Dear All, On Saturday, Peter Bruce,* BusinessDay* editor tweeted as follows;
"Fascinating piece from Charles Moore, a traditional conservative on why the left may be right:http://tgr.ph/naoQTb ” I followed the link and saw this article in the UK newspaper, *The Telegraph*: I'm starting to think that the Left might actually be right *What with the the phone-hacking scandal, the eurozone crisis and the US economic woes, the greedy few have left people disillusioned with our debased democracies.* *By Charles Moore<http://www.telegraph.co.uk/comment/columnists/charlesmoore/> * 8:13PM BST 22 Jul 2011 It has taken me more than 30 years as a journalist to ask myself this question, but this week I find that I must: is the Left right after all? You see, one of the great arguments of the Left is that what the Right calls “the free market” is actually a set-up. The rich run a global system that allows them to accumulate capital and pay the lowest possible price for labour. The freedom that results applies only to them. The many simply have to work harder, in conditions that grow ever more insecure, to enrich the few. Democratic politics, which purports to enrich the many, is actually in the pocket of those bankers, media barons and other moguls who run and own everything. In the 1970s and 1980s, it was easy to refute this line of reasoning because it was obvious, particularly in Britain, that it was the trade unions that were holding people back. Bad jobs were protected and good ones could not be created. “Industrial action” did not mean producing goods and services that people wanted to buy, it meant going on strike. The most visible form of worker oppression was picketing. The most important thing about Arthur Scargill’s disastrous miners’ strike was that he always refused to hold a ballot on it. A key symptom of popular disillusionment with the Left was the moment, in the late 1970s, when the circulation of Rupert Murdoch’s Thatcher-supporting Sun overtook that of the ever-Labour Daily Mirror. Working people wanted to throw off the chains that Karl Marx had claimed were shackling them – and join the bourgeoisie which he hated. Their analysis of their situation was essentially correct. The increasing prosperity and freedom of the ensuing 20 years proved them right. But as we have surveyed the Murdoch scandal of the past fortnight, few could deny that it has revealed how an international company has bullied and bought its way to control of party leaderships, police forces and regulatory processes. David Cameron, escaping skilfully from the tight corner into which he had got himself, admitted as much. Mr Murdoch himself, like a tired old Godfather, told the House of Commons media committee on Tuesday that he was so often courted by prime ministers that he wished they would leave him alone. http://www.telegraph.co.uk/news/politics/8655106/Im-starting-to-think-that-the-Left-might-actually-be-right.html On reading this tweet and the article itself, I immediately thought of the concluding paragraphs of the *SACP Central Committee Discussion Paper *of September 2009 on the strategic task facing the party where among others it says; *"Working class hegemony means the ability of the working class to provide a consistent strategic leadership (politically, economically, socially, organisationally, morally - even culturally) to the widest range of social forces - in particular, to the wide range of middle strata, and in South African conditions, to many sectors of non-monopoly capital." * The correctness of this statement was again strengthened for me by another article I saw in the *Daily Maverick* (please forgive me for bombarding you with articles) about capitalism gone wrong! *Inside Job: The story of capitalism gone wrong, very wrong* Capitalism is a good thing. It allows the rainmakers to create and take risks. It allows people in the free world to make a difference by waking up early, working hard, creating value and hopefully making magic. But capitalism only works if there's a set of rules, a code of conduct predicated on commonly agreed principles of right and wrong. When we bend those rules and pervert capitalism, things get ugly. As they did – explosively - in 2008. By MANDY DE WAAL and RONNIE APTEKER How will the world remember Alan Greenspan? As a financial genius, the "greatest central banker who ever lived"? Or will history write off Greenspan as the man responsible for helping create the biggest Ponzi scheme in living memory? In 2006, when Greenspan stepped down as chairman of the US Federal Reserve, The Economist said he enjoyed "rock star" status and left office with accolades ringing in his ears. Four years later Greenspan would headline a documentary called "Inside Job", but this film would be anything but adoring. "Inside Job" - together with what the world now knows about the sub-prime crisis - lays a heavy burden of responsibility on Greenspan (and others) for the global economic crisis. "Inside Job" describes a system whereby Greenspan, the US government and financial institutions in a country best known for free markets and promoting a free world, played their roles in corrupting the rules of capitalism. The result was a recession that rippled around the world and left few untouched. In "Inside Job" director Charles Ferguson tells the jaw-dropping story of how the deregulation of the American financial empire seeded its downfall. To lead in to this complex narrative of financial collapse, Fergusson tells the story of Iceland. Before the turn of the century, the Atlantic island country enjoyed low tax rates, was one of the wealthiest and most developed nations in the world, boasted low rates of unemployment and its government had very little debt. In 2000 Iceland's government took the decision to deregulate its three largest banks in what "Inside Job" calls "one of the purest experiments in financial deregulation ever conducted". The result was disastrous. The banks revelled in excess and unchecked greed. They developed an enormous appetite for risk and went on a borrowing spree the likes of which had never been seen in Iceland before. In a few short years Iceland's banking sector collapsed. "Finance took over, and more or less wrecked the place," Icelandic economist Gylfi Zoega says on film. "In a five-year period, these three tiny banks, which had never operated outside of Iceland, borrowed $120 billion, 10 times the size of Iceland's economy. The bankers showered money on themselves, each other and their friends. There was a massive bubble. Stock prices went up by a factor of nine; house prices more than doubled. The banks set up money market funds. And the banks advised deposit holders to withdraw money, and put it in the money market funds. The Ponzi scheme needed everything it could, huh?" This collapse could have proved an early warning signal for the US, but policy makers like Greenspan were as blind to Iceland as they were to America's institutional memory. The Great Depression that lasted four cruel years, ended in 1933, and only really beaten by the advent on World War II, appeared to leave no lasting lessons. The tragedy brought home by watching "Inside Job" is the realisation that the global financial meltdown that saw millions of ordinary consumers lose their homes, jobs and savings, was entirely avoidable. "It was a completely avoidable crisis; indeed, for 40 years after the reforms following the Great Depression, the US did not have a single financial crisis," says Ferguson. "However, the progressive deregulation of the financial sector since the 1980s gave rise to an increasingly criminal industry, whose ‘innovations’ have produced a succession of financial crises. Each crisis has been worse than the last; and yet, due to the industry's increasing wealth and power, each crisis has seen few people go to prison. In the case of this crisis, nobody has gone to prison, despite fraud that caused trillions of dollars in losses." To show how people like Greenspan created an environment that made the sub-prime crisis possible, Fergusson introduces viewers to 'Reaganomics'. The Reagan administration thought deregulation was a great idea, and in 1982 the change in economic policy enabled financial companies to use depositor funds to make risky investments for the first time. In the documentary, TV journalist and editor of NBC Nightly News Tom Brokaw calls this "the biggest banking heist in our history”. Thousands of financial executives went to jail during this time, one of the worst culprits being Charles Keating. In the mid-eighties Keating took over the Lincoln Savings and Loan transforming it from a $1 billion savings, loan and mortgage business into a $6 billion high-risk investment company. Elderly depositors were urged to purchase high-risk, uninsured bonds that became absolutely worthless when Keating's scheme imploded. Before his scam unravelled Keating was under investigation and hired an economist called Alan Greenspan to write to regulators and say he approved of Keating's investment scheme. Greenspan got $40,000 for his services. When the flawed scheme went belly up Keating went to jail, but Greenspan was rewarded by being taken into government under Reagan's wing. Greenspan was a renowned free market fundamentalist and the deregulation process he was involved with under Reagan endured through to Clinton and Bush. "Inside Job" shows that Greenspan so avidly supported deregulation that it would blind him to the law. "Inside Job" says Greenspan even ignored banking mergers that "violated laws passed after the Great Depression, which prevented banks with consumer deposits from engaging in risky investment banking activities." In an unregulated market Greenspan and his cohorts believed that banks and other financial institutions would do the right thing by "self-regulating". Reality proved them wrong. The sub-prime vehicle was created by deregulated banks, and mushroomed from a $30 billion-a-year industry to more than $600 billion a year in just a decade, creating the world's biggest Ponzi scheme. Financial institutions did anything but "self-regulate" - they luxuriated in greed and excess. Warning bells sounded loudly about the same time that Greenspan stepped down. Shortly afterwards the market for complex derivatives collapsed, and banks were left with billion-dollar loans that couldn't be unloaded. Global investment giant Bear Stearns ran out of money and was bought for next to nothing by JP Morgan Chase, while home loans leviathans Fannie Mae and Freddie Mac had to be taken over by the government. When Lehman Bros ran out of cash and went belly up in September 2008, the writing was on the wall. As blood flowed on Wall Street, the owners and leadership of financial institutions walked away from the crisis with their personal funds relatively untouched. Ordinary folk like pensioners were completely wiped out and left destitute. Government bailouts arrived and as they did banking leaders awarded themselves bonuses and flew themselves off to luxury spas to deal with the “stress”. The US government would appoint a Financial Crisis Inquiry Commission whose final report would blame deregulation for the crisis. Time magazine pointed its finger directly at Greenspan who would refuse to accept blame, but would go as far as to say that his faith in deregulation had been "shaken". "Inside Job" won the 2011 Academy Award for best documentary and Ferguson would use his acceptance speech to lambast Wall Street and the financial industry. "Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by financial fraud, not a single financial executive has gone to jail, and that's wrong," Ferguson said to an audience that burst into applause. Perhaps the audience applauded because they understood the truism that money made by hard work and risk taking should always be celebrated. But money made by exploiting legal loopholes is a tragedy that demands accountability. If a repeat of this sub-prime debacle is to be avoided it means that the greedy and corrupt must be brought to justice. What "Inside Job" shows is that the art of hedging funds is not an act of industrial creation or generating real business value. It is simply about the manipulation of numbers, and the exploitation of loopholes. If the world's hedge fund managers disappeared tomorrow, would anybody care? There is value in financial consultants and money managers, but when money managers create events that leave them with millions of dollars in their personal accounts and those they were meant to be looking after are destitute, what is there to celebrate? The disaster we've all been left with is a system that hasn't altered despite the sub-prime crises and subsequent global financial meltdown. No one has taken accountability, no one was punished and the fat-cat culture of taking without making or creating real value has not stopped. The real kicker is that the fat cats who accumulated so much money took no risk! Their real skill is in perverting capitalism and destroying trust. Anyone can make a big profit in the short term with twisted accounting practices. This leads to the seduction of massive bonuses based on phantom profits in an unsustainable business system that's just begging ultimately to collapse. Regulations can serve to protect and as America clearly showed the world, deregulated financial markets failed because greed got the better of everyone. The question these days is not if, but when will the next crisis hit? DM [DailyMaverick] http://www.thedailymaverick.co.za/article/2011-07-18-inside-job-the-story-of-capitalism-gone-wrong-very-wrong Am I being overly optimistic or naive to think that maybe, just maybe it is beginning to dawn on some capitalist adherents and believers that, as the CC discussion paper says *"There are no solutions within capitalism for these crises of capitalism. The crises are not the result of the failure of capitalism, but of its very successes! The crises are not "abnormal", they are systemic and inevitable ...as long as we remain imprisoned within a capitalist system."* -- Mthimkulu Mashiya -- You are subscribed. This footer can help you. Please POST your comments to [email protected] or reply to this message. You can visit the group WEB SITE at http://groups.google.com/group/yclsa-eom-forum for different delivery options, pages, files and membership. To UNSUBSCRIBE, please email [email protected] . You don't have to put anything in the "Subject:" field. You don't have to put anything in the message part. All you have to do is to send an e-mail to this address (repeat): [email protected] .
