Back to main newsFree market fatality - exposing the myth of the free market, and their obituary
Sun 11 May 2008
Author: Robert GriffithsROBERT GRIFFITHS exposes the myth of the free market.
THE myth of the "free market" is finally dead and not before time. Its pulse ceased - it didn't have a heart - on Monday April 21.This was the day that the Bank of England, at the behest of the Prime Minister Gordon Brown and Chancellor Alistair Darling, announced its willingness to hand Britain's banks at least £50 billion in Treasury bills.
This bail-out to save the money and housing markets is the biggest in British history.
The bankers had gone to the governor of the Bank of England a month earlier with their begging bowls. They could no longer borrow funds from each other in the money markets, presumably on the grounds that nobody would lend to greedy crooks and incompetents like themselves.
The government's concern was that the shortage of funds would choke off new mortgage lending, while the banks would not pass interest rate cuts onto hard-pressed mortgage holders.
This would mean that house prices would go into freefall. Industrial investment could also suffer.
So, the Bank of England is offering to swap up to £50 billion in Treasury bills to the banks, in return for mortgage-backed securities. The bills can then be sold on the money markets to raise funds, backed as they are by interest and redemption payments from the Bank of England itself.
The assets will then be swapped back between 2009 and 2011.
The deal is that the banks will use these funds to boost mortgage lending and cut mortgage rates, that they will come clean about the real value of their mortgage-backed assets and where necessary raise more funds through new share issues.
And Robert Maxwell will then be annointed the patron saint of pension funds.
There is no sign so far that the interbank lending rate which influences mortgage rates is going to fall by about 15 per cent to bring it into line with the Bank of England's current base rate.
Most banks and building societies have refused to pass on base rate cuts to hard-pressed householders.
While the RBS has launched a rights issue to raise an extra £12 billion from its shareholders, most of the big five banks are taking no such steps. Instead, they are already whispering about the need for an extra £50 billion in Treasury bills.
These are the same bloodsucking creatures who made a record £40 billion in profits last year, £2 billion more than in 2006. But where has all the money gone?
Well, £24 billion has gone straight to their shareholders in dividends.
RBS and Barclays raised their dividend rates by 10 per cent and HBOS by 18 per cent. The biggest bank, HSBC, ramped up dividends by 11 per cent with investment chief Stuart Gulliver trousering £10 million in salary and bonuses, while the chair and chief executive pocketed between £3 million and £4 million each.
There is no belt-tightening 2.5 per cent pay increase for the best-heeled beggars in Britain.
The scale of the "free market" bail-out is staggering.
Every month, the Treasury's Debt Management Office issues between £5 billion and £7 billion in Treasury bills, in weekly instalments. The Treasury uses the proceeds to finance public-sector spending. It uses future issues and other government revenue to pay interest to bill owners and to redeem those bills when they become due in three, six or 12 months time.
Over the past four months, monthly issues have risen to around £9 billion as the Treasury has sought to revive the money markets.
Now, the debt management office is making an extra £50 billion available in bills over the next six months and perhaps as much as £100 billion.
Had the government sought to raise these sums for any socially useful purpose, the value of the pound would have collapsed. The IMF, Organisation for Economic Co-operation and Development and European Commission would be demanding the heads of Chancellor Darling and Bank of England governor Mervyn King on a silver platter.
How about £150 million to fund the annual deficit for Remploy? Out of the question. Close 30 factories and sack 2,500 workers with disabilities.
Or £200 million to fund the annual deficit in Britain's post office network? No can do. Close 2,500 post offices instead.
Or £1.5 billion to fund the deficit in NHS trusts since 2006? Can't afford it. Close wards, cut 2,785 beds and shed 24,610 staff.
Or £22 billion to renationalise the railways immediately, according to the government's ludicrously inflated figures? Unaffordable. Carry on subsidising the railway "market" with £6 billion a year as companies increase ticket prices by between 5 and 10 per cent.
Ok then, how about £50 billion to refill the troughs in the money and housing markets? No problem. Dip your snouts here, courtesy of new Labour.
When opposing renationalisation of the railways at the 2004 Labour Party conference, Brown declared that, "if we had £22 billion to spend, it will not be for an expensive renationalisation. We will put investment into schools and hospitals first."
He lost the vote on the resolution. But he won't have to answer for his priorities at this year's conference. Resolutions have been abolished.
OBITUARY
On April 21 2008, the free market passed away after a short but intense sickness. Several months of high fever brought about by greed and fear proved immune from treatment.
Thanks are due to the nursing staff at the Bank of England and the US Federal Reserve, who tried in vain to pump life into the patient.
In its early years, the free market enjoyed a period of rude health during which it organised the slave trade and industrialisation.
But it then developed the symptoms of a genetic disease, monopoly, which included chronic instability, periodic slumps and a tendency to fight wars of conquest and plunder.
While some of these symptoms could occasionally be eased by the medicine of Dr Keynes and injections of social democracy, considerable subterfuge had to be employed in order to maintain the facade of market "freedom" and "independence."
This became increasingly difficult when the patient became premanently attached to the drip of public money.
The deceased is survived by its descendants Third World debt, social inequality, global warming, job insecurity, greedy bastards and socialism.
No flowers, but a replacement for Trident instead.
Condolences to new Labour and neoliberalism.
Funeral at the Bank of England, Threadneedle Street, Friday April 25 2008.
Robert Griffiths is general secretary of the Communist Party of Britain.
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