samedi 25 octobre 2008

The first cut is the deepest

The cutbacks have started. The British government is to cut back on higher education for students from poorer backgrounds. There is a £100m shortfall in the budget and o dear sorry the minister says, and presumably doesn't expect the predictable response, but there just isn't that sort of money available.

Yes - we know the reponse. It's a clear political choice the elites have made. Under the guise of blackmail and 'doing us all a favour in the long run', they have sheilded the upper class from the ensuing economic slump and are making the poor pay.

There is the temptation for some, the Will Huttons of this world, to give the elite the benefit of the doubt. The argument goes, 'If there hadn't been the money made available to the banks, then there would have been a run on them and the recession would have been ten times worse.' Well, like my philosophy Prof always said, 'Try to disprove an argument at its strongest point. Assume it to be true and prove it wrong that way.'

If there had been a run on the banks with people panicking and taking out all their cash, sure some institutions would have failed. They would have failed because they didn't capitalise themselves properly. They didn't have the reserves to cover themselves when the bets went bad. As you know, banks of late turned themselves into gambling machines, betting money they didn't really have. So the losers would have run out of money. You don't need a degree in economics to see that. People want their money back, the banks haven't got it - Uh-Urr, up go the "For Sale" signs, staff are laid off and the government insurance schemes cover the deposits, up to a socially acceptable level. (Incidentally, what should the maximum be? After all the talk of minimum wage, now is the time to press for the idea of a maximum level of wealth). The credit crunch was a stupid name given to a lack of trust that had built up between all the banks. No one could trust any body else enough to lend them money. Wages etc. were not going to be paid since the banks were hoarding the money they had. Now, the developments in the past few weeks have been dramatic but also have happened incredibly quickly. For example, Lehman Brothers was seemingly there one minute and - poof - gone the next. So bank failures can happen. There was a lot of collatoral damage, but that's all factored in. Hence, bank failures are just like any other industry failure. That's capitalism. Given, then, no handout, the fraudulent banks would have had to close down. That's dramatic, but that's the way capitalism is. The ones left standing would have been able to pick up the pieces. The government would have only needed to ensure the average account was secured. The systemic trigger for the collapse has been, of course, the fall in house prices. Now, if the government wanted to 'solve' the crisis, it is there that the government should have applied its financial magic wand. To more sound approach to solving the crisis, if that's the right way to think about it without thinking about total revolution for the moment (but really of course, that's THE only solution but that's next year I guess!), would be to dump money on those that need it.

But, by their latest move, the government in Britain is doing just the opposite. They have cut money from the poorest (and in education too!) in society. One can only conclude that their "solution" was never intended as a solution to prevent money for the ordinary people drying up, but was a gift to the real people they care about to protect them against the coming catastrophe.

Come, friendly bombs.