‘I am aware that some of these proposals are not very orthodox. So what?’ – Views from the left (1)

Slugger has been providing much commentary on the current economic crisis, I will be linking to some content from left views not given much coverage as yet.

First up is a Declaration from Francis Wurtz, President of the GUE/NGL group at the European Parliament, sourced from the Spectrezrine blog.

He starts by giving his view on the lessons to be learned:

For several weeks now we have been witnessing – against the dizzying backdrop of billions of euros or dollars – planetary confusion and unbearable waste. These have been generated by a system on behalf of which European leaders have, for many years, advocated wage moderation and the rationing of social expenditure, and have allowed inequalities to explode. Those same people have now flown to the assistance of banks to refloat them before handing them back to the private sector, while at the same time announcing a long period of recession and sacrifice for ordinary people. Many people who are following these events cannot help but to see in this a genuine lesson on many things, not on the excesses, but on the very essence of capitalism, in all its injustice and brutality, whatever phenomenal transformations it has experienced over the past decades. I believe that European leaders will be held to account by our fellow-citizens.

He then continues with three immediate concerns. Firstly the protection of small and medium savers:

there should be no scrimping when we reassure small and medium savers, who are legitimately concerned about their modest savings. The announcement made in this connection comes late, is timid and vague. On 15 October, the whole European Council should solemnly assure an absolute guarantee on deposits across the entire territory of the Union.

Then the protection of public investment from privatised profiteering on bailouts:

a basic sense of ethics as well as simple concern for effectiveness should prevent the sorcerers’ apprentices from drawing profits either now or in the future, from the public financial support that the failure of their “irrational exuberance” has provoked. This is why each state should – or in any case should be able to – compensate for assistance contributed to a threatened financial institution through a sustainable nationalisation of its healthy assets, with a view to working towards the constitution of an entirely dedicated public financial pole which would finance socially useful investments, particularly those rich in jobs in future.

Views on the European Investment Bank (EIB) and the European Central Bank (ECB)

The EIB first of all. It should be made responsible – and given the resources necessary to achieve this mission – to guarantee access by SMEs to all the credit they need to develop their production on condition that they create real, properly paid jobs and that they respect the rights of their employees. In this respect, the decision taken to help SMEs to the tune of 30 billion euros in three years’ time is interesting, but this amount is too low and the deadline too long. In France alone, SMEs need 60 billion a year and the Union includes 27 countries. Moreover, they need oxygen right now. In many cases, later is likely to be too late.

-As for the ECB, is this not the right time to ask it to adapt its mission to the vital needs of the economy and our societies, by redirecting money not towards the financial markets but towards the real economy? It possesses an instrument to do so, and it is incomprehensible why it categorically refuses to use it. This instrument is selective credit – very expensive when intended for financial transactions and, on the other hand, very accessible when it encourages employment, training and all useful investments.

Full article

  • DK

    “Those same people have now flown to the assistance of banks to refloat them before handing them back to the private sector, while at the same time announcing a long period of recession and sacrifice for ordinary people.”

    Am I the only one not seeing a contradiction here. Flying to the help of banks IS helping ordinary people. If the banks go under, as well as the people working in the banks (a lot & most are clerks) are unemployed, then all the businesses reliant on the banks go under too. This is why banks are so important, although whether that is an arguement to nationalise them is another issue.

    Main lesson from this crisis is: don’t lend money to poor people, with the additional lesson, don’t trade in loans from poor people.

    It’s not very socialist though to deny poorer people money, but if the banks were nationalised (as they partially are now) it will make it harder for poor people to get their hands on money. Is that a left-wing result?

  • ulsterfan

    Very few lessons will be learned despite what the politicians say, and we the voters will forget this debacle as soon as our investments are secure and recover to the point of showing some growth.
    The more serious person may recall the attractions of socialism enjoyed by most when in our youth.
    Where are the leaders to convince us that modern idea of socialism is fair ,and not encumbered with 19th century idealism, and provide sufficient checks and balances to protect freedom.

  • Mark,

    Thanks for posting this. I have been looking on solidnet.org for responses and hadn’t seen much, so this is very welcome. I think this is good stuff. It is not frothing at the mouth, let’s have war communism now stuff, but a reasonable set of statements exposing the true nature of the crisis and proposals that will be of real help to ordinary people.

    DK’s reasoning is that the banks are so central that they must be saved at all costs. I suspect that if the hundreds of billions given to the banks was guaranteed to industries and businesses to create and secure employment, as well as public services, people would get on perfectly fine.

  • perry

    “it will make it harder for poor people to get their hands on money. Is that a left-wing result?”

    Maybe yes. Less credit means less over-inflation of property values and what’s more leftwing than cutting the unearned returns of property owners?

  • perry

    “I suspect that if the hundreds of billions given to the banks was guaranteed to industries and businesses to create and secure employment, as well as public services, people would get on perfectly fine.”

    Where’s the “given”. The banks have sold preference shares. I’m assuming these are subject to coupons and what not.

    Are you suggesting the The Bank of England should take preference shares in my firm?

  • I’m suggesting that the state could let some of the more irresponsible speculators go to the wall, and spend on the money on industry, or social housing, or other methods of priming the pump.

  • perry

    Unless I’ve missed something the “irresponsible speculators” are either the ordinary shareholders in the banks, the managers of the banks who took bonuses on “profits” based on discounted returns that didn’t factor risk or they’re people who bought into assests overinflated on the basis of too much credit/greed.

    The last are already burned and this rescue’s unlikely to help them much.

    The managers are getting the sack (too late – put ’em in jail!)

    What about the ordinary shareholders in banks?

    Arguably, by buying preference shares the government has restored value to the ordinary shares (their value as an option to sell has increased as there’s more likelihood of the banks remaining going concerned) and given the shareholders an unearned gain.

    Perhaps the government should have taken the ordinary shares at a discount in their distressed state but that would have exposed us (taxpayers) to greater risk and we’d be then gurning about that.

    Personally I’d have preferred it though. I also quite like the idea of banks being forced to take capital stakes in firms German/Islamic style rather than sitting back and raking in profit on interest. Then we really would be investing in ourselves.

    At least end the tax deductibility of interest payments says me, so that, other things being equal, debt is no cheaper than equity.

  • ulsterfan

    On one hand the Government is correct in getting preference shares to safeguard taxpayers investment but this at the same time discourages other investors when they see little chance of a dividend being paid.
    I think the Government will have to reconsider this otherwise growth is stunted.

  • Mark McGregor

    Ulsterfan,

    How does that work? The people have invested in bailing out the banks and thus protecting investors from the collapse they willingly left themselves open to. How or why should they demand anything other than socially just behaviour in response as opposed to investor dividends and a return to trading on a government supported business?

    Seems some want the freedom to not lose on the market no matter what.

  • ulsterfan

    Mark MCG

    I was thinking of future investors not those already on board.
    The way the banks are presently constituted with governments holding significant stock even for a short time will not be an encouragement for others to invest in the business as ordinary dividends are put at risk to satisfy the Governments demands which are reasonable.
    This will retard the development of the Banks which is obviously to their detriment.

  • Reader

    Mark McGregor: socially just behaviour
    Isn’t that just left-speak for Sub-Prime Mortgages? And what will you say to the pensioners with their pension funds invested in – among other things – banks? Banks where you want the Government to either run them at a loss (‘socially just behaviour’), or keep what little profit might actually be earned (‘preference shares’).
    And whatever your ideology might say, investing in shares is far more healthy for the economy (‘jobs’) than having everything snatched by the government to split between pissing it up a wall and trying to kick off another house price pyramid scheme in time for the next election.