like with the talents we have. If I choose to buy power and use the power to my advantage, no one can oppose me. I’m a free person in a free market. I consume society, and those in it, like I consume meat. I do because I can, and because you let me.


LeftAtTheCross - June 22, 2011

Socialism or barbarism, them’s the choices.


10. John Lanchester on Marx « The Cedar Lounge Revolution - April 10, 2012

[…] some extremely interesting stuff on the economic crisis (we’ve discussed him here, here, and here). I’ve just come across a podcast and article by him from the LRB. The podcast is an hour […]


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