Recapitalise the real economy….
Apparently, the definition of insanity is not repeating the same behaviour over-and-over again but repeating it and expecting different results. If this is the case than our policy-makers and politicians, continent-wide, lost their last marble a long time ago. One of the proposals on the table to deal with the continuing Eurozone crisis is apparently to;
allow the European Financial Stability Facility, the euro zone’s 700 billion euro rescue fund, to help recapitalize banks directly, rather than lending to individual countries that then lend it on to the banks.
In other words, yet more pump-priming of Europe’s banks. Now, and this is a serious question, if this hasn’t worked up to this point, despite being flogged very much to death upto this point, what makes people think it will work this time? I am genuinely curious as to the answer to this, because to my mind, not only is there a conspicuous lack of sanity in what passes for economic discourse there is also a startling lack of imagination. In actual fact, they throw into stark relife the plain truth that policymakers and politicians havent got a clue what to do about this crisis because they can’t understand or accept its underlying causes. The state, be that the European state or its component nation statelets, seem locked in a death spiral, simply unable to let go of each other as they plummet further and further into the abyss, unable to reach out and save themselves (and us, the wealth creators, who are bound too them) by reaching for the sides and safety because they are two intent on squeezing the last drop of life out of each other.
Of course, the government don’t mind this, because they are ideologically bent on their economic kamikaze run to smash the state sector once and for all but this is not to say that the Labour Party is being the voice of the economic sanity that it needs to be in this situation. Ed Balls and even Francois Hollande are making a cataclysmic mistake in egging on this continued circle of madness. Voters have made it clear what they expect from us and Mr Hollande and that is to stay the madness, not carry it on at full pelt and if either need any reminder of the price of complicity they should have a chat with their Greek colleagues in PASOK. Ending this spiral means a radical new departure, a recapitalisation of the real economy. If we use the money tossed at the banks for a radical program of social investment and debt relief than ordinary households will start to pay down the debt they owe, the banks will therefore get their money, eventually, as money starts to come from the state directly but relived households. Current recapitalisation policy is putting the cart before the horse in giving the money straight into the banks; a policy sends the money down a great big back hole, inflating banks profits, shareholders dividends and, of course, Chief Executives pay packets. This is a false economy because the money then disappears out of circulation and has therefore, effectively, been totally wasted and this strategy, coupled with the austerity driven assault on jobs, wages and the real wealth creating economy is a toxic brew that can only lead to the eventual traumatic death of the patient.
Labour should be quite clear. The banks are not getting a penny piece more of state money. Instead, that money is going to be used to lighten the burden on the real economy. This is a strategy for growth that is both necessary and bold and radical enough to capture the popular imagination, harnessing creatively the dissatisfaction so many feel and have clearly expressed at the polls for the creation of a new, sustainable and productive economy.