Euphemisms

The Governor of the Bank of England, on euphemistic form:

“I’m sure the rating agencies and the markets will be looking… for a more detailed explanation of how the structural fiscal deficit will be brought down over the lifetime of the next parliament,” said Mr King.

“…more detailed explanation”: also known as spending cuts, post-election. Big ones. Note, incidentally, who appears to be really running Britain’s economic policy.

For the time being, however, it would appear Darling’s cuts-tomorrow strategy retains the markets’ confidence; the projected growth figures may be hokey, but the Cabinet behind them looks a better bet for the City than the chancers on the benches opposite.

Whether that confidence will hold until the general election is an open question. A single bad day’s trading could focus minds on the UK’s ropey public finances, sparking a speculative attack.

And in Greece, the protests are hotting up as the full, miserable extent of the austerity package there becomes clear. The question of a political alternative to the bankers’ diktat is going to be posed sharply: either we break the grip of the financial markets, or they will break us.

They think it’s all over

Well, it isn’t.

First, the numbers don’t support it. Behind a certain amount of excitable flapping and squawking over a few decentish headline stock prices, much of the underlying data is grim: unemployment here continuing to rise, foreclosures in the US and late UK mortgage payments still rising, and wage settlements grinding to a halt.

All these matter hugely for both economies, since – with credit lines still jammed – they’ll directly affect consumption. And with consumption spending driving 80 per cent of US demand growth during the boom years[*], that’s a big blow to growth across the whole economy.

Coupled with the immense pressure now being exerted on government spending as a result of the bailouts, and it should be clear that future prospects for capitalism in its neoliberal heartlands remain somewhat shaky. The trillions now sloshing around the financial institutions may, eventually, trickle into the rest of the economy, stimulating a boom. But the underlying weaknesses remain.

That’s the real story here. The numbers are only part of it – and, really, only a fairly small part. The truth of the last 18 months or so is that the entire existing economic order, “neoliberalism”, the economic rules of the game we’ve lived under for twenty or more years now, suffered a massive seizure. But instead of changing that order, even in capital’s own terms, rejigging the institutions, rewriting the rules, doing everything just a little bit differently – we’ve placed the sickly patient on a drip.

That’s the meaning of the bank profits and the bonuses. Zombie neoliberalism is still with us, lumbering on as if nothing had happened. Yet it is far weaker than previously: without a purge of the banks and the financial institutions, killing off the insolvent and the incompetent, there is no reason whatsoever for any of them to reform. And without reforms, they will expose capitalism to the same illnesses it contracted last time: contagion, the spread of financial plague from economy to economy, and systemic risk.

But of course, the banks and the institutions couldn’t be allowed to collapse, whatever Mervyn King may have wished. They were peering into the abyss after Lehman Brothers collapsed. The grim prospect of an almighty domino effect loomed, with the ties between collapsing banks pulling more and more of the economy down behind them.

So the bailouts. The patient is hardly cured; more drugged to the eyeballs, and weakened.

[*] figure from Glynn (2004), Capitalism Unleashed, p.53