Grace Blakeley, of the IPPR, has written a tour de force on the financialisation of capitalism on the Jacobin website and bemoans, as do most of us, the lack of proper change since the financial crisis.
She sums up the pre 2008 situation rather neatly, I thought:
This class of [middle class] “mini-capitalists” had a material interest in the continuation of the model of debt-driven asset price inflation. The privatization of pensions was another critical extension of this model. Together, “property owning democracy” and “pension fund capitalism” sustained a bargain between financial capital and the middle classes that lasted all the way up to 2008.
But she continues:
States have used private financing to demonstrate their fiscal rectitude. Part of the reason governments consider such a demonstration necessary is that they need private investors to believe that they will honour their debts. Demand for government debt is inversely correlated with yield: the higher the demand, the lower the interest payments. This gives the markets a huge amount of power to discipline states that fail to demonstrate a commitment to creditworthiness.
States that fail to implement neoliberal policies can be punished through bond sell-offs (and through runs on their currencies)….
Almost the only thing that is true in this summary is the bit in brackets at the end. Bond sell-offs won’t cut it. Has she never heard of Quantitative Easing?
A mass sell-off of UK government debt would create a huge crisis for the British economy, which is the logic that underlies austerity.
There is logic that underlies austerity? It’s a con, and not logical at all. You cannot expand by cutting back.
That’s real logic.
Then there is the bleak poverty of the conclusion
In the coming years the Left must refocus on the central economic questions of our time, showing that the suffering most people have endured since 2007 can be traced back to the financialisation of our economy. We must show that previous governments have been too busy protecting the interests of finance to support the needs of ordinary people. And we must adopt a policy agenda that challenges the hegemony of financial capital, revoking its privileges and placing the powers of investment back under democratic control. In doing so, we might just be able to move beyond capitalism altogether.
Obviously she’s both highly qualified and likely to be on ‘our’ side – but how on earth has she failed so consummately to understand where money comes from?
In consequence she fails absolutely to suggest any sort of radical solutions – just suggesting we might move on from capitalism.
Perhaps we might, but it really doesn’t matter what it’s called. If ‘The Left’ has not understood money sufficiently to use the tools that are at every government’s disposal, then they will not properly embrace – or execute – the authority that they have…
And that, alas, seems to be a major mountain still left – for ‘The Left’ – to climb.