Radhika Balakrishnan and Diane Elson: The U.S. financial crisis, and the $700 billion rescue plan, even as amended by the Senate and the Treasury Department, do not simply involve huge monetary costs. Both the crisis and the proposed bailout involve violations of the human rights of millions of Americans. Any short- and long-term solutions to the problems must take human rights into account and ensure that the banks are fully accountable to the American people
The Universal Declaration of Human Rights, crafted under the leadership of Eleanor Roosevelt in the aftermath of the great depression and the Second World War and signed by the U.S., declares that everyone has inalienable political and civil and economic and social rights. Governments have obligations to respect, protect and fulfill those human rights, which include the right to an adequate standard of living, the right to housing, and the right to education, as well as the right to freedom of peaceful assembly and association.
The obligation to respect requires that states refrain from interfering with the enjoyment of human rights. The obligation to protect requires that governments prevent violations of human rights by third parties. The obligation to fulfill requires that governments take appropriate legislative, administrative, budgetary, judicial and other measures towards the full realization of human rights. The system of international human rights law provides a framework through which governments can be held accountable for their discharge of these obligations.
While neither the financial crisis nor the rescue plan violates the obligation of the U.S. government to respect human rights, the former reflects a lack of compliance with the obligation to protect and the latter with the obligation to fulfill.
The U.S. government has been complicit in the emergence of the financial crisis. It deregulated the financial sector, failing to provide adequate protection for Americans against violations of their human rights by financial institutions. It failed to provide protection for Americans needing safe assets to achieve an adequate standard of living in their retirement, and good-quality affordable mortgages to purchase housing. The U.S. government allowed the financial sector to become dominated by speculation, creating an unstable house of cards that was bound to collapse.
Financial institutions have now lost all confidence and trust in one another, and are failing to provide the credit required for businesses to produce and workers to be paid and houses to be bought and sold. Americans have been left unprotected against the loss of their businesses, homes and jobs; against the falling value of their savings, and homes; against the falling value of revenue from property taxes, leading directly to a decrease in the availability of resources for public education.
Belatedly, the government has awoken to the idea that it has some responsibility. But neither legislators nor the administration have proposed to re-regulate the financial sector in order to end the abuses that have violated the human rights of Americans. Instead, they have proposed to divert resources which could have been used to fulfill human rights to bail out the financial sector. Think of what could be done to fulfill human rights with $700 billion - improvements in public education, support for job creation, support for homeless people and health care for all to name a few.
The financial sector does not need a bailout, but rather thorough reform and restructuring. It is legitimate to spend public money to reconstruct the financial sector, if that is done in a way that serves to fulfill human rights through ensuring banks can be held fully accountable for regenerating the flows of productive, rather than speculative, credit that are essential to prevent a recession. The rescue plan, even as amended by the Senate and now the Treasury Department, does not do that.
The $250 bn plan to buy shares in US banks announced on 14th October is billed as comparable to that introduced in the UK, but the UK plan goes much further than the US one in securing for the people control and oversight of the banks. The US plan only involves the purchase of preference shares, which give no voting rights. The UK plan involves purchase not only of preference shares but also of ordinary shares that do give voting rights to the government; and there will be a seat for a government representative on the boards of participating banks. In the UK the government has insisted that those responsible pay some of the cost, with some banking chiefs quitting their jobs- with no golden goodbyes. The US plan makes no mention of this. The US plan will involve restrictions (unspecified) on executive pay: the UK plan requires an end to cash bonuses for bank directors. The UK plan requires participating banks to return mortgage and small business lending to the levels of 2007.
The US plan has no such specific targets. America needs a plan at least as good as the UK one in terms of regulation, oversight and control of the banks on behalf of the American people.
Better regulation, control and oversight of banks is not a curtailment of rights and freedoms, it is an expansion of rights and freedoms: the rights and freedoms of ordinary Americans to make a decent living, have a home, have savings that won't disappear, get a good education - freedoms that are now in jeopardy. When the supposed freedoms of a few threaten to destroy the freedoms of the many, it is time to hold the U.S. government accountable to comply with obligations it undertook in voting for the Universal Declaration of Human Rights.
Diane Elson is a Professor of Economics and Sociology, Human Rights Center, Essex University.