The Institute for Fiscal Studies has estimated that government finances are out of control, and New Labour will have to make cuts of £37bn to balance the budget over the longer term. These cuts amount to 2½% of Britain’s GDP. As right wing Labour MP Frank Field tartly points out, “The government’s forecasts of debt levels have a terrible habit of being way out. This year’s borrowing is 40% up on its estimate last year, standing at a staggering £118bn.” (Guardian 08.12.08) As borrowing rises faster than income from taxes and other receipts, the mass of government debt is likely to hit £1 trillion for the first time ever by the end of 2009. The Financial Times commented, “Mr Darling’s projections look gloomy. The worry is that they may not be gloomy enough.”

Graham Turner has published The Credit Crunch.  (The credit crunch by Graham Turner, published by Pluto Press) Turner is an independent consultant who worked in the City of London for many years.  What singles out this book is that it claims to approach the problem from a socialist perspective, or at least it has been adopted by the left.  Turner has spoken at many left forums in recent months.

What is Graham Turner’s message?  He outlines his aim in the preface: “the roots of this crisis must be understood to ensure there is no repeat of the flawed economic policies that have created the biggest credit bust since the 1930s.  If we understand the causes, the damage can be mitigated”.

The Report, and the accompanying package of measures, has been greeted in the Financial Times as, “Say goodbye to New Labour.” Philip Stevens goes on, “After a decade when it dared not offend the wealthy, Gordon Brown’s government intends that the most affluent bear the brunt of post-election tax increases. It is not quite socialism but neither is it New Labour.” (25.11.08)

This was the headline thrown up by a BBC File on 4 investigation into CDC, formerly the Commonwealth Development Corporation. This was a government body set up in 1946 as part of Britain’s overseas aid programme. In 1998 CDC had over 400 different projects in 50 countries. Crucially more than 40% of its funding went into agriculture – helping to feed the world’s poor. But CDC had a problem. New Labour was determined to privatise it

US Democratic Congressman Dennis Kucinich described the $700bn bail-out of the US banks by the Bush administration as: “The largest single act of class warfare in the modern history of this country” In Britain £50bn is being doled out in a similar scheme. That’s approximately £833 for every man, woman and child in the country, or £1,500 for every taxpayer. If someone was to help themselves to £1,500 of your money and spend it wouldn’t you at least want to know how and why? Yet the language saturating the media is full of panic and obfuscation.

Martin Wolf in the Financial Times today: “…this would be a recipe… for xenophobia, nationalism and revolution… Everything must be done to prevent the inescapable recession from turning into something worse… Deflation is a real danger… At stake could be the legitimacy of the open market economy itself… the danger remains huge and time is short.”

It really is a pity capitalism can’t devote as much ingenuity on a cure for cancer as it does on trying to make money or as much resources on getting rid of world poverty as it does on gambling. But it’s a laugh when they get it horribly wrong.

Unprecedented!  That was the mantra of the broadcasters, pundits and newspapers throughout September, as the credit crisis took a dark turn.  Credit markets (mortgages, loans for cars and goods, company bonds and overdrafts) just dried up.  Banks stopped lending even to each other.  Liquidity disappeared like water into the Sahara desert.  Interest rates rocketed despite the best efforts of the central banks to provide unlimited credit at almost any price.  The capitalist financial machine seized up.  Banks started to go bust and even countries went bankrupt (Iceland).  Nothing has ever been seen like it – for the first time in the hyperbole of the news media, it really was unprecedented.

Over the past couple of weeks, Britain, many other European countries and the US have announced plans to nationalise large chunks of the financial sector, thereby taking a good proportion of the commanding heights of the economy into public ownership. The British government has been forced to effectively part-nationalise three of the country’s biggest banks, RBS, Lloyds TSB and HBOS. The plan, which includes putting treasury-appointees on the boards of all three banks, will cost the taxpayer in the region of £37 billion. Many of the major European powers are unveiling similar plans, and even the US, the ideological bastion of free-market capitalism, has been forced to invest $250 billion into buying stakes in nine of its banks (though these ‘non-voting preference shares’ mean the US government will have no direct control over the running of these banks).

Nationalisation of the banks and financial institutions is a corner stone of any plan by socialists to implement socialism. This idea has been ridiculed and has always been hated by big business, capitalists and economic commentators. 

Yet within the last months, because money that the banks don’t have has been lent to people, banks and companies which they cannot pay back, the chickens have been coming home to roost.  Bank after bank has been partly or totally nationalised. What a turnaround in events! Does this mean that we have won the ideological argument and socialism is around the corner?