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Saturday 25 November 2017

From individual casualties to mass slaughter, the 'solution' is killing us

The people who run the world simply want to get back to the way things were, writes Gene Kerrigan

Most of the time, the slaughter of jobs is pretty much invisible. A few workers let go here and there, a small shop or an office closes and half a dozen or more families are in trouble. The statistics are shocking -- 4.4 per cent unemployment in 2007 soared to 14.7 per cent now. For comparison, in the US, Mr Obama is in trouble because unemployment remains at 9 per cent. The UK rate is lower than that, and Japan -- in economic trouble for years, and with massive debts -- is at less than 5 per cent.

When something like a Dell or an MBNA happens here, a whole town is devastated -- and it's then the wringing of hands and gnashing of teeth is seen at national level.

Last week, MBNA's Carrick-on-Shannon workers were left dangling. The area has about 4,500 people, 700 work for MBNA. The business is for sale -- perhaps as a going concern, perhaps as a loan book that can be instantly transferred electronically to the distant back office of some other company. The facts behind the MBNA distress are fairly simple. The parent company, Bank of America, was for many years an insatiable monster, snacking on other big companies, at home and abroad. When it slugged down the MBNA credit card business in 2005, it appeared to be on a never-ending course of expansion.

With entrepreneurial timing, its highly paid geniuses swallowed Countryside Financial in January 2008, taking a huge chunk of the US mortgage market, just as the fraudulent mortgage time bomb exploded at the heart of the international credit system. It's now become apparent even to the highly paid geniuses that this is no passing recession -- the stormy waters will not recede for a long, long time. Bank of America was bailed out by the US government, recovered and is now consolidating its interests. Goodbye MBNA.

The media often makes too much of workplace openings and closures. That's the way the system works -- capital takes on the labour it needs and dispenses with it as it sees fit. Government regulation and trade union pressure can make this process somewhat less savage than it used to be, but such shape-shifting companies operate on principles that would be familiar in Charles Dickens's day.

In short, there isn't much the Government can do about monsters such as Bank of America -- except put the IDA to work, servicing such entities as MBNA. In this case, they'll act as unpaid consultants to the company, in the hope of selling off at least some of the Irish arm as a going concern.

In theory, the Government could use the domestic economy to soften the pain. We used to have over €20bn in reserve, but they blew that on zombie banks. Fashionable austerity policies have sabotaged domestic-based growth.

Recently, economist James Galbraith, from the University of Texas, made a speech about the importance of understanding that the global crisis isn't simply a recession, it's a breakdown of the financial system. His argument is that illegality wasn't a sideshow in the crisis, it's part of the complex credit machinery created by the financial geniuses over the past three decades. "Fraud was not a bug in the system, it was a feature." And there's no getting out of the crisis without wholesale reform of that machinery. "There is no national policy solution and no financial market solution."

Unfortunately, the people who run the world simply want to get back to the way things were, and to do so at the least cost to themselves. This requires ignoring the systemic nature of the crisis, and concentrating on "solutions" that transfer the cost of the crisis to others.

(Or, as James Galbraith put it: "Those who failed most miserably to forewarn against the financial crisis have, as a consequence, regained their voices as scourges of deficits and public debt.")

Last week, economist Nouriel Roubini, from New York University, who justifiably won credit for having warned against the coming collapse, spoke of the austerity policies being followed around the world.

"In the last two or three years. . . we've had a massive redistribution of income from labour to capital, from wages to profits, and the inequality of income has increased."

So? "You cannot keep on shifting income from labour to capital without having an excess capacity and a lack of aggregate demand. That's what has happened. We thought that markets worked. They're not working."

Instead of looking the crisis in its frightening eye, and acting accordingly, our leaders regularly tell us it's almost beaten -- then, the stock markets plunge again or an MBNA teeters on the brink. Their "solution" is killing us.

Sunday Independent

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