“All comparisons with the 1970s are absurd”, squeaked one of Gordon Brown’s media people, embarrassed about the Government’s decision on 17 February to nationalise Northern Rock.
“The man running it has credibility in the City, it will be run on a commercial basis..”
There is nothing “welfare-state”-ish about this nationalisation! No, sir! “Credibility in the City” is still the highest principle!
Actually nationalisation cannot but be a “social” measure. It is even a “welfare state” measure. Only... the “welfare” being tended to is the welfare of the rich.
According to the writer Gore Vidal: “America is a unique society in which we have free enterprise for the poor and socialism for the rich”. Not so unique after what Gordon Brown and New Labour are doing here.
One hundred and forty years ago, Marx defined developed capitalism as the combination of social production with the rule of private gain — “the co-operative form of the labor-process, the conscious technical application of science... the transformation of the instruments of labor into instruments of labor only usable in common, the economising of all means of production by their use as means of production of combined, socialised labor, the entanglement of all peoples in the net of the world-market” together with “the constantly diminishing number of the magnates of capital, who usurp and monopolise all advantages of this process of transformation...”
He didn’t know the half of it.
In the relative boom of the last decade, as the BBC’s business editor Robert Peston points out in a new book, “investment bankers, hedge fund managers and partners in private-equity firms all did very nicely from the bonuses and the capital gains and the fees... The triumph of the super-rich has been the most striking social phenomenon of the New Labour year...”
Now, says Peston, “most of us are paying for their foolhardiness”. Except that is not quite right. The working-class majority are paying, all right; but the super-rich were not foolhardy. They knew that the Government would bail them out.
When Northern Rock went bust, the Government stepped in with vast guarantees to prop it up. It was an effective subsidy — the bank would have had to pay huge fees to get such credit, or credit guarantees, commercially — and more, since the bank in fact could not have got the guarantees commercially at any price.
The Government’s aim was to nurse Northern Rock into a condition where some private capitalist would take it over - make a tidy profit, of course, but release the Government from its guarantees.
The bidders were not willing to meet even the Government’s most minimal hopes. So the Government is nationalising it, handing it to Ron Sandler so that he will strip it down, sack most of the workers, and chop the residue into shape where it can be sold off.
The Northern Rock shareholders may lose out, getting little or nothing for their shares. They are squawking loudly about it. If hedge funds make big gains when business is good, then they should accept losses when dodgy investments go bust? Oh no! It’s boom we win (the market must be allowed to work freely), slump you lose (the taxpayers should bail us out).
Whatever happens there, things look good for the big players in Northern Rock. Most of Northern Rock’s best assets were siphoned off to a series of separate offshore companies called Granite. Granite’s assets, and debts, were in Northern Rock’s accounts; but the assets are also legally “off the balance sheet”.
The nationalisation does not include Granite and the “good” assets. It covers only the “rubbish” assets held in the main Northern Rock company. But the nationalised Northern Rock remains responsible for Granite’s debts.
If the world downturn now shaping up proves severe, then Northern Rock will collapse completely, but the Government will pay the price, and many financiers will escape very well. And if it proves not so severe, then even more financiers will do very well out of the episode.
The nationalised Northern Rock will be run by Ron Sandler and Ann Godbehere. They will be paid £90,000 and £75,000 respectively. Per year? No, per month. And although Sandler has lived and worked in Britain since the mid 1980s, they are both “non-domiciled” for tax purposes, so will benefit from the Government’s recent climbdown on “non-domiciled” tax.
Peston’s book explains why the Government runs this way. “The new super-rich have the means through the financing of political parties, the funding of think-tanks, and the ownership of the media to shape Government policies...
“Since 2001 the private-equity doyens Sir Ronnie Cohen and Nigel Doughty have contributed £1.8 million and £1 million respectively to Labour, the former Goldman Sachs partner John Aisbitt has given £750,000 and the hedge-fund executive William Bollinger has handed over £510,000.
“Tony Blair decided it was preferable for Labour to be financially dependent on wealthy individuals than on the party’s trade union founders...”
A socially-interconnected economy should be socially owned and socially (democratically) controlled. But for that we need a workers’ government, a government based on the independent representation of the working class in politics.