Just Say 'No'

The Irish State faces a historical moment. In keeping with its tradition of courageous struggle for freedom and justice and the unique role that Irish people and culture have played on the world stage, Ireland can now be the country that stands up against the bullying forces of the financial markets. The morally unacceptable terms it is being offered mean that any other response is unthinkable.

The bond traders responded to Merkel's attempt to constrain their profiteering by downgrading Irish debt - thus raising the income they gain from it - increasing the costs imposed on the Irish state, and crucifying the Irish people. It is time for a proud nation to say no: default is better than humiliation.

Such a strategy will also turn the tide. Since the break-up of the euro nwo appears inevitable Ireland could be a player in the end-game, rather than a victim. The plan of the financial interests is to pick off one Euro country after another. This is similar to the financial contagion that began in South-East Asia in the 1990s, but with the added appeal that, as each country falls, Germany will pay off the traders. Ireland's default would signal the end of this process and force a political solution on the Eurozone. If Ireland does nothing Germany will come under increasing pressure itself to abandon the euro and create a new currency, leaving the smaller nations of Europe in turmoil.

And here is one I prepared earlier. All EU states should simultaneously suspend trading in their national debt. They should then agree interest rates that they are prepared to pay on their national bonds over a 10-year period. These rates would vary to reflect the nature of the economies involved, but only within narrow bands, and at much lower rates than are being paid today. New dated bonds with fixed returns would be issued up to a percentage of current holdings.

States would thus retake the power over their national economies. Traders could accept the terms or lose everything. Their game of extorting the value of national economies through pressurising their politicians would be finished.

This radical political move would clearly have serious implications for the other global currencies, and especially the dollar. But it would bring the interests of citizens back into play and increase the pressure for urgent negotiations to establish a new global financial architecture which serves people rather than financial interests.
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Merkel Confronts the Market Wolves

Throughout the years of financial crisis it has been notable that financial and business interests have been writing the story. Media analysts have been colluding: those who understand what is going on are in the pockets of the business lobbyists; those who do not are scared to reveal their ignorance. The result is that we are being sold a lie.

The official version of what is happening in the finance markets goes like this. Countries are in debt so they look like a bad risk. The debt of risky countries is harder to sell and so the price falls and traders need to be offered a better rate of interest to accept it. Traders will not buy it at all unless they are convinced about the soundness of the national economy selling it, so that markets demand that countries introduce austerity measures. If they are not satistifed the austerity must be made more austere.

The truth is different. As they pick on each country in turn the bond traders create a self-fulfilling prophecy. They (through the credit-rating agencies) downgrade the surety of the country's debt. Its price falls and the return they gain from holding it rises. Thus their creation of this story is a simple means of increasing their profits. They feel they can still squeeze more out of Irish debt, hence the story that the 'markets don't believe' the Irish government is secure. Once they have destroyed Ireland they will move on to Portugal, Spain and even Belgium, according to today's story. Governments in those countries tremble and beat up on their own people.

Understanding the behaviour of market traders is not difficult; devising policy to counteract it is. The process of globalisation meant the signing away of political power over economics, so even when the free operation of finance markets is clearly disastrous for the world's people politicians feel powerless. If one country acted alone they would face the massive movement of speculative money and, as Black Wednesday proved, no country or currency can withstand that.

German Chancellor Angela Merkel has been clearest about the need for political action, perhaps because she represents the strongest economy, perhaps because of the folk memory of the 1930s and the destructive consequences unrestrained finance wreaked then, perhaps because she grew up in a debt-averse Protestant home. First she called for political controls over credit-rating and now she is suggesting that the bond-holders should contribute to paying for the costs of the crises they are causing, shifting the balance of their incentives away from destroying domestic economies. These represent the first feeble attempts to reassert political authority over the globalised economy. "Have politicians got the courage to make those who earn money share in the risk as well? Or is dealing in government debt the only business in the world economy that involves no risk?" she asked on Wednesday.

Gordon Brown is short of a job these days. Perhaps the son and daughter of the church could combine their efforts in devising a plan for European governments to take charge. If he really wants to save the world, now could be just the right time.
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The Happiness Crusade

The demonstration I was on yesterday in Cardiff was so much fun it went on all night. If you are a tweeter you can support the protest by sending a message of support. The demonstration was lively, noisy and made up of a mixed bag of students and schoolkids, leavened with a mix of Marxists, socialist workers and Greens. We were already well into chanting when the younger students arrived in their own march to great cheers - what somebody on the Twitter feed has called 'the children's crusade'.



Protesting is turning out to be so much fun that it makes me wonder whether this is part of Cameron's reason for beginning to measure happiness since, as the graphic shows, close social connections make people happier than money, once their basic needs are met (thanks to nef for the graphic, and their leading research in this area). Labour's creation of the disturbingly oxymoronic position of Happiness Tsar has been taken up by the Condems who have instructed their national statistician to begin a programme of scientific measurement of how jolly we all are.

Unlike in Bhutan, however, happiness is not to become the focus of policy-making, merely an adjunct to the measure of economic growth which is, as the PM will tell us later today, the real source of all our aspirations. If Richard Douthwaite was right in his seminal book The Growth Illusion in establishing that, beyond a certain point, growth actually detracts from our happiness, then this is a circle that simply cannot be squared. Instead we need to be developing policies for the post-growth world, as in the recent example of participatory policy development at the Leeds Steady State Economy conference, whose report was recently published.
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Money on the Move

It would be nice to portray David Malone as an Everyman, stumbling disbelieving through the financial crisis and documenting his rising confusion, frustration and rage. To an extent this is true: he may be a leading documentary film-maker but when it comes to credit-default swaps and fractional reserve banking, we have almost all been brought to the same level of ignorance and disbelief.

Malone's book The Debt Generation is a positive response. From the summer of 2008, when he first glimpsed the 'Mad Max Future' he kept a regular diary of the news of financial mayhem. The book is humorous, but there are few belly-laughs. However, the very personal nature of the account is its main strength. We all took the same journey from a sunny summer, through an incredible autumn and on to the coninuing winter of our discontent. The difference is that David Malone kept a regular record, and in the era of ephemeral information this is invaluable.

Here is an extract from February 2009:

'Now here is a surprise. Jean-Claude Trichet, the head of the European Central Bank, has just declared, 'We live in non-linear times' . . . Our leaders and economic masters are linear recidivists. They still think of the economy as if it were a machine that has broken down. . . They imagine all they need to do is pour in lots of lubricating money, replace a few bent and busted parts, then press the big green GO button and the machine will roar back to life.' (p. 79)

Malone concludes that the financial system - indeed the whole economy - is a system. The problem we have is systemic and only systemic change can fix it. As crises pile up the wisdom of this position becomes clearer by the day.

In a world where community has broken down and mutual aid is, for most, no more real than the legend of King Arthur, all we have to rely on is our money. This is the message of capitalist invididualism: your money will make you happy; your money will keep you safe. This is why the financial crisis is so pointedly and destructively frightening and why people are losing their heads. Some are reacting with anger, others with despair, while the majority resort to denial, analgesia and shopping.

For those of us who are keeping our heads there are a rising number of campaigns for a new type of banking system, new money, or a whole new economic system. You can find out more about David Malone's work at The Debt Generation website. Positive Money is a campaign growing out from the New Economics Foundation. There is even a Bill that has been introduced in parliament which you can ask your MP to support. Tweet

Ooh aah!

You might think that footballers would know a thing or two about money. Not only are they paid absurd amounts of the stuff, but they have also seen their game destroyed in a process of rapacious financialisation so that nothing beautiful remains. Well, ok that winning goal that Spurs scored against Arsenal on Saturday is an honourable exception.

So we can be delighted to hear from Eric Cantona that it is not complicated to sort out the global financial crisis. All we have to do is nip to the bank on December 7th and take all our cash out. This will precipitate a banking collapse: banks are the problem, so problem over.

The advantage of being French is that you can make such prognostications sound really cool and when you say 'C'est pas complique' you sound irresistible. But Eric could not be more wrong about this providing a solution to the problem. Just like in 1968, destroying an existing system is not the complicated part: it is putting something better in its place that takes the thought and effort.

I'm intrigued to see whether this money withdrawal ploy will take off like the Rage Against the Machine mass buy-in did last Christmas. Perhaps it is something about the festive season that lures us to act in a communal fashion. If it works, then Cantona may finally get himself onto a Philosophy Football t-shirt, although there will no means of buying it.
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Currency to Serve People and Planet

We need to see the Irish tragedy as part of a wider picture: the ongoing currency wars and the struggle for domination of the global capitalist economy. Since 1945, the US has enjoyed extraordinary power as a consequence of the Bretton Woods Agreement that the dollar should be acceptable in the place of gold as a global numeraire. Since the US reneged on its promise to support its currency with gold in 1971, its government has been able to print dollars at will, and claim goods in return. This, more than anything else, explains the decadent US lifestyle - and its planetary consequences.

Europe's response, after years of decline and unfair competition, was to establish the Euro. This was a fatally flawed strategy since, unlike the USA, Europe is not a natural currency area, and there is no single democratic body that matches the currency area. Hence it has always operated like a strait-jacket, with some currencies having interest rates too low for their needs (hence the Celtic boom and bust) and others having interest rates too high. It was Germany's currency, the Mark, which gave the Euro its credibility, and the German economy that provides the ballast for the currency. Hence what worked for Germany has been forced onto the other members of the Eurozone, with disastrous results for their national economies.

Yet the problem of dollar dominance persists. Hence Skidelsky's call for a 'bancor', or bank gold, a proposal for a neutral currency to facilitate world trade and form the basis for national currency holdings. This should be the call of the Irish people: global justice and a balanced system of international trade. This has been the call of the Chinese for some time. It is only because we live in the Anglo-American media bubble that our perceptions of the dollar demise are so distorted.

I have been calling for some time to consider the possibility of linking the new global currency to carbon emissions, thus putting an automatic brake on economic activity on a global basis, and rationing CO2 emissions by country. Another possibility is that the exchange rates between countries might be fixed in an inverse relationship with wages, so that no country can undercut another by restricting rates of pay. In this way, a neutral global currency could not only stabilise the financial system but also end the 'race to the bottom' that globalisation has brought in its wake.
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Vultures Circle Dying Tiger

Today we are likely to witness the death of what Richard Douthwaite once called 'De Valera's Dream'. The dream of an Irish people in control of their own destiny, proud of their culture and their bountiful resources, confident in their ability to follow a different and better path to that of their erstwhile coloniser. But while the Irish were smart and brave enough to escape English military domination they misunderstood the dangers of the more subtle currency colonialism to which they are now subject.

At last Ireland's politicians are talking about sovereignty, but they are 20 years too late. Sovereignty was lost when the country opened its border to US finance and when it allowed its domestic economic policy to be controlled from Germany by joining the euro. As in Iceland, the policy was driven by a tiny 'business' elite who benefited most from the inflation in asset prices and the development boom. The masses were lured into support by cheap money and tawdry consumer goods: a poor price for the loss of independence.

It is tempting to ask how many of Ireland's politicians really believed that they could control that beast whose misnomer is of epic proportions: the Celtic Tiger. An economic policy designed in corporate America, driven from Frankfurt and labelled by Baudrillard was always going to end in tears. The finance-driven model of economic development led, as it always does, to social instability, inequality and ill health, as documented in Feasta's 2004 volume Growth: The Celtic Cancer. A model of growth based on uncontrolled, undirected growth in this way can never be either socially or environmentally healthy.

De Valera's model of development came with a narrow parochialism and stifling Catholicism that would be unacceptable today. But in its focus on indigenous resources, the agricultural sector and cultural specificity it has much in common with a bioregional approach to economic development. The vision of a self-reliant economy that uses its own resources for the benefit of its own people may now seem more appealing than a turbo-charged boom-and-bust model, especially when that automatically implies a loss of democratic control and environmental sustainability.

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