Corporate Welfare
The US administration effectively nationalised AIG to the tune of $100 billion or thereabouts but this isn’t the beginning of a socialist revolution. No, the Bush administration acted to prop up the rest of the stock market which might have collapsed if AIG had gone to the wall, which is what makes the development particularly sus.
AIG was in a bad way, they were left holding the bag on a whole bunch of so-called financial instruments which were underwritten by the now non-existent home loans that were extended to a whole bunch of people who couldn’t afford them. The credit growth over the last decade or so suddenly ran into the brick wall of reality and AIG were stuck with billions of dollars worth of assets that weren’t worth a thing. Zilch. Kaput!
So why should the US government buy them if nobody else wanted to be party to the biggest financial writedown in history? And importantly what do the good people of the US get in return for the money? Well it seems obvious that the move by the US Federal Reserve was meant to avert a complete collapse of the stock market, time will tell if that works, but it already seems likely that the crisis in the home of capitalism has not yet abated with news that a consortium of world central banks have popped another US $360 billion into the money market to avoid the next installment in the story. The figures just keep getting bigger. And the solutions are starting to look more like panic…
Why should any government, especially one that preaches so loudly on the efficacy of markets and the need to dergulate step in and pick up the tab? Who wins? Well the companies that don’t see their stock valuation disappear in a massive global plunge get some respite perhaps as do the fund managers who have sizeable portfolios invested in the stock market on behalf of pension and superannuation schemes. The average punter with a few shares might suffer, but it is the institutions with zillions of other peoples money at stake that are probably the most nervous at this stage, and here in lies the big rub for the western world.
The relatively recent phenomenon of spectacular and sustained growth in wealth via the stock market has suckered all and sundry into this house of cards. Governments around the globe have abandoned policies that protected national wealth as they heeded the neocon catchcry of global financial deregulation, market economies and notionally free trade. Public assets have been flogged off, government pensions replaced by private superannuation schemes and manufacturing dismantled in order to promote economies built on consumerism, driven by continuous credit. If the stock markets around the world collapse, then everyone is in deep shit because so many of our institutions are wedded to this system, whether we like it or agree with it or not.
And what happens when it does fall apart? Then the financial reserves of the biggest economies get raided. But stop and think about the money involved. $100 billion, to bail out AIG could probably build millions of houses, or 100’s of hospitals or thousands of solar and wind farms. That sort of expenditure results in tangible assets and is arguably a better way to spend public money. Instead the US government has effectively offered a very limited form of welfare that directly benefits the big players on the stock market and ends up returning nothing to the rest of the population, other than a vague assurance that the whole facade won’t come crashing down. Brilliant! What could be done with $350 billion?
The only truly delicious element to this very sorry debacle is the way that the news of it has been spread so successfully by the very agents of consumerism and manufactured consent, the mass media. Maybe we will see a sudden upsurge in some other headline grabbing news so that the Wall St wonder can quietly go about and do whatever else it needs to. What that could be is REALLY worrying. Maybe we will see the worldwide launch of a massive tree planting scheme or perhaps a wholesale shift towards sustainable agriculture and food for everyone. Maybe George Bush will grow wings and fly, perhaps the Queen will abdicate or Angelina Jolie will adopt another half a dozen needy babies. Maybe people will figure it out for themselves.