A neo-Jacobin

Failing banks? Why not let them fail?

The best joke I’ve heard recently is ‘what’s the difference between the Provisional Irish Republican Army (IRA) and bankers? Some people still have a bit of sympathy for the IRA’.

British capitalism is currently in a very sorry state, meanwhile, thousands of people in the UK, and Ireland are feeling the pain of this crisis.

The policy of bailing out financial institutions with state funds does not appear to be working - indeed, it seems to be making matters far worse. On the surface, it also looks as if we are witnessing the rise of ‘state capitalism’, with unprecedented levels of state intervention in the economy. There must be a better way to run the economic affairs of a nation? The Nobel prize economist, Joseph Stiglizt admitted to The Daily Telegraph that there was a solid argument for letting bad banks go to the wall - and why not? The billions we would save in ‘bailouts’ could be used, as Stiglizt argued, to rebuild the ‘skeletons of the old banks to build a healthier structure’.

Stiglizt is not alone in thinking that governments would be much better placed to deal with the problem of a failed bank - if only the authorities would declare these banks insolvent. The respected American economist James Galbraith, bemoans the fact that some $9.7 trillion of state funds is being thrown at banking institutions who's assets and 'securities contain, on the face of it, misrepresentation or fraud in the files'. Indeed, I agree with Galbraith's sentiments - why should the public hand over trillions of dollars, or billions of pounds, for assets, as Galbraith argues,'which nobody, no outside investor doing due diligence on behalf of a client for whom they have some responsibility, would touch'?

That money could be used instead in investments in the real economy - as opposed to propping up discredited and bankrupted banks and financial institutions. It's a real shame that the current debate on the economic crisis is being led by a political elite who are failing to take any responsibilities. The authorities new mantra seems to be 'we have no desire to takeover banks' - if that really is the case, why bother to bail them out when they go bust then?

Labels: Capitalism, New Labour

posted by Courtney Hamilton @ 1:12 AM