Beasts of Burden

Post-general election, the laundry of the EU-IMF ‘bailout’ appears complete, since the ‘bailout’ is now presented not as an ongoing imposition, but an assumed historical reality: an inheritance from the now decimated Fianna Fáil party. The main product of Enda Kenny’s ‘democratic revolution’, so far, is a sort of normalised robbery. Or maybe an inverted magic realism, according to which a pained insistence on assuming the grim reality of austerity is expected to produce magical results at some point down the line.

Yesterday evening I heard a Drivetime feature in which a journalist was talking about the forthcoming banking stress tests and how ‘experts’ had been brought in from BlackRock, which is the biggest asset management firm in the world. As befits a programme sponsored by an investment bank (it’s still sponsored by HSBC, right?), any question as to why BlackRock had been selected did not arise. (A few months back I thought BlackRock was a firm based in …Blackrock).  The fact BlackRock has been ‘brought in’ to do the stress tests should give a clear indication of precisely whose interests are behind this particular round of technocratic knob twiddling. As NAMA Wine Lake wrote a few weeks back:

A stress test for BlackRock ® « NAMA Wine Lake

Last night on Prime Time the Central Bank governor indicated that he was acting under instructions when he engaged BlackRock. Presumably instructions from the IMF or EU. I cannot find any tendering process on the government’s etendering system for this engagement with BlackRock (there is a tender won by Barclays Capital in February 2011 but nothing for BlackRock or indeed BCG). It has not been disclosed how much BlackRock is to be paid for its work on the stress tests but an article in the Irish Times in January 2011 suggested that the three firms involved in the stress tests would be paid an overall total of less than €20m. Bloomberg reported in January 2011 BlackRock CEO, Larry Fink saying with respect to the assignment with the CBI “this is bigger than AIG with the Federal Reserve; this is bigger than what we did with the Bear Stearns; this is a gigantic assignment”.

But sure they’ll sort it all out in the best interests of the population, no doubt.

Below the interview with Rick Wolff a little further down is a transcript of what I thought was the most relevant parts. I am posting the transcript because I presume no-one listens to interviews on YouTube that don’t have any moving pictures, but the interview is worth listening to in full. It gives precisely the sort of account that is entirely missing from media coverage of the current capitalist crisis in that it relates the Irish situation to the wider crisis of capitalism.

The international character of the crisis is habitually omitted from Irish media narrative, for lots of different reasons -e.g. the reliance on Irish government officials for briefings, the systematic denial that there might be anything wrong with capitalism other than a severe bout of cronyismbut the effect of this omission is noxious: it fosters a despairing isolationism that makes it all too easy for draconian measures to be introduced without a whit of forceful dissent. Hence the importance of perspectives like that of Wolff. Against the laundry operation of the bailout, there is a lot of dirty linen that needs airing in public.

And the transcribed excerpt:

Wolff: In order to focus it all on Greece and Ireland you have to want to avoid the pain of adjustment elsewhere – that’s what’s going on. The British leaders, the French, the German business community, they would like to escape from the economic costs of this crisis, and they would like to see all of those borne by poorer countries like Greece and Ireland. So if you destroy your own economy in order to keep paying off your sovereign debt, you save them from the economic pain that they really ought to be bearing because they had more to do with bringing this crisis than Ireland or Greece ever could have.

Interviewer: We have seen that the European Financial Stability Facility has not been able to calm the markets yet. If this facility is strengthened and its scope of operations expanded, will it be able to protect the Eurozone?

Wolff: It depends on the larger policies that are followed in Europe. It depends a lot on what the French and the Germans and the British and the Italians and so on finally do in this situation, whether they’re prepared, of the economic problems that have come up in this crisis. That’s a fundamental question. No particular agency, no particular body either in these countries or across these countries can reasonably be asked to solve this problem by itself. For example, if the German economy, because it is the strongest right now, because it has such a high level of employment and exports doing so well. They would have to be prepared one way or another to take some of the burden of this crisis onto themselves. Whether it’s through the financial agencies they’ve created, or through a change in their wage structure that benefits moving more production out of Germany and into countries like Greece and Ireland and so on: these are the questions they have to ask. They don’t want to do it. They would like as much of this burden to be carried by other societies as they possibly can.

Let me give you a parallel of this. Here in the United States we have been speaking for about a year and a half about a ‘recovery’. All that has happened in the United States is that the business community has succeeded in getting the government to pour huge amounts of money into banks and insurance companies and large corporations. Their profits have recovered. The mass of unemployment has not been touched. The foreclosures, people being thrown out of their homes, is larger in 2011 than it was in either of the previous 2-3 years. So what we’re seeing in the United States is I think what you’re seeing in Europe: a recovery for some, and indeed for those who were most responsible for bringing the crisis, who have received most of the benefits of government money to date, and they have decided to try to push the burden of paying for all of this onto the poorest and least strong among them. In our country, it’s the mass of the working class. In Europe, it’s the working class especially in the poorer countries like Greece and Ireland.

Interviewer: What you’re saying is that Germany for example, the strongest country in Europe, should take part of the burden for this financial crisis, but on the other hand what they’re doing is they are lending money to countries like Greece and Ireland with an extreme interest rate instead.

Yes, and I think you can see very clearly what is going on: the largest holders, for example, of Greek sovereign debt, of Irish sovereign debt, of Portuguese and Spanish sovereign debt, of Italian sovereign debt – the largest holders of these are the biggest banks in Europe, particularly those in France and Germany and so forth. If you permitted the renegotiation of debt, as it should be done, Greek debt and Irish debt and so on, so that in a sense you make the investors -which are in this case large European banks- take a haircut as we call that in the United States, have to give up some of their wealth because of the crisis that their behaviour produced, then you would put the problem in the hands of the German, French and British governments because they would have to bail their banks out again.

They would have to help those banks, because those banks’ investments in Greek and Irish bonds had been cut in half, say. That’s what they don’t want to have to do. That’s politically difficult for them, they would then have to bear the blame, they would have to feel the pain of an economic adjustment. But that’s what ought to be happening now. They ought to be facing that situation and they don’t want to have to do that – they would prefer that the Greek government cut its wages, laid off its workers, that all the pain be concentrated somewhere else rather than be taken out on the big banks in those countries, and then on the governments of those countries who would have to step in and help the banks, which they don’t want to have to do.

Interviewer: Now Professor Wolff, how would you assess the International Monetary Fund’s track record up to now with the programmes it has implemented in the various countries it has lent money to?

Wolff: It has a long history of being mostly interested in maintaining the concerns and serving the interests of the biggest banks, the biggest and richest countries. No smaller country, and certainly, no mass of the working class in any country, has anything to hope for from the International Monetary Fund. That’s not what they do, that’s what they have never done. They will be waiting till the last possible moment, and only under massive political pressure will the Iternational Monetary Fund take any step that really resolves these kinds of questions. Their participation in the Greek ‘solutions’ of last year was only as an adjunct to a policy that was worked out that basically threatened Greece -and it’s doing the same in other countries- with even worse difficulties if they didn’t knuckle under and perform this act of, literally, economic self-destruction in the name of solving a problem. It is clear, both in the name of Greece, and even more in the case of Ireland, that the austerity programmes supported and promoted by the IMF, for example, that these problems in many ways make the economic crisis worse. They are not solutions. They maintain the income flow of the banks and investors, but they do so at the price of economic damage done to the underlying working class, commitment to labour, infrastructure, social structure of a country that is put through this kind of crisis.

You can see it in Ireland, you can see it in Greece, but by the way you can even see it in England. This is a way of helping one sector of the economy but it is at the long-term cost of the whole system. For many of us economists, what we think we are observing, is not only the saving of only the saving of a small financial core of the economy at the expense of everybody else, but we don’t think that’s a succesful policy, and it’s more and more looking to us like a capitalism that is imploding, that is shooting itself in the foot, that is undercutting its own long term survivability by this horrifically ineffective short-term effort to get out of the crisis for the few who produced it at the expense of the many who will determine the future of the economy.

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1 Response to “Beasts of Burden”


  1. 1 John McDermott March 30, 2011 at 7:27 am

    Great article.! It might be titled. “The blame merry-go-round”


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