In a far reaching interview with Red Pepper, David Harvey argues that the current financial crisis and bank bail-outs could lead to a massive consolidation of the banking system and a return to capitalist ‘business as usual’ – unless there is sustained revolt and pressure for a dramatic redistribution and socialisation of wealth
Does this crisis signal the end of neoliberalism? My answer is that it depends what you mean by neoliberalism. My interpretation is that it’s a class project, now masked by a lot of rhetoric about individual freedom, liberty, personal responsibility, privatisation and the free market. That rhetoric was a means towards the restoration and consolidation of class power, and that neoliberal project has been fairly successful.
One of its basic principles that was set up in the 1970s was that state power should protect financial institutions at all costs. This is the principle that was worked out in the New York City crisis in the mid-1970s, and was first defined internationally when Mexico threatened to go bankrupt in 1982. That would have destroyed the New York investment banks, so the US Treasury and the IMF combined to bail Mexico out. But in so doing they mandated austerity for the Mexican population. In other words, they protected the banks and destroyed the people – and this has been the standard practice in the IMF ever since. The current bailout is the same old story, one more time, except bigger.
What happened in the US was that eight men gave us a three-page document, which pointed a gun at everybody and said ‘give us $700 billion or else’. This to me was like a financial coup against the government and the population of the US. Which means you’re not going to come out of this crisis with a crisis of the capitalist class; you’re going to come out of this with a far greater consolidation of the capitalist class than there has been in the past. We’re going to end up with four or five major banking institutions in the United States and nothing else.
Many on Wall Street are thriving right now. Lazard’s, because it specialises in mergers and acquisitions, is making megabucks. Some people are going to be burned, but overall it’s a massive consolidation of financial power. There’s a great line from Andrew Mellon (US banker, secretary of the treasury 1921-32), who said that in a crisis assets return to their rightful owners. A financial crisis is a way of rationalising what is irrational – for example, the immense crash in Asia in 1997-98 resulted in a new model of capitalist development. Disruptions lead to a reconfiguration, a new form of class power. It could go wrong, politically. The bank bailout was fought over in the US senate, so the political class may not entirely go along – they can put roadblocks in it, but in the end they caved in.
But this can lead to a deeper political struggle: there is a strong sense of questioning why we are empowering all the people who got us into this mess. Questions are being asked about Obama’s choice of economic advisers – for example Larry Summers, who was secretary of the treasury at the key moment when a lot of things started to go really wrong, at the end of the Clinton administration. Why would you now bring in so many of the characters who are pro-Wall Street, pro-finance capital, who did the bidding of finance capital back then? Which is not to say that they aren’t going to redesign the financial architecture because I think they know it’s got to be redesigned, but who are they going to redesign it for? People are really discontented about Obama’s economic team, even in the mainstream press.
Republished with permission. To read the rest of this interview, click here: http://www.redpepper.org.uk/Their-crisis-our-challenge
There is also an interesting video interview with David Harvey and Alexander Cockburn on GRITtv here: http://davidharvey.org/2009/03/david-harvey-interviewed-by-laura-flanders/