Northern Rock Nationalisation : Don’t Believe the Hype

By Travis Fast

Over the last couple of months one could be forgiven for thinking that the world had reverted to those heady pre 1970s days. First, the phrase market failure crept back into to the popular lexicon in the wake of the subprime meltdown; then a concert of central banks stepped in to underwrite and manage financial markets; then growth came to preoccupy central bankers over price stability; then deficit spending became not only acceptable again but was championed by the bastions of fiscal probity; and now alas, a Labour government has nationalized a major financial institution. Indeed, if one could only see the trees and not the forest it would seem as though there was decisive shift in the political economy of macroeconomic management to the left.

Such a myopic vision would however be remiss. Crucially context matters. These are neoliberal times. It is, after all, David Miliband who stalks the halls of New Labour and Whitehall–not his father Ralph. Understood correctly, the litany of events outlined above must be viewed through the lens of system maintenance and crisis attenuation. This is further down the putative «Road to Freedom» and not the  further down the«Road to Serfdom».

Plainly stated, the logic of the present invocation of deficits through to nationalization is not one of system change, but, rather, system stabilisation and crisis management. Deficits are being used to shore up the system–not to undermine its logic; low interest rates are similarly being used reinforce the price floor–not with an eye to full employment; and now nationalisation is being used to ensure that the mother of all market failures does not see the light of day—not to socialize mortgage markets (the mother of all middle-class public goods I should add).

New Labour has been an active architect of the present conjuncture. They have purged every economic lefty in their dogged determinism to be born-again. To that end, New Labour has not merely made their peace with the City and international finance but actively encouraged their deepening influence. The collapse of Northern Rock, and the consequence that would follow in train cannot be merely viewed, as Darling would have it, as the protection of the public purse, but rather, the protection of a financial system and middle England to which New Labour has been so slavishly devoted and used so well to wage its own intercene struggle against old labour.

When it dawned on Darling that he could use that great Shibboleth of the left—nationalisation—in the service of the capitalist class as whole, while wearing the mantle of guardian of the public purse, it must have given him a wry smile indeed. And with some irony it also rather confirmed Ralph Miliband’s instrumental view of the state.

On this view, the nationalisation of Northern Rock and the rest must be viewed in the sober light of continuity not change. If private shareholders want to view this as infringement on their human rights they need only console themselves with the thought that they took one for the team.  Now they know how it feels to be Red Ken and G. Galloway.

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