Mark Carney isn’t due to move from being governor of the
Bank of Canada to governor of the Bank of England until next July. But the
intensity of the global economic crisis is so severe that policy makers can’t
wait that long.
Chancellor George Osborne, who tempted him here, and the
other beleaguered leaders of the capitalist world are prepared to discuss
Carney’s ideas and put them into effect as soon as possible – preferably before
the likely effects begin to be appreciated by those who’ll suffer the consequences.
Since the global crash in 2007/8, the top financial and
economic brains in the world have tried everything they know to bring about a
recovery. The shock of seeing the sudden shutdown of the credit markets
bringing world trade to a virtual standstill after the decision to abandon
Lehman Brothers prompted emergency action.
Governments encouraged central banks to pour trillions of
every currency into the world’s financial institutions and, it must be
admitted, the treatment had an effect. The patient’s heart was restarted. But
capitalism has been on life-support ever since. The system has drawn its energy
from the millions suffering the effects of “austerity” – soaring unemployment,
falling incomes, smashed up pensions, wrecked health and social care.
Interest rates offered by central banks have been held at
historic lows for years now, hovering just above zero – but below inflation, so
negative in real terms. Low rates paid to savers mean the few people lucky
enough to have any, have seen the income from their savings decline. The
majority with debts to service find above inflation rates charged driving them
further into poverty. It’s a deliberate policy called “financial repression”.
So what’s Carney’s big idea, and why is it so attractive? Does
it really amount to a revolution as the Financial
Times suggests?
Put simply, Carney says that its time to turn the attention
from keeping inflation at bay to a more positive focus on promoting growth. The
new target should be based on “nominal gross domestic product” – which brings
growth and inflation together in a single figure.
It’s a way of convincing themselves that governments and
their central banks can turn their attention from just rescuing the financial
system to “prioritising growth”, by which they mean furthering the interests of
the global corporations. It’s a refrain shared by the newly-elected centre-right
government of Japan ,
led by prime minister Shinzo Abe.
But Carney and friends fail to understand that whatever the
subjective intentions of the central bankers, or anyone else wishing for a “return
to growth”, the objective conditions of the capitalist economy are what
determines their actions. After several decades of growth stretched way beyond
its natural limits by the deregulation of the credit system, the crash simply
announced that the only way is down.
As the capitalist tide ebbs away, it continues to exposes
the desperate measures taken to sustain profits, whilst millions suffer. UBS
has joined Barclays in paying fines to the regulators for fixing LIBOR – the
world price of financial contracts – so that it favoured them and their
clients. As the regulators summed it up: “They manipulated UBS’s submissions in
order to benefit their own positions and to protect UBS’s reputation, showing a
total disregard for the millions of market participants around the world who
were also affected.”
No surprise there.
In its article on Carney, the Financial Times actually quotes Lenin’s famous dictum that “a
revolution is impossible without a revolutionary situation” to try to stand up
their story. The situation is indeed pregnant with revolutionary possibilities
– but not as the FT means.
In December 1917, Lenin drafted a decree for attention of
the revolutionary government. It called for joint-stock companies and the banks
to be taken into social ownership. Something to consider over the holidays.
Gerry Gold
Economics editor
