Dealing With Globalised Financial Capitalism

November 2, 2011Marketsby David Smith

Capitalism’s Pallbearers: The Companies That Run, & Could Eventually Destroy, Th
Capitalism’s Pallbearers: The Companies That Run, & Could Destroy, The Global Economy

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“The Euro zone is under great stress and that has global implications. The Zurich study shows how the cross ownership of global businesses links the two parts of the north Atlantic – Europe and US - together. Whatever happens in Europe has enormous ramifications for the rest of the world. Just as the trigger for the 2008 crisis was the prime mortgage crisis, now we have another trigger. It seems unlikely we will re-establish the conditions for stable capital accumulation, economic growth and mutual trust.”

Professor Carroll, however, argues that there are some measures that would help to limit the dangerous concentration of power in the hands of a few companies.

“The measures I favour are ones which erode the structural power of capital and curb ‘casino’ capitalism. We could introduce global anti-trust measures, or tax companies’ interconnectedness. But it’s hard to envisage. As there is no global state, global antitrust legislation is difficult to put into place and administer. We need to ask who is ‘we’ when asking what measures ‘we’ need. Clearly, those who benefit from globalised financial capitalism – what the Occupy movement calls the 1% - wouldn’t like to see such restrictions.”

Another measure which Professor Carroll favours is the ‘Tobin tax’ which places a penalty on short-term financial round-trip excursions into another currency.

“It’s intended to slow down the speculative churching of the world economy. The EU is looking at this seriously, so it’s not a pipe dream. It’s on the agenda.”

Better still, though far more radical, would be to follow the advice of the Canadian political scientist Leo Panitch and convert the financial institutions into public utilities.

“Panitch argued that it was better not to bail out the banks at public expense, but to run them for the benefit of people and communities,” said Professor Carroll. “This makes it possible to direct capital away from speculative measures which are not socially useful and tend to destabilise the global economy, into measures that actually help.”

In support of Panitch’s argument, Professor Carroll points to the way China’s state-run capitalist system rode out the crisis. 

“After the 2008 crash, China was able to take advantage of the crisis to some extent, even though it’s tremendously dependent on exports. I would not offer it as a model, except to say there is more control over what capital can do. Unfortunately, it’s not democratically based control.”

Professor Epstein agrees that finance has to be brought under control and “serve the economy rather than lead it”. But he says one of the dilemmas is what to do about international trade, particularly with respect to China and Asia.

As long as we have a totally open trading system which can be manipulated by this group of interconnected multi-nationals in the ways pointed out by the Zurich study, the system is unsustainable. Multinationals can harness relatively cheap labour from Asia to sell products that undermine production in the EU and the US. There has to be more managed trade. Otherwise, the older rich countries, like the US and England, won’t prosper in the new world.”

The politicians may have been slow to address the structural issues, but another major crisis would force their hand. “In that situation I think the politicians will have to turn to other groups for political support, including the Labour unions and people out in the street, which may break the political monopoly of the banks. I hope it doesn’t happen because it will be very messy, but it is possible,” said Professor Epstein.

And what would emerge from the mess would be a different system entirely.

“The best solution would be for communities and governments to have an alternative strategy that provides jobs and what people need without so much reliance on the financial sector. In rich countries, like England and the US, I think we could see more local control and ownership, cooperatives and community development, all in combination with the national guidance necessary for a modern economy. Plus, it will have to be harnessed to a new industrial revolution, which is the green economy. There’s lots of stuff to be done, and lots of profit to be made.”

Professor Epstein said the fact that the large multi-national finance companies were almost all in the West could make it easier to reform the system.

“There’s only the US, the UK and the rest of the EU. It’s not as if the whole world is involved. They are talking to each other now and trying to avert financial meltdown,” he said.    

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