REPRINT: Given where we are now I thought this might be worth a reread. It was written last march of this year. It is like I was clairvoyant back then: paragraph two three and four.
There is by now a broad consensus that the problems in the sub-prime sector were intimately linked with, on the one hand, a gush of global liquidity caused by too many investors seeking too few outlets and exacerbated by low interest rates and on the other hand, by demand underwritten by a property bubble and a deluge of consumer credit–again underwritten by low interest rates.
All of this points to the fatal flaw at the heart of, what for lack of better term I will call, «the neoliberal growth model». Namely that it is premised on the continual expansion of consumer demand at a pace that exceeds wage growth. At some point workers were going to get over leveraged and at that point a vicious cycle had to set in. We have only seen the collapse of housing thus far (in the US and starting in the UK) but there is an equal if not greater tranche of bad consumer debt floating around.
When the ‘public’ i.e., the state steps in to underwrite all this bad debt, which they have already begun in the US, we are going to see the (re)nationalisation of private debt of all kinds. This would in effect mark-off the end of the privatisation of national debt onto the backs of workers as individuals but not collectively as tax payers.
In the short term, therefore, it seems key that we would want to argue that workers cum consumers and homeowners get the first bailouts (as it is they who will have to collectively pay it all back through taxes) and secondly that any cash that does go to the financial sector comes at a high price in terms of large public ownership. AND not the kind where the public buys the toxic junk and lets J.P Morgan buy the performing assets!
We ought to recall just how savagely public assets were raided by capital during the last 20 years. Why not insist on a reverse fleecing whereby the only shareholders which get reasonable treatment are institutional investors such as pension funds the rest are left to eat cake.
In the more medium to long term something has to be done to reverse the situation whereby workers wages are stagnant and at the same time capital has so much cash on hand that they can’t find legitimate places to invest and so buy into pyramid schemes masquerading as financial innovations or bubbles or both as the case now seems to be.
All of this points in the direction of extremely strong labour rights clauses and enforcement mechanisms in trade agreements because the present imbalances are being driven by the core neoliberal imbalance between workers and capital. If workers are given the legal tools to organize and take on employers at the bargaining then some modicum of parity could be restored between wages and profits which would go some way to resolving the demand flaw at the heart of neoliberalism.