Are we condemned to repeat history?
A wise man - George Santayana - said in 1905 "Those who cannot remember the past are condemned to repeat it." In the last few decades we have seen the apparent victory of capitalism in the wake of the collapse of the USSR, and in that time we have also seen its fatal flaws exposed in greed, aggrandizement and folly as the world economy teeters on the brink of collapse.
I say apparent above because it would appear to be a hollow victory at best; capitalism has been shown, I believe, to bring out in people both the best and the worst of us. The best of us, in that those striving for personal improvement can do some amazing things that benefit us all. The worst of us, in that much that it iniquitous and base is brought to the fore, and sometimes displayed in the guise of advancement. We get:
- often highly paid people in power using that power to advance themselves at the expense of others;
- actions deriving from a dissociation of risk and consequence, for example the recent actions of bankers recently, but also trawler men with limited fish stocks, and some types of industrial development badly affecting the environment.
- a culture of hopelessness among the poor that does nobody favours as people are prevented by poor education and low expectation from reaching their potential;
- a "democratic" system that is only democratic in that we can change the faces; the policies are enforced from above and decided, in the main, by an elite including of lobbyists for major companies and "the markets".
I started with a quote about repeating history, so where does that come in: well, we have been here before. Anyone remember Magna Carta? Then it was a not-so-great King who was trying to enforce his will on the nominally less powerful barons, who objected and finally forced some concessions. Somewhat later, the French aristocracy became too objectionable in their behaviour and demands to the people, and the carnage of the French Revolution was the result. It seems quite clear to me that in any society - certainly any society that claims to be just - you need to keep the majority of your population "onside"; go too far and you will eventually find out that your own power actually means nothing.
The current financial disaster stems from greed but it was based on a principle - that banks can loan out money they don't have - that is as old as the hills. The banks get away with this because although obviously people deposit and withdraw money all the time, there is a certain "balance" that is there all the time. Moneylenders discovered they could lend this money out at interest and gain from it. It works as long as a lot of people don't ask for their money back at the same time. Back when my Economics teacher was explaining this the banks were kept in check through regulation but also through the Gold Standard; the requirement that there was real Gold backing this up. Thus at that time the banks loaned about 3x what they had in savings. During the 1990s the Gold Standard was dropped and the regulation lightened; in the middle of the last decade the combination meant that the banks were lending 7x what they had. That is, there were Seven perfectly legal claimants for every actual £1. This is the root of the current crisis. The money didn't disappear: it simply never existed.
I spoke this year to a lady who holds a doctorate in physics and worked a decade or so ago as a financial analyst. Even then it was obvious to her that the system was broken, that it was just a matter of time. Just recently, Warren Buffet - he who famously forced the UK's exit from EMU - admitted on television that he too knew that the system would collapse, and that he was surprised that it hadn't done so earlier.
And the reason for this? Greed. Pure and simple. The elite rather liked the Status-Quo; it benefited their back pocket, and they wanted it to carry on. It is inconceivable that those in power in the Treasury, or in the banks, didn't realize it was just a matter of time. It is possible they didn't realize exactly how disaster would strike: the financial system is a fiendishly complicated thing. And yet it seems most did nothing much to stop it.
The politicians and governors of various institutions are now pleading with a population to help them get out of this mess, and seem upset that some people are saying no. The protests that started in the USA and seem to be spreading around the world are one symptom that some people, at least, are not happy to let the elite off the hook. Politicians in particular are very visibly at odds with each other on how to solve the not insignificant problems that have been thrown up, but it is equally obvious that the stark choices that they have before them require structural change, not just tinkering at the edges. No amount of tighter regulation will solve this problem, because the problem is built into the system. In a sense, the problem is the system: Capitalism means, essentially, incentivise people to work for personal reward on the basis that mass reward (greed) is good for all when done in a particular way.
I am not sure, but my feeling is growing that unless a major reworking of the economic structures of the world takes place, we will find a modern version of the French Revolution, or the Magna Carta, will be imposed by those who feel most hurt: the people. And so far at least, those in power seem blind.