This is not what I should be writing at all, but my tragic fate entails getting a surge of energy to do something at the precise moment when I should really be doing something a lot more pressing. And yet there is an itch I need to scratch.
It relates to this story in the Irish Examiner yesterday.
“I just can’t cope with it any more,” she said, wiping her eyes. “It’s just that there’s so much stress and I can’t cope with it.
“I know it’s a horrible thing to leave my house,” she sobbed, as barristers shifted uncomfortably. The judge, commenting sympathetically, asked that they leave – they did in a matter of seconds, scattering like a herd of frightened zebra.
With her husband minding her son out in the corridor, the woman continued: “We have four children and I’ve explained it to them.
“My husband is trying to get work and we just can’t…”
The couple’s children are aged 13, 6, 4 and 18 months, and afterwards the father said the case, listed as involving GE Capital Woodchester Home Loans, had been hugely stressful for the family. He mentioned the phone calls from the lender, using the word “harassment”.
This is a scene that will be replayed again and again in coming years, unless there is a mass campaign to resist it.
Note the name of the firm conducting the harassment on the family.
GE Capital Woodchester is a subsidiary of General Electric.
When I started living in Dublin about 10 years ago and got my first job I went out for a few drinks on a Friday night in Thomas Read on Dame Street with a crowd of twentysomethings who were working in the IFSC, and, from what I could tell, making good money.
One of them, a fund manager who had been taking cocaine, started bending my ear with career advice, telling me grand tales about the head of General Electric and his great business wisdom. A book he had written had given him lots of lessons, many of which he shared with me but none of which I can recall.
It may not come as a surprise that the fund manager was a dick. Despite my failing to show any interest whatever in what he was saying, he made a point of handing me over his business card at the end of the night. He has always stuck in my mind as a model of wideboy asshole I’d never imagined I’d come across in Ireland but whose type, over the next decade, I’d end up encountering a lot more frequently than was healthy.
Some history on General Electric tells you a lot about the current predicament.
Before the global financial crash in 2008, referring to the Enron scandal, Michael Perelman had written the following:
Where does the blame lie? The criminal activity of some of the Enron executives and their abettors in the financial world is not surprising. A certain percentage of people will always cross the line when the opportunity presents itself. What is shocking is that the majority of the wrongs that Enron comitted were actually legal, largely because of the regulatory laxity achieved by the right-wing revolution. (Michael Perelman, The Confiscation of American Prosperity: From Right-Wing Extremism and Economic Ideology to the Next Great Depression)
The right-wing revolution, Perelman writes, was down to a small group of business interests ‘carefully engineering a conservative takeover of the main organs of power in the United States beginning in the 1970s’. A ‘combination of well-financed think tanks, racist demagoguery, and sophisticated political maneuvering’ rolled back many of the progressive advances of the 1960s and set in motion ‘the destructive forces’ that presently beset the US economy. No force was more important than financialisation:
In reality, unregulated financialization works like a drug-induced euphoria. A get-rich-quick mentality spreads throughout the economy. Solid wealth-producing activities quickly lose their attraction. Recall the billion dollar incomes of hedge-fund managers.
There was no question, in Perelman’s mind, about what was needed:
The need for stricter financial regulations is more urgent than ever. Since 1970, the ratio of total financial assets to GDP has more than doubled. By the end of June 2004, the Bank for International Settlements estimated that the world financial market had $200 trillion worth of outstanding derivative contracts, or more than $35,000 for every single person on the face of the earth
While the relative size of the financial sector has ballooned, the manufacturing sector has shrunk. For example, the share of manufacturing represented 21.2% of GDP in 1974; by 2004, that figure had fallen to 12.1%. In contrast, the Finance, Insurance and Real Estate sector rose during the same period from 14.9% to 20.6%, effectively trading places with the manufacturing sector.
But that doesn’t tell the full story, and here’s where GE Capital Woodchester come in.
(These) data fail to reflect the full extent of the shift from manufacturing to finance because nonfinancial companies often earn substantial profits from financial operations, without reporting separate information for their financial operations. The magnitudes in question can be substantial. For example by 2005, General Motors and Ford earned almost all their profits from their financial operations rather than from producing cars. For General Electric, financial operations produced almost half of the company’s profit.
I’m getting to the age now where I forget what I was thinking a couple of years back. I look back and it feels like I was floating in some sort of narcosis. When I was hearing about the General Motors bailout, did I think that it had mostly to do with crap cars that didn’t sell? Is that what others thought?
But back to General Electric. Jack Welch, the fund manager’s hero, is supposed to have coined the term ‘shareholder value’ in a speech in 1981.
Ha-Joon Chang’s 23 Things They Don’t Tell You About Capitalism describes what followed:
Soon after Welch’s speech, shareholder value maximization became the zeitgeist of the American corporate world. In the beginning, it seemed to work really well for both the managers and the shareholders. The share of profits in national income, which had shown a downward trend since the 1960s, sharply rose in the mid 1980s and has shown an upward trend since then. And the shareholders got a higher share of that profit as dividends, while seeing the value of their shares rise. Distributed profits as a share of US corporate profit stood at 35-35 per cent between the 1950s and the 1970s, but has been on an upward trend since the late 70s and now stands at around 60 per cent. The managers saw their compensation rising through the roof, but shareholders stopped questioning their pay packages, as they were happy with ever-rising share prices and dividends. The practice soon spread to other countries – more easily to countries like Britain, which had a corporate power structure and managerial culture similar to those of the US..
Now, this unholy alliance between the professional managers and the shareholders was all financed by squeezing the other stakeholders in the company (which is why it has spread much more slowly to other rich countries where the other stakeholders have greater relative strength). Jobs were ruthlessly cut, many workers were fired and re-hired as non-unionized labour with lower wages and fewer benefits, and wage increases were suppressed (often by relocating to or outsourcing from low-wage countries, such as China and India – or the threat to do so). The suppliers, and their workers, were also squeezed by continued cuts in procurement prices, while the government was pressured into lowering corporate tax rates and/or providing more subsidies, with the help of the threat of relocating to countries with lower corporate tax rates and/or higher business subsidies.
We can see Ireland’s supposed golden goose of low corporation tax as partly the product of this unholy alliance. But there are other consequences.
The intense media focus on exorbitant salaries of politicians and top government officials tends to blot out the fact that these pay levels were established via a process of benchmarking intended to confer some degree of parity with top managers in the private sector. But since top managers in the private sector were, as Chang points out, the beneficiaries of an unholy alliance with shareholders that allowed them to swell their own pay packets, this was a remarkably sweet deal for top politicians and government officials, given that the task of providing public services is antithetical to meeting the goal of delivering shareholder value.
This is worth bearing in mind when you hear calls, such as the one made in the Irish Times yesterday -an egregious example, given the implicit call for fascist rule- for the state to be run like a private sector corporation: the Ireland Inc wet dream of the anguished petty bourgeois imagination:
Breathing new life into civil morality – The Irish Times – Wed, Oct 20, 2010
Should we sit and wait to see if a saviour emerges from within our political system or should we take the necessary steps to fix the problem in a more creative manner? Asking our elected representatives to vote for the type of significant changes necessary to fix the issues of confidence, lack of trust and general apathy caused by decades of clientelism and corrupt practice would be a huge stretch. Instead we ought to demand our Government and all Opposition parties come together, agree to dissolve the Dáil and as a last action appoint qualified private sector specialists to run the various departments as a business.
We could have the cream of our business community thus running the country and guiding us through the difficulties we surely face for the next several years. – Yours, etc,
PETER B MacNAMARA,
If the state were run in this way, top politicians and officials -sorry, duces and gauleiters- would be paid more, not less. Public sector worker wages would be driven down, but the cost to the citizen of obtaining the service would be driven upward. Because that is the way these entities operate.
If government officials bid bankers and builders full steam ahead with their catastrophic housing bubble, drawing the working population into massive debt through the lure of cheap credit and the fear of never being able to buy a home, it was not least because people who had raised themselves aloft on profits gleaned from slashing workforces, asset-stripping and outsourcing were telling them they were worth it, and they should play along.
Back to Jack Welch’s General Electric, the company that ended up making its profits not from electricity, but from financial operations. Back in 2001, Ireland had a critical, now retired admirer:
BW Online | December 19, 2001 | Jack Welch: “The Opportunities Are Enormous”
And I hope everyone in this room believes as I believe that globalization is in fact the only game in town that will give the have-nots what the haves have…. Ireland is the best example. Go to Ireland today and see a booming economy that came because jobs came from the U.S. Jobs came from Europe to make Ireland a greater place.
Image by Getty Images via @daylife
The Irish are worried now because Gateway announced they’re moving a plant to India and they’re saying, “What do we do
now? Globalization is killing us.” They’ve just been benefiting for 20 years from globalization but now they’re concerned that Gateway is moving to India. They have to move up the food chain just the way we have here. As we’ve lost jobs in one industry after another, the low value-added jobs, we created the lowest unemployment we’ve had in our country in the ’90s. So it works. India. China. Eastern Europe. Go to Prague, Warsaw, or Budapest. They are different cities than they
It works all right. For the likes of Jack Welch. In the cold light of a country on the verge of the abyss as a consequence of financialisation, Welch’s words are an effective emetic. Get-sick-quick.
And yet, whilst many people, like the family in Cork, are sinking helplessly, General Electric sustains itself through massive state support.
The Washington Post wrote in 2009:
Loophole Helps GE Benefit From Bank Rescue Program – washingtonpost.com
General Electric, the world’s largest industrial company, has quietly become the biggest beneficiary of one of the government’s key rescue programs for banks.
At the same time, GE has avoided many of the restrictions facing other financial giants getting help from the government.
The company did not initially qualify for the program, under which the government sought to unfreeze credit markets by guaranteeing debt sold by banking firms. But regulators soon loosened the eligibility requirements, in part because of behind-the-scenes appeals from GE.
As a result, GE has joined major banks collectively saving billions of dollars by raising money for their operations at lower interest rates. Public records show that GE Capital, the company’s massive financing arm, has issued nearly a quarter of the $340 billion in debt backed by the program, which is known as the Temporary Liquidity Guarantee Program, or TLGP. The government’s actions have been “powerful and helpful” to the company, GE chief executive Jeffrey Immelt acknowledged in December.
GE’s finance arm is not classified as a bank. Rather, it worked its way into the rescue program by owning two relatively small Utah banking institutions, illustrating how the loopholes in the U.S. regulatory system are manifest in the government’s historic intervention in the financial crisis.
GE’s ability to live in the best of both worlds — capitalizing on the federal safety net while avoiding more rigorous regulation — existed well before last year’s crisis, because of its unusual corporate structure.
Banking companies are regulated by the Federal Reserve and not allowed to engage in commerce, but federal law has allowed a small number of commercial companies to engage in banking under the lighter hand of the Office of Thrift Supervision. GE falls in the latter group because of its ownership of a Utah savings and loan.
David Harvey writes in The Enigma of Capital:
The credit system has now become..the major modern lever for the extraction of wealth by finance capital from the rest of the population. All manner of predatory practices as well as legal (usurious interest rates on credit cards, foreclosures on businesses by the denial of liquidity at key moments, and the like) can be used to pursue tactics of dispossession that advantage the already rich and powerful. The wave of financialisation that occurred after the mid-1970s has been spectacular for its predatory style. Stock promotions and market manipulations; Ponzi schemes and corporate fraud; asset stripping through mergers and acquisitions; the promotion of levels of debt incumbency that reduce whole populations, even in the advanced capitalist countries, to debt peonage; dispossession of assets (the raiding of pension funds and their decimation by stock and corporate collapses) – all these features are central to what contemporary capitalism is all about.
We could add to this list the pursuit of families into destitution and desperation, even when these families are the victims of the destruction of economies wrought by institutions such as GE, who suck the life out Peter so that they can turn round and suck the life out of Paul, and they do so with the support of ruling elites, who suck up to the likes of Jack Welch, even if the country they live in crumbles into dust.