Guilty Men
In David Rothkopf’s book Superclass: The Global Power Elite and the World They Are Making, the author (whose own experience is very much as part of the group he describes) identifies those who are assumed to “control” markets and billions of dollars of credit, investments and business assets. They are, as it happens, the ones who completely lost control of international finance and now claim to be able to solve the crisis they created. They are the guilty men. Rothkopf lists them:
… the heads of the biggest financial institutions …; the top 50 control almost $50 trillion in assets. The heads of the world’s biggest corporations are also members; the top 2,000 support perhaps 500 million people, generate almost $30 trillion in sales and have well over $100 trillion in assets. The list also includes top government officials with real cross-border influence: heads of state, of course, leading diplomats and military chiefs, but also central bankers like Geithner and Bernanke, and their counterparts like Chinese Central Bank Gov. Zhou Xiaochuan … and the other top economic officials responsible for the world’s fastest-growing economy and its nearly $1.5 trillion in reserves. They are joined by media barons like Rupert Murdoch, whose global network of newspapers, web products, movie studios and TV stations reach hundreds of millions of people every day ….
But if we look more closely at the activities of each of the above-mentioned “elite” who are brought together to seek to solve the crisis in global markets, we see the very people and institutions who were intimately, unequivocally and irresponsibly the cause of the crisis in the first place. The above will certainly include banks like Citibank (subprime losses of $40 billion), ubs (subprime losses of at least $37 billion) and Merrill Lynch (subprime losses of at least $27 billion). Their first instinct of course is to ensure that the “solution” starts with relief of their own corporate or, in the case of government, political and fiscal losses. Last in their line of concern will be the taxpayers, savers and entrepreneurs.
The central banks allowed themselves to be cajoled by money-printing governments and thus undermined the whole financial system, bailing out the grossly irresponsible and rescuing over-lending banks and over-indebted governments—by allowing inflation to raid the savings of those who were responsible.
We see government finance ministers pulling the levers of the printing press while pretending to “fight inflation” and inventing false definitions of inflation to fool the electorate. We see the large multinational corporations whose government- “promoted” mal-investments fail and who go cap in hand to the state for a subsidy—“otherwise there will be high unemployment and you will lose your majority, minister.”
We see the large City investment funds and banks who have wastefully churned “other people’s money” taking the appropriate fee at every juncture. We see the pension fund managers whose returns are barely more than the value of the government subsidy to the individual pension saver and the irresponsible highly borrowed hedge fund managers to whom City firms hand over billions of pensioners’ money. By highly risky “gearing” of investments, some of these hedge funds have achieved ludicrous 80 percent annual returns and then wonder why the next year they are bankrupt. We see the central banks who claim to be fighting inflation but in fact do no more than respond to economic activity, perpetually postponing healthy recessions until the distortions, failed investments, property bubbles and inane forms of production collapse into a slump of historical proportions.
We see the central banks like China, which hitched its currency to the U.S. dollar in order to subsidize its exports and then finds that a collapsing dollar is causing it serious inflation (the British central bank once did the same by linking the pound to the deutsche mark and with predictably similar results!).
Finally we see a global press baron, albeit by no means the worst of those media empires that have perpetually failed to analyze the crisis before it hit. The press habitually claim a pivotal role in the education of the voter, and yet in the one vital area where they could have warned the consumer—in the matter of his savings, capital spending and borrowing—they failed abysmally. For years the press talked of “high interest rates” when inflation made real interest rates very low and “low interest rates” when real interest rates were high. Furthermore, the press ludicrously decried both homelessness and lower house prices and promoted the use of the word “credit” for “debt” thus promoting that most toxic destroyer of homes and families. As a result, they were effectively urging their readers to take on ever bigger risks, and with the U.S. and British consumers the biggest debtors in the world, their irresponsibility has certainly borne its rotten fruit.
So these are the geniuses of the “Superclass” who are going to rescue us from the crisis they themselves created. Just as a member of the German Bundesbank once said to a friend of mine (a professor of economics) after the latter had warned that the one-size-fits-all euro could cause a serious economic crisis, “Good, that means we can use the crisis to acquire the kind of power which otherwise might not be given to us.”
At first blush the idea of the great and the good, a large international collective of “important” institutions gathering to bring political weight, money and “solutions” to a crisis, sounds comforting. But we must be aware of the political nature of such collectives where not one of the participants will be investing their own personal resources in the solution and they will have been collectively responsible for the crisis in the first place because they were able to play fast and loose with “other people’s money,” whether that money belonged to pensioners, taxpayers or employees. Their idea of a bailout will certainly mean your money doing the bailing out!
The larger the organization, the less responsibility the executives will have. The less responsibility they have for their decisions, the less they learn from their mistakes and the more their “solution” will mean a repetition of those mistakes. Such is the weakness and irresponsibility of collectivism, either in its corporatist or its socialist forms. Ironically it is the once entrepreneurial capitalist marketplace (with none of those characteristics) that is now accused of failure. But there is no capitalist crisis, only a corporatist, statist failure by collective funds and failed central banks where the idea of investing one’s own money and accepting personal loss is anathema.
There is an old adage in business: “If I owe the bank £1,000 and can’t pay, I am in trouble. If I owe £10 million, the bank is in trouble.” The wisdom and responsibility of the whole is always dependent on the wisdom and responsibility of the individuals who act wisely because they know they must accept the consequences of their actions. As soon as they collectivize, become part of a gigantic system of aggregate finance or business lending to the monopolistic or to the state or dependent on the state for subsidy, allowances or patronage, then the greater the loss the more comfort they enjoy. The establishments must survive and therefore feel “justified” in financing incompetence and failure on a gigantic scale.
So [at least in today’s society—Ed.] the solution to a great crisis is in fact the same as for a small—let the crisis be revealed, let those responsible be exposed, break up the establishments, break down the monopolies, separate the state from business and banking, remove government from monetary control, eliminate subsidies which reward failure, take decision-making from the collective whole and return it to the atomistic many where failure can be identified and punished and where no one need say, “He is big and has been grossly irresponsible so everyone else must pay to rescue him.”
