The International Finance Centre, Hong Kong. Flickr/Ndecam. Some rights reserved.
It has become trite to point out the fact that, though the 2008 financial crisis caused an untold amount of unemployment, misery and social damage, those who were directly responsible for the collapse suffered least. Indeed, Alessio Rastani, a previously unknown stock market trader, gained widespread (if fleeting) infamy after claiming that he had been “dreaming” of recession for years as it was, for him, a massive money making opportunity.
Without even considering the ethics of this behaviour one is forced to ask – why is this the case? How is it possible for anyone to maintain, let alone improve, their standard of living in a time that is, quite rightly, described as a crisis?
These questions are answered, though perhaps simplistically, by the following statement:
“There are some activities in which the motive for private profit leads, on the whole, to the promotion of the general interest and others in which this is not so. Finance is now definitely in the latter class.”
In spite of its simplicity, it is difficult to doubt the veracity of this observation, and given our present financial and geopolitical situation one may be forgiven for believing that it was published relatively recently. This statement was actually posited in Bertrand Russell's essay 'the Modern Midas'; first published in 1933. Nevertheless, this eighty-one-year-old piece remains as relevant today as it was when it was first written.
In this short text, Russell submits that, though many who are considered 'hard headed realists' ardently argue that financiers and businessmen operate entirely on the basis of acquisitiveness (the desire to grow rich) the reality is that most wish to see their rivals ruined as much as, if not more than, they desire their own success. To Russell, this point is made evident by the fact that, while it is quite clear that a stable currency and security of credit would bring prosperity to all, no financial or business institution supports any attempt to bring about any reform to realise these desiderata, as doing so would confer an equal benefit on their rivals.
For Russell, at the time of writing, the financier's rival was the foreigner, and accordingly a nationalistic ethic was supported by the plutocracy. Foreign investment was discouraged, illogical tariffs were maintained and domestic business did not have to compete with foreign interlopers.
With the decline of nationalism through the late 20th century however, the benefits of foreign investment were realised and a global financial system emerged. The rise of multinational corporations and banks ensured that there was no reason to fear foreign competition and that those who were once rivals could now be considered as friends and colleagues. This change has not, however, brought about the realisation of utopia.
Market forces are dictated by human emotion and, in spite of their often obscene wealth, financiers are as human as the rest of us. It is natural for people to hate what we fear, and (to an extent) vice versa. Thus, just as the 20th century banker harboured a fear that he would be usurped by foreign competition, so too does the 21st century banker fear being usurped by the uppity 'lower classes'. In the 21st century, as in the 1930's, financiers continue to be governed by a mixture of acquisitiveness and hatred of their rivals; accordingly, the modern financier seeks to diminish the middle class while simultaneously bolstering his own income. The working class receive no consideration as, to paraphrase Orwell's O'Brien, they will not revolt so long as they are 'distracted' and apathetic.
To realise their goal, the plutocracy ensures that the inner workings of the financial system are kept shrouded in mystery. Since the majority of the general public, and it must be said, politicians, do not fully understand notions such as quantitative easing, inflation, deflation and other such financial issues, they feel that those who can discuss such matters with ease must be very wise and as such accord their views a respect which may or may not be due.
A prime example of this phenomenon in action concerns the research paper Growth in a Time of Debt, by Professors Reinhart and Rogoff. This influential paper has been cited as empirical evidence in support of widespread austerity measures by numerous politicians, however, its findings were effectively disproven by a Massachusetts student; Thomas Herndon. The fact that a flawed paper could prove so influential illustrates the power wielded by eminent economists and financiers: there can be no informed, democratic debate on a matter that the people, the demos, do not understand.
Even those who possess a visceral hatred of bankers and their ilk fall foul of this, whatever their claims to the contrary. One may dislike, distrust or even despise the financial sector, but in the absence of universal understanding, one remains subject to its whims. The libor-rigging scandal stands as a case in point. Although widespread public anger was recorded in light of it, few members of the public understood why, exactly, they were enraged.
The reason for this ignorance is obvious; few are actually taught about the subject of economics in their formal education, and those who are tend to be taught by teachers or lecturers who personally benefit from the status quo. Under the present system, a minority of the population, who understand the intricacies of economics, find that they wield an extraordinary and disproportionate amount of power over the majority due to the superstitious reverence that their specialist subject is treated with.
This situationis no different from any situation in which a minority obtains power as a result of specialised knowledge and superstition – the priests of Ancient Egypt (who could predict eclipses with precision, and extort gifts and tribute accordingly), the leaders of the Catholic Church (who possessed literacy throughout the middle ages, and were able to promulgate whatever message they chose accordingly) and the medieval monarchs (who asserted and protected their right to rule by reference to 'divine right') all employed similar means to achieve the same end.
This superstition, borne of ignorance, perpetuated by the institutions of all 'civilised' countries and maintained by the general lack of education on the matter of economics, presently safeguards the power of financiers. But the power that they wield is no greater than that once held by clerics. The people were warned, in bygone days, that displeasing the King or clergy would anger the gods. Now, similarly, we are told that any action which displeases financiers—our modern, secular clerics—will anger 'The Market'.
'The Market', and those who preach on its behalf, is an unelected force, yet it insidiously influences every political decision made by the establishment. Indeed, we have now reached a point that no political party is willing to challenge the orthodoxy of neoliberalism for fear of angering the financial classes. Choosing between the Liberal Democrats, Conservatives or Labour is now little more than a tactical decision, a question of managerial competence and the perceived lesser of evils. Clegg squandered his time in government, and signed the death-warrant of his party, by spinelessly accepting Tory dogma and letting his promise of a fairer society fall by the wayside. Miliband has sacrificed any ethos that he may have laid claim to by similarly seeking to appease the markets and refusing to consider renationalising 'the family silver', the Royal Mail. At least people know that they're getting a PR-approved corporate shill when they vote for Cameron.
In light of the bland, boring sameness of the mainstream parties, even neo-Thatcherites such as UKIP appear to be 'anti-establishment' in the eyes of the common voter.
We have been told that 'red tape' angers 'The Market'. This is because regulation limits the power that may be exercised and enjoyed by financiers. Consequently, crucial legislation has been repealed and austerity has been imposed. We have been told that renationalising our once-public services would anger 'The Market'. This is because it would take money from the hands of financiers – it would possibly even deposit money into the hands of their rivals, the 'lower' classes! Consequently, no establishment figure dares advocate it—not even the leader of the once-socialist Labour party—in spite of the fact that almost 70% of the British populace favour doing so. We were told that Scottish independence would anger 'The Market'. We were told that because the status quo, the United Kingdom, protects the interests of bankers. Consequently, the entire weight of the establishment was thrown behind 'Better Together'.
The solution to our present problems is tripartite. The Westminster Parliament must be significantly reformed, the precepts of finance must be simplified so that they may be commonly understood and the population must be educated on the subject of economics as if no political issues were at stake.
These aims will not be achieved easily. Because Scotland ultimately voted against independence, the agenda of the Westminster elites and the bankers has been vindicated. The status quo will be maintained: although the leaders of Labour, the Liberal Democrats and the Conservatives have pledged to redefine the nature of the whole United Kingdom, (as Jack McConnell, former (Labour) First Minister of Scotland stated last night) the British Parliament is highly resistant to reform and cannot be trusted to bring about change on its own. Indeed, it is quite clear that, so long as the upper tiers of politics are driven entirely by a superstitious reverence of 'The Market', any reform carried out by Westminster would need to receive unofficial approval from the priests of finance.
Because of this, the people of Scotland, England, Ireland and Wales must maintain pressure on the Parliament to realise a new constitutional settlement. A declaration of Scottish independence would have forced change upon an unwilling institution. This, unfortunately, did not occur, but the people of Scotland are more politically active than ever. To many, the pro-independence campaign was not about nationalism. It was about proving that society does not only exist, contrary to Thatcher's claims, but that it can be made fair and just by the individuals in it. It was about embracing one's social conscience and taking a stand against austerity and financial orthodoxy. It was about doing the right thing, instead of listening to 'The Market'.
If a movement or party which espouses a positive vision of the future, in the vein of the Yes campaign, emerges in the other three nations of the United Kingdom, if it can capture the hearts and minds of England, Ireland and Wales, then the whole populace could become as politically energised as the Scots north of the border.
With an energised population, with our strength in numbers, we could realise the revolution of a thousand butterflies that the pro-independence campaign sought to bring about. We could change the fundamental structure of the country; use our political will to ensure that true representation and active debate return to a Parliament that has long since forsaken it.
With a reformed legislature in the United Kingdom, the people, the demos, would be able to take the first step in demystifying finance. Superstition provides financiers the power to assert dominance over the majority of the population; this superstition is perpetuated by the current establishment. If the current establishment is driven out, or discredited, it presents the people of Scotland, England, Ireland and Wales with a golden opportunity: the opportunity to gain knowledge.
The Scottish Yes campaign proved that an apathetic populace can be spurred to action and convinced to educate themselves. Indeed, a study by Edinburgh university found that those who were 'more informed' were more likely to vote yes than the under-informed. If the politically active climate of Scotland were to be emulated throughout the rest of the nation then we could begin a democratic investigation into the practices of finance; thus, a widespread education on the matter of finance may be socially, not formally, achieved. In light of this, the tenets of finance could be simplified and the superstition that permeates the sector could be banished.
Perhaps I am being overly optimistic. Perhaps such reform is out of our reach. But one thing remains certain. The enemy of superstition is knowledge, and Sir Francis Bacon's famous assertion that knowledge is power remains as true today as it was when he first wrote it. The minority, 'The Market' and its priests, may be protected by superstition, but knowledge, education and understanding can grant the majority the power to repel their entrenched sophistry, shed their superstitious ethic and throw their previously held beliefs into the light of open and informed debate.
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