government of the rich, by the rich, for the rich

On the plane to Athens I read The Big Short by Michael Lewis, an account of the sub-prime debacle. It lionises the few who bet against sub-prime and won big, in the process demonstrating that many of those on the inside didn’t understand the instruments in which they were dealing, and which almost brought down – may yet, in the end, be an important step in bringing down – the entire financial system of the West. It’s a commonplace by now how outrageous it is that these people got away with ridiculous amounts of money when they should be in jail for negligence in charge of one of the vital functions of civil society – the banking system – if not for outright fraud; and yet it still has the power to shock. The guy who crashed AIG to the tune of almost 100 billion dollars, a disaster now being paid for by the taxes of average people, lives in idle luxury in a Kensington townhouse, while (according to a story in the Guardian) a young woman who briefly picked up two left shoes from a looted shop in Birmingham during the riots, and then put them down again before going home, gets ten months in jail. What’s wrong with this picture? It’s getting wronger and more blatant too – the rich have figured out that they don’t even need to pretend any more, they can get away with anything and make the poor pay. What seemed still contestable in the days of Thatcher is now pure fait accompli.

The Big Short is an interesting read, though if it adds to the detail of the picture which has been fairly clear for three years now, it doesn’t change its overall shape. It challenges, in its final few pages, the functioning of the system that can allow disasters like this to happen, though it doesn’t raise the question of why the far-sighted winners whose perspective he takes should be allowed to make so obscenely much money, even if they were right. Shouldn’t there be a limit? How much does one person need? Did they do anything positive for the functioning of a proper banking system in which capital is allocated to people with positive ideas which will be productive for society and add to the general well-being? Or were they nothing more than gamblers, even if very astute ones?

As it was, the big banks, as Lewis points out, were handed a fat gift from the taxpayer, no strings attached, to carry on just as before with their irresponsible ways and excessive bonuses; the poor subsidizing the rich, in effect. Where he doesn’t run with the ball (not that it was his aim to do so) is into territory where he asks what should be done. Three years on and, with Geithner in the Treasury and Obama a flop, the answer in responsible circles seems to be: nothing. It would be useful for someone to stand up and channel the increasing rage and cynicism of the powerless into meaningful action to punish the guilty from the last time around, moderate present excesses, and call a just and well-structured year zero followed by measures to ensure a banking system that serves its proper purpose – but heading into a year when a pusillanimous Obama seems to be the best that American politics has to offer, it doesn’t seem likely somehow. So the infrastructure will go on crumbling and the bonds of society will continue to fray…

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