It’s Finished

Peter Brookes on the bailout
Peter Brookes on the bailout

In an excellent, thorough investigation of the financial crisis in the last issue of the London Review of Books, John Lanchester had presented the scrapping of pensions in the public sector as a worst case scenario. Looks like it has already started to happen in the private sector with Barclays scrapping the pensions of its 17,000 employees. This does not, of course, affect the President Bob Diamond who last year raked in £21 m, nor does it affect the rest of the the 1,500 best paid employees. Here is Lanchester (however, let me warn that this piece is more than 14,000 words long, so you better have a good strong copy of coffee and plenty of free time before diving in; also, I’ve appended a reader’s letter correcting an accounting error made by the author):

It’s a moment of confusion and loathing that most of us have experienced. You’re in a shop. It’s time to pay. You reach for your purse or wallet and take out your last note. Something about it doesn’t feel quite right. It’s the wrong shape or the wrong colour and the design is odd too and the note just doesn’t seem right and . . . By now you’ve realised: oh shit! It’s the dreaded Scottish banknote! Tentatively, shyly – or briskly, brazenly, according to character – you proffer the note. One of three things then happens. If you’re lucky, the tradesperson takes the note without demur. Unusual, but it does sometimes happen. If you’re less lucky, he or she takes the note with all the good grace of someone accepting delivery of a four-week-dead haddock. If you’re less lucky still, he or she will flatly refuse your money. And here’s the really annoying part: he or she would be well within his or her rights, because Scottish banknotes are not legal tender. ‘Legal tender’ is defined as any financial instrument which cannot be refused in settlement of a debt. Bank of England notes are legal tender in England and Wales, and Bank of England coins are legal tender throughout the UK, but no paper currency is. The bizarre fact of the matter is that Scottish banknotes are promissory notes, with the same legal status as cheques and debit cards.

These feared and despised instruments, whose history has long been of interest to economists, come in three varieties from three issuing banks: the Bank of Scotland, the Royal Bank of Scotland and the Clydesdale Bank. Small countries with big ambitions but few natural resources need ingenious banking systems. The history of the Netherlands, Venice, Florence and Scotland show this – and so does the tragic recent story of Iceland. ‘In the 17th century, when English and European commerce was expanding by leaps and bounds,’ James Buchan wrote in Frozen Desire, ‘the best Scots minds felt acutely the shortage of . . . what we’d now call working capital; and Scots promoters were at the forefront of banking schemes in both London and Edinburgh, culminating in the foundation of the Bank of England in 1694 and the Bank of Scotland in 1695.’ The powers down south, however, came to think – or pretended to think – that the Bank of Scotland was too close to the Jacobites, and so in 1727 friends of prime minister Walpole set up the Royal Bank of Scotland.

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The Real Expenses Scandal

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George Monbiot

There’s something very odd going on with the British political system when the Chancellor of the Exchequer can lose his job over less than £700 whilst billions are squandered on illegal wars, nuclear missiles, corporate subsidies and bailouts. George Monbiot’s latest piece on Znet uncovers the massive corruption behind the M25 project. It is but one of many examples of the way the political system is designed to ensure the socialisation of risk and privatisation of profit.

It’s a thousand times bigger than the one we’re talking about, so why doesn’t it ignite public anger?
For a moment, my heart leapt. The headline on the front of yesterday’s Daily Mail contained the words travel, scandal, extortionate and £6.2. I imagined, until I read it properly, that it referred to the £6.2bn contract to expand the M25 motorway, which has just been signed. Some hope. “The £6.2m bill: Scandal of how MPs are taking taxpayers for a ride with extortionate travel expenses” referred to a rip-off precisely 1000th of the size of the travel expenses scandal that interests me.

I understand the public anger and fascination about MPs’ expenses, and the burning question of whether you can obtain capital gains tax exemption on your second duck house. But it is microscopic by comparison to the corruption that has been bubbling along merrily for 15 years in the UK, unmolested by the tabloid press.

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Here’s a broom, Mr Speaker

‘The MPs’ expenses scandal has exposed the House of Commons as an Augean stable – and I mean to get it cleaned up’, writes Mark Thomas.

As some readers may be aware, I have been working on the destruction of international capitalism and bourgeois parliamentary democracy for some time. However, even I have been taken aback by my recent run of success. Had I factored in the self-destructive culture of greed, I could have spent considerably less time handing out leaflets and waving placards and spent considerably more time on the champagne aspect of the “champagne anarchist” life style.

Frankly, no one could have quite predicted the depths to which parliament has sunk. And each release of information, similar to the release of Police Academy films, gets progressively lower and more vile.

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Kabul’s New Elite Live High on West’s Largesse

Patrick Cockburn reports about the self-enriching practices of the Western ‘donor’ community in Afghanistan. As despicable as it may be to siphon off wealth from one of the poorest countries in the world, it really ought to come as no suprise. It is but the continuation of the the multi-billion international development industry’s standard practice. Graham Hancock, a former World Bank employee and one of the first to expose the endemic corruption of the aid policies of the IMF, World Bank and USAID in the late 1980s, aptly calls them the “Lords of Poverty“.

Kabul – Vast sums of money are being lavished by Western aid agencies on their own officials in Afghanistan at a time when extreme poverty is driving young Afghans to fight for the Taliban. The going rate paid by the Taliban for an attack on a police checkpoint in the west of the country is $4, but foreign consultants in Kabul, who are paid out of overseas aids budgets, can command salaries of $250,000 to $500,000 a year.

The high expenditure on paying, protecting and accommodating Western aid officials in palatial style helps to explain why Afghanistan ranks 174th out of 178th on a UN ranking of countries’ wealth. This is despite a vigorous international aid effort with the US alone spending $31bn since 2002 up to the end of last year.

The high degree of wastage of aid money in Afghanistan has long been an open secret. In 2006, Jean Mazurelle, the then country director of the World Bank, calculated that between 35 per cent and 40 per cent of aid was “badly spent”. “The wastage of aid is sky-high,” he said. “There is real looting going on, mainly by private enterprises. It is a scandal.”
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The Big Takeover

‘The global economic crisis isn’t about money – it’s about power’. Matt Tabibi of Rolling Stone on ‘How Wall Street insiders are using the bailout to stage a revolution’.

It’s over — we’re officially, royally fucked. No empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country’s heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.

The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history — some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That’s $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG’s 2008 losses).

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