
Its just over three years ago that I wrote my blog Northern Rocked warning that it was the opening salvo of an evolving Credit Crunch.
“The crisis at Northern Rock should come as no surprise, to anyone that has been reading my blogs and comments over the last couple of years. It is part of the slow motion train wreck I have been saying was almost inevitable as a result of the huge accumulation of debt promoted, and forced upon western economies, in particular the US and UK. That policy of credit fuelled expansion, and the bail out of Northern Rock – likely to be only the first of a series of bail outs some much bigger than this one – exposes the myth of neo-liberalism that it was about free markets and non-intervention – a myth also bought even by some on the Left see Dave Broder’s comment here as part of a wider discussion, and my subsequent response. The reality is, as I said in my response there, the capitalist state has been intervening on unprecedented levels over the last 20 years, and without it, western capitalism would have undergone a severe crisis, perhaps worse than the 1930’s.”
That same Neo-Liberal State intervened once more not just in Britain, but throughout the globe, pushing more liquidity into the system. That staved off the immediate consequences, and lessened some of the underlying problems that would lead to the Credit Crunch erupting a year later at the end of 2008. That is it prevented a complete collapse of house prices, especially in the US, where the bulk of all those Mortgage Backed Securities had their ultimate resting place.


At the time I was still allowed to post comments to the Workers Liberty site. In his Blog, Bruce Robinson wrote a post arguing for the nationalisation of Northern Rock, because if it was allowed to go bust, it would be the workers in the company, and the savers with the Bank who would be the main losers. I wrote the following response:
“I disagree, partly with the argument made by Bruce (Robinson) that if the B of E did not bail out NR then it would be the depositors, not the shareholders and Management that suffered. In fact, today after the Chancellor has said the Government will use taxpayers money to bail out the Bank, its shares, and the shares of the other banks likely to be next in line at the begging bowl - Alliance and Leicester and Bradford and Bingley - have soared. Clearly, the main beneficiaries have indeed been those shareholdres and the Management that undoubtedly also has many shares and share options. The whole basis of capitalist ideology is that owners of Capital make profits for taking risks, but if capitalists can make huge profits and Capital gains by making risky decisions such as those made by NR and the other banks, yet are guaranteed against going bust by the Government where is the risk. In fact that is the whole basis on which neo-Liberalism operates at a macro as opposed to micro economic level, and where it differs with classic Liberalism.
NR should have been allowed to go bust. Then with its true value demonstrated as worthless it should have been nationalised under the control of its workers, depositors and borrowers, and only then with the savings of those depositors guaranteed. It should then have been transferred into the ownership of the workers, savers and borrowers to be run as a financial co-operative. The lesson for all those savers in existing mutualised and co-operative financial institutions such as the Co-op Bank, Brittannia Building Society, especially these where the unions have a considerable involvement, is that they should demand an opening of their books to see what Management practices they have adopted, what their business model is. At least in these co-operative organisations you have the right to do that, you have some control.”
Who Is Irrational
As I said at the time, Northern Rock was only the first, and one of the smallest Banks to go under.


But, just because that is seen as necessary by Capital, does that mean that workers have to see that as the only, let alone best solution? Are there options besides seeing a total economic catastrophe? The answer is that, of course workers do not have to see this as the only or best option, as I wrote in that reply to Bruce Robinson back in 2007. First, let's look at the situation in Capitalist terms.
If AIB goes bust the first losers will be its shareholders, whose shares will become even more worthless. That includes the Irish Capitalist State. It also includes many Financial Institutions, including other banks around the globe. They will find that not only their shares in AIB are worthless, but any loans they have made to it, and Bonds bought in it will also become worthless. These are first round consequences. The other people immediately affected would be AIB's workers. Since 2007, States, and Ireland was the first to introduce it, have given protection for savers deposits in Banks up to varying limits – Ireland introduced full protection. Any saver with more money than that, given the experience of the last two years, is likely to have been savvy enough to have divided their savings up across various banks to make sure it was all covered. So, part of the argument I raised back in 2007 no longer applies.
Taking just the situation up to this point then, one option based on what I said back in 2007 becomes possible.

However, as stated above the consequences so far described are only first round effects. Those other banks and financial institutions who lose out big time when the Bank goes bust, may find that for some of them this is the straw that broke the camel's back, which will expose what a sham the recent European Bank Stress Tests really were. Some of them may go bust too. But, in that case the very same argument, the very same response from workers should be made. The workers in those banks should occupy them too, and take them over as Co-ops. In fact, that would open the door to those banks combining with the AIB Co-op, and the Co-op Bank in Britain, and other Co-op organisations throughout Europe to form a very powerful financial Co-operative indeed. Some of the organisations that have invested in these banks may be large or medium sized enterprises who may also go bust, but again the answer is the same, the workers should occupy the only thing that has real value, the factories, shops and offices, and the equipment within them.

In other words, workers should recognise that real wealth is not made up of all those scraps of paper, be they Euros, share certificates, Bond certificates etc. with which the Capitalist System has become transfixed by, and which has caused the current financial crisis, but is made up of the physical things produced by workers themselves be they the end commodities which are consumed, or be they the things used to produce those commodities, the building, the machines, the materials and so on, and above all the Labour-Power of the workers themselves. Once that fact is grasped the solution becomes obvious. It is to ensure that all of those things continue to be utilised to their maximum potential, and that the fetish of the bits of paper is put to an end.
On the BBC's “Question Time” last night, the idiocy of that fetishisation of the bits of paper was highlighted by a statement from the doltish David Starkey.

In the BBC's “This Week” programme, after Question Time, former Thatcherite, Tory Minister, Michael Portillo, pointed out what I have been arguing for some time. The only way of dealing with the debt is through growth – though I would add that a big part will be played by inflation.

There is another option open for workers in Ireland to argue. The Capitalist State says it has to bail-out the banks once again to prevent the Capitalist economy collapsing. It is asking the workers to rescue the Capitalists. In that case workers in Ireland could demand that all of the existing shares in those Banks be cancelled, and that every Man, Woman, and Child in Ireland be given free a non-Negotiable share in those banks. That would make them the direct owners of those banks with the right to have a direct say in their operation, including the salaries and bonuses paid out to Executives. It would mean that when those Banks began to turn a profit, that profit would go directly to the mass of workers, not to the capitalists or to their State. It would mean that they could utilise the resources of the Bank to invest in things that furthered the workers interests, not the bosses. Personally, I do not prefer this solution to the first, because the experience of Mutual Building Societies shows that where ownership is widely diffused to workers and others who do not have a direct interest in the day to day functioning of the business, who are not directly dependent upon it for their livelihood, they will not exercise active control, and they will be prone at some point to simply agree to sell it for a quick buck.
Finally, again as the State says it needs to bail out these banks in order to save the Capitalists, it could be asked to make all of those Capitalists pay the price. In my post How To Pay For The Deficit, I argued that it would be possible to raise a tax in kind on Capital, by requiring every limited company to issue new shares equal to 10% of its existing shares, and to simply hand them to the State, who could then sell them – or alternatively could hand them directly to every Man, Woman, and Child to do with as they chose.
There are alternatives to those advocated by Capital if workers choose to fight for them. They are alternatives which can strengthen the longer term economic and social position of workers. That is why the Bosses and their pundits will not suggest them. And is probably also why the bosses ideological representatives in the Labour Movement will not put them forward, arguing instead for yet more bargaining within the system, for strikes with no immediate goal other than to “oppose the Cuts”, and which for that very reason will be doomed to failure short of a complete overthrow of Capitalism, which is unlikely. But, workers throughout Europe, and North America will increasingly be posed with these questions over coming years. Marxists have a duty to put forward to them practical political solutions such as these that can offer them a way forward.
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