‘The harsh reality of economic power’: what Gordon should say
The other day Blograde Dave was asking whether what Giles calls ‘institutional bias in favour of clients’ on the part of the international credit rating industry (but which I’d prefer to call rampant corruption) was symptomatic of ‘outmoded ideology’, or whether it is ’an expression of naked class interest’.
Good question, and the answer lies in an analysis of the hegemonic power of discourse exerted by capitalism. I mean, doesn’t it always (here’s Paul Sagar moving towards a similar conclusion).
I’ll be tackling that in more detail, and suggesting ways forward. But today, as a little taster, here’s Geoff Dyer in the FT assessing why ‘China’s century’ has not arrived just yet:
‘The crisis has also given China, with its $2,000bn-plus foreign exchange reserves, a lesson in the harsh realities of economic power. Many developing countries have sensibly built up a foreign currency pile to insulate themselves from financial crises. Yet real power lies not with the country with the most reserves, but with governments that can easily borrow in their own currency. After all, who does the US borrow from? China.’
It’s not about fiscal responsibility, about living within your means, says Geoff. That’s not done the Chinese much good so far.
No, it’s about naked power.
The US has the dollar, and it’s not going to give up its position as the lead currency, whatever the longstanding Kaldorian arguments that a world ‘commodity currency’ would bring greater long term economic stability to use. It’s not going to because it doesn’t have to.
And here, for good measure, is Simon Kuper in the same FT edition, on the reality of football, not as business, but as an expression of class interest:
‘Clubs are immortal chiefly because creditors dare not pull the plug. The clubs’ brands are strong enough to cow banks and taxmen. And so clubs can incur debts without fear………….. Much of football’s debt will never be repaid. So it will be written off.
…..Large chunks will be nationalised. In many countries football lives off state support. The prime example is Argentina, whose government last month bailed out the clubs by “buying” football’s television rights for almost triple their previous price. In Italy and England, governments have quietly accepted that many clubs will never pay their back taxes. Even Dutch city councils bail out profligate clubs. Taxpayers are therefore funding footballers’ Porsches.’
Just like the United States’s strategy for maintaining world domination, football doesn’t need to operate within the limits of fiscal responsibility. It has institutional power, and that’s what counts.
And just like the big football clubs, in their patronising attitude to the smaller clubs (yeah, I do support Blackpool), the international credit rating industry doesn’t need to operate according to the rules it sets out for others. It has the power not to do so.
The ‘rules’ of fiscal restraint and responsibility are only for those without power. That’s why, in this new neo-neoliberal universe, where the expression of naked class interest is just a little more visible to the naked eye than it was before the smokescreen of the efficient-market hypothesis was blown away by the crisis, the dominant narrative is that of slashing public services to curb the national debt.
Because curbing the national debt by slashing public services and hiking unemployment to previously intolerable levels (see part 2 of my essay) is done at the expense of those without power, that is what those with the power will do.
That is why Osbourne can crow ‘we have won the argument on spending’.
Osbourne is correct. The argument IS won, because it is the ‘powerful’ argument. It simply doesn’t matter that, from any other perspective than that of naked class interest, it’s stupid and wrong, and that prioritising the national debt over investment is incredibly short-sighted.
That, comrades, is the harsh reality of economic power, and what we’re up against.
It would be nice to think Gordon Brown will stand up in conference this week and call out the Tories on their economic strategy, that investment IS more important than the debt as a percentage of GDP, and that Britain should be confident enough to know that it can keep on borrowing as much as it takes to make that investment happen, because the markets will not in fact refuse us further credit, and because the gilt market will stay manageable anyway as they remain an attractive investment option (see also this tentative FT ‘long term’ view). (See also Giles at Freethinking Economist on his view that ‘whatever grim future awaits Iceland holds no auguries for Britain or other advanced nations.’)
It would be nice to think that the Labour government was stronger and more confident in its cause than your average indebted football club. If that were so, I’d happily stay up late and write Gordon’s speech for him, just like last year.
Message to Gordon: my mobile’s on if you want to call. Try to avoid kids’ bedtime though, if you would.