We awake every morning with news of what got announced at midnight the evening before. Usually this news is dominated with the relative success or failure of our capitalist economy. The key feature of capitalism is that no-one is in charge of it. Political systems theologically connected to capitalism as their high altar and democracy as their political mandate have durability because governments can take the blame and fail for whichever set of policies they have adopted but the system runs on, unchallenged. Communism as a ideology failed because the economy was welded to the governing party; when it lost control, the economic system it managed fell with it.
I studied economics in my youth, briefly. I lost interest because in those days it was largely a fictional right-wing subject, which took no account of the cost/benefit analysis of various public service projects: hospitals, schools, police forces etc., It only described an economy which hasn’t existed in the western world since, roughly speaking, before the Russian ‘Revolution’. That historical construct seriously challenged the chances of unfettered capitalism. Since then scholars of economics have vastly improved their rigour. Much analysis is now devoted to costing and proving the social dividends of various public projects, be they state managed or otherwise. We’re all very familiar now with talk of something or other saving the NHS a certain amount of money, for example. More recently, there have been faltering and tentative steps towards agreeing international carbon emission costing schemes. Nevertheless, we’re nowhere nearer to anyone knowing what is going on.
The closest accurate predictions of the economy can only be identified in hindsight. Since our political and economic news is riveted with the immediate moment, this leaves us with very little hard factual information to discuss. We are thrown back on speculation. Thus, this morning the world’s news are ablaze with a slight adjustment in the credit scores afforded by some largely unregulated businesses in relation to nine European governments. The name Standard and Poor’s is on everybody’s lips, though very few people know how they operate. It is the top dog in the international credit rating industry. It was born in 1860 with a publication by Henry Varnum Poor which attempted to describe the financial and operational state of US railway companies. These were the engines of capitalism at the time. These days, Standard & Poor’s credit ratings are used by financial insitutions to assess the risk of lending. No company or government is ever rated as safe. Instead degrees of risk are proffered. AAA, AA, A and BBB denote investment grade; BB, B, CCC, CC, C, CI, R, SD, D and NR denote non-investment grade. C spells real trouble. CI means that previous interest payments have not been met. R means a company has become subject to regulatory supervision, which is not possible for countries. SD means that selective loans have not been repaid (the D standing for default). D means defaults have become the norm and NR means no rating is offered. This scheme has now become so crucial to the machinations of international capitalism that Standard & Poor’s declarations now dominate international politics. Upset at this morning’s downgrade of their economy, French politicians are understandably outraged that neither the UK nor the US have been similarly downgraded despite having much high debt obligations. Whether or not the French high command is justified in their complaint against Standard & Poor’s slight on their economic prospects is a matter of speculation, as with everything else in capitalism.
Speculation is embedded not only into the very nature of capitalism but also the regulation of it. Financial regulators in the various key economies require banks to rely on credit rating schemes when making investments. That is why the public declarations of the credit ratings agencies have become so important to our news media. Strange then that these companies are not better regulated.
Certainly, much criticism can be made of the accuracy of these agencies’ pronouncements. Famously, they rated Enron at investment grade up until four days before that company went bankrupt in 2001, despite having plenty of knowledge of Enron’s precarious financial state. The major complaints are that the industry as a whole is too close to the major companies it assesses, is too powerful to be unregulated, is effectively operating an unrestricted licence to slander and is effectively operating as a monopoly (the two biggest agencies have over 80% of the market share). Although their profits are derived from charging the borrowers if a debtor refuses to pay, a big credit rating agency often issues a rating anyway. Consequently, this industry has a stranglehold over modern capitalism because our economic system is now based entirely on credit.
Where does that leave the rest of us? Politically, we’re offered a choice across the globe, which can summed up as follows: you can live under one of the following political systems -
- Fascism – political control by a dictator is absolute and the people are at the mercy of psychopathic corporations and the military, e.g. Saudi Arabia
- Communism – political control by one party is absolute and the people are at the mercy of psychopathic corporations and the state, e.g. China
- Theocracy – political control by a clerical class is absolute and the people are the mercy of it, which comprises the state, e.g. Iran
- Anarchy – no-one can claim to have political control and the people are at the mercy of warlords, which may or may not include invading foreign powers. The people lack the benefits of an advanced economy e.g. Afghanistan
- Democracy – political control is managed by competing parties of public service managers of varying incompetence and the people are at the mercy of psychopathic corporations, e.g. the UK
Great choice eh? Clearly everybody’s preference is to live in a democracy. People have been laying down their lives for it around the world. At least it gives you the possibility of being able to restrain in the psychopathic corporations. Well, it would do if the politicians around the world had the spunk to coordinate attempts to restrain corporate power gone mad. In the early part of the twentieth century, there was such a political movement – the international trades unions and labour movements. The former part of this movement is still fighting its cause in many parts of the world but the political wing of it has died a slow lingering death here in the West. Arguably, it is still alive but it is receiving palliative care in a hospice being tended to by public relations experts – policy wonks who have never worked in their lives. Unsurprisingly, it is not expected to recover.
The few that openly blame capitalism for the exploitation of the earth and its people are regarded as being on the political fringe. I’m proud to be a member of one such group – the Green Party. We’ve only got the one MP at Westminster and control of only one council. That still puts us miles ahead of all the other anti-capitalist parties in the UK but also miles behind the apparently serious players in the national political debate. We’d be a much more serious force in the serious political debate if we could engage the support of the fairly large numbers of people who also wish to challenge capitalism in a constructive manner. Unfortunately most of those people either vote for the Labour Party, despite it having abandoned socialism as an embarassing creed from its more colourful past, or do not vote at all because they are under the luxurious illusion that by not voting they are somehow not responsible for the politics we get. Refusing to vote is antisocial.