Tuesday 30 November 2010

Men Of Money, Women Of Steel

"But titanic, too, is the onslaught of money upon this intellectual force. Industry too, is earthbound like the yeoman. It has its station, and its materials stream up out of the earth. Only high finance is wholly free, wholly intangible. Since 1789 the banks, and with them the bourses, have developed themselves on the credit-needs of an industry growing ever more enormous, as a power on their own account, and they will (as money wills in every Civilisation) to be the only power. The ancient wrestle between the productive and the acquisitive economies intensifies now into a giant gigantomachy of intellects, fought out in the lists of the world-cities. This battle is the despairing struggle of technical thought to maintain its liberty from money-thought.

The dictature of money marches on, tending to its material peak, in the Faustian Civilisation as in every other. And now something happens that is intelligible only to one who has penetrated to the essence of money. If it were anything tangible, then its existence would be forever - but, as it is a form of thought, it fades out as soon as it has thought its economic world to finality, and has no more material upon which to feed. It thrust into the life of the yeoman’s countryside and set the earth moving; its thought transformed every sort of handicraft; today it presses victoriously upon industry to make the productive work of entrepreneur and engineer and labourer alike its spoil. The machine with its human retinue, the real queen of this century, is in danger of succumbing to a stronger power. Money, also, is beginning to lose its authority, and the last conflict is at hand in which Civilisation receives its conclusive form - the conflict between money and blood."

Oswald Spengler "The Decline Of The West"

"The dictature of money" and "material peak" are obviously the Spenglerian terms for "neoliberalism" and "late capitalism" respectively. Curiously, the birth and death of these phenomena can be dated from visits to the British Isles by teams from the Washington-based International Monetary Fund, the first to the United Kingdom in 1976, and the second to the Republic of Ireland in 2010.

The original IMF bailout to the UK, negotiated by Labour’s Chancellor of the Exchequer Denis Healey, has always been something of a historical curiosity, following on as it did attacks on Sterling on the international markets based on Treasury deficit statistics that have subsequently been found to have been unduly bleak. Even the original pessimistic estimates could have been ameliorated if Britain had included her newly discovered oil reserves within her potential earnings, as Tony Benn had recommended. Although the IMF loan was rapidly paid back within three years, the monetarist incomes policies insisted on by the IMF were the first victory for finance capitalism over industrial capitalism, and the harbinger for the neoliberal decades that were to follow. I leave it to others as to outline Healey’s membership of certain elite global plutocratic groupings and to speculate as to what extent these events were genuinely accidental.

Certainly in the years since 1979 when the IMF loan was originally paid back, money in its neoliberal capitalist guise has "thought its economic world to finality" in a way that would have been beyond even Spengler’s fertile imagination. Not for nothing did Spengler call Western civilisation "Faustian", as he believed that Western man’s attempt at "expansion into infinity" via abstraction piled upon abstraction was always doomed to failure, but the inventive excesses of the money men eclipsed the achievements of the engineers and scientists many times over. Although, remarkably, the glass and steel temples to mammon are still being constructed in the City Of London, much like the last Mayan temples that were being decorated as the people starved in the fields, the deeper insolvency of the system is presenting finance capitalism with an unenviable predicament: the only way to save the system is to cancel the debts and wipe out the bondholders, and yet it is the bondholders who primarily run and benefit from the system.

In the last few weeks, the IMF have visited Dublin as part of the EU/IMF "team" who have been offering Ireland "bailout" loans of up to €85 billion on its sovereign and bank debts. Although this has been largely viewed as an archetypal neoliberal problem/reaction/solution "shock doctrine" wealth transfer from the working population to the financiers, there are unusual factors involved that give cause for consideration. Most notable is that the IMF portion of the loan is charging interest at 3.12 to 4%, as opposed to the contribution from the European Union’s European Financial Stability Facility which is reportedly being charged at 6.7%+.

The nation that has provided the greatest portion of funds to the EFSF is Germany, at 27%, and who may have requested the punitive interest rate in response to the Irish tempting the German Depfa bank to relocate to Dublin’s International Financial Services Centre, in which a special law was passed in Ireland (S.I. 470/2002) allowing it to operate as it wished. Depfa was sold to the German Hypo Real Estate bank in 2007, and subsequently brought its parent down (at a cost of €50 billion to the German taxpayer) thanks to its exposure to American municipal bonds conducted under lax Irish banking regulation. That the bailout also effectively marks the end of the Irish banking sector is a forewarning of what will happen to the Anglo-Saxon banking system as a whole, for which Ireland was an outpost.

German Chancellor Angela Merkel is the first international leader who has talked of punishing bondholders of both bank and sovereign debt instead of allowing the debts to be passed onto citizens in the form of tax rises or cuts to services. That she was persuaded not to by the European Central Bank with regards to Ireland, has merely resulted in an interest rate that will ensure that Ireland has to default. The certainty that Ireland cannot in practice tolerate the terms of this bailout effectively ends the era of neoliberalism, the era of money. Where Merkel leads, sooner or later, all other world leaders will have to follow.


Anonymous said...

So after the era of money, what comes next?

Phil Knight said...

According to Spengler, the age of the Caesars. In my more febrile moments, I suspect the current fetishism for all things military (Wootton Bassett, "Sing For Heroes", the increasing emphasis on Remembrance Day) could well be a harbinger for this.

Seriously though, I think that anybody who thinks that the end of Neoliberalism will *necessarily* result in a happy return to social democracy is being rather optimistic.

JamieGriffiths said...

This is my fear too, Phil.
A faint foreboding from a purely gut level but I sense that what we will end up with is a return to militarism on a large scale.
Many nations are, or are on the verge of, instituting capital controls, currency manipulations, trade protection tariffs.
The trade war has already begun.
The globalised economy of the neo-liberals, the molten magma of money swirling unfettered by trade barriers over the face of the earth, is cooling and crystallising. Allegiances will form, lines of division will be drawn and if we're not careful (and we rarely are) we will march inexorably into another age of world wars.

Phil Knight said...

Well, I think although Caesarism fetishises the military, it's not necessarily externally aggressive - it's just that a charismatic populist with a military background tends to pop up at certain points in history, and tries to give the illusion of purpose while the system continues to fall apart.

I think if we're heading into a more fraught world, that will happen regardless of the kind of regimes that are in charge of world governments.