The 2008 financial crash: Punishing the victims, rewarding the perpetrators
The 2008 financial crash should have marked the end of a neoliberal era marked by greed and inequality. But it ushered in even more iniquitous economic policies which have benefited the super-rich at the expense of the majority.
It was the worst economic disaster since the Great Depression of the 1930s. However, unlike then, the crash of 2008 did not lead to the adoption of progressive New Deal-style policies, but the exact opposite. The massive bankers’ bailouts that were introduced following the collapse of Lehman Bros were paid for by ordinary taxpayers, who then saw their living standards plummet as governments imposed harsh austerity measures, which led to important public services being cut. Let’s look at what happened in Britain.
In the 2010 General Election, the Conservatives, out of office since 1997, promoted themselves as the party most serious about “cutting the deficit.” The election was all about ‘the deficit’. The ‘d’ word was everywhere. The Tories scraped home, but could only form a government with the support of the Lib Dems, who, under the leadership of banker’s son Nick Clegg, were now enthusiastic neocons.
New Chancellor of the Exchequer George Osborne introduced an emergency “austerity budget,” which we were told was going to “rebuild the economy.” Cuts in public spending would reach £17bn (US$21.7bn) by 2014/5. There was a public sector wage freeze and an announcement that a rise in the state pension age would be brought forward.
The following winter, local authorities across the country announced cuts in public library provisions. I was involved in a campaign to save my local library. We were told that councils couldn’t afford to keep professionally staffed libraries open, given the reduced money they were receiving from Whitehall. But ‘austerity’ was a sham, a failure even on its own terms, as the figures show. Public sector net debt was £1.1bn in 2009/10, the last year Labour were in power.
By 2016/7 it had risen by 53 percent. Public finances were in a far worse state after seven years of Tory austerity than they were at the start, when so much fuss was made about the need to “balance the books.” That’s even after a number of state assets, including the Royal Mail, in public/state ownership since its inception in 1516, were privatized.
Rather than being a serious attempt to improve the public finances, as indeed genuinely ‘free market’ libertarians had wanted, ‘austerity’ was used as a pretext for redistributing wealth upwards and destroying the last vestiges of the social democratic post-war settlement. There was still money to spend on projects favored by the elites, like bombing Libya in 2011 (£320mn) or backing 'rebels' in Syria, but not enough money to support much-needed public services.
As Andrew Murray of ‘Stop the War’ put it: “the calibration of a state big enough to impose its military will on the Middle East but too small to keep the local library open is a study in the contradictions of neoconservatism worth pondering as David Cameron brings the ‘big society’ to Benghazi with a bang.”
The greed which fueled the financial crash in the first place was encouraged still further. The super rich got even richer from privatization, state handouts, and tax cuts.
Meanwhile, British workers suffered the biggest drop in real earnings since the Victorian age.
If ever a government deserved to be ejected in a general election, it was the Conservatives in 2015. But Bullingdon Boy David Cameron stayed in power, partly because Labour’s line on austerity had been too timid. Instead of flocking to Ed Miliband’s party, voters turned to UKIP, and took their anger out on the EU. But the core problem was – and is – neoliberalism and an economic model which is expressly designed to favor minority, not majority, interests.
We are now witnessing, not just in Britain, but in America and across the West, what I call “the politics of mass distraction.” We’re encouraged to focus on cultural issues, such as whether or not Muslim women should be banned from wearing a burqa and what the signage should be on toilets – and not on the fundamental unfairness of the existing economic order.
The so-called ‘Alt-Right’ and the ‘ID Politics Liberal-Left’ are who the elites want the debates to be between. For all their ‘populism’, you don’t hear the Alt-Right talk too much about rail fares, hikes in energy bills, or library closures. Neither do the ID Politics Liberal Left. While the Alt-Right and ID Politics Left hurl abuse at each other on social media and in TV studios, the 0.01% continue to get even richer.
The banks took taxpayer money 10 years ago (around £500bn of it in the UK), and our reward has been the closure of thousands of branches up and down the country. In June, it was reported that bank closures were reaching the “alarming” rate of 60 per month. And of course, the government does nothing to stop this. It’s not all that we’ve lost in the era of doubled-down neoliberalism. Everywhere you look, we’re worse off than 10 years ago. Almost 500 public libraries have closed. Thousands of public toilets have been shut.
A city the size of Newcastle upon Tyne, (population over 300,000) no longer has any public toilets in its center, leaving the sick, elderly, and disabled scared to go out.
Meanwhile, in Northamptonshire, the Tory-run council has backed ‘radical’ cuts to services, with children’s services, road management, and waste management all threatened.
How was it that back in the 1960s, local authorities were able to provide a far wider range of services than today? I have a copy of a guide to Oxford in 1966, when the council operated a number of restaurants and cafeterias, providing affordable food for workers and those visiting the city.
“You’d not only find council car parks and public toilets, but also municipal swimming pools, pitch and putt courses, crazy golf, deckchairs for the beach, boating lakes, recreation grounds for bowls and tennis, bus services and civic theatres, all manned by local authority employees,” I wrote in a Guardian piece about British seaside holidays in the late 1970s.
In those days, we operated under a much fairer economic model which in the decades immediately following World War II delivered to ordinary people the biggest rise in living standards in our history. It’s a majoritarian, economically viable, and much more efficient system we should have returned to in 2008. Instead, we got something much worse than even Thatcherism and Blairism: NeoLiberalism on Steroids and the Politics of Mass Distraction.
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The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.
