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Arguments for socialism :: Banking crisis
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As panic spread that the building society Northern Rock was about to collapse, thousands of people queued overnight outside its branches to withdraw their hard-earned savings. Well over £2 billion has been withdrawn.
This is the worst banking crisis in Britain for more than 30 years; but it is only the tip of the iceberg. The Chancellor, Alistair Darling, has been forced to step in and guarantee the deposits of all those who bank with Northern Rock and "any solvent financial institution" because the government is terrified that the disaster will spread.
However, it is not those who are withdrawing their savings from Northern Rock, as a result of understandable fears, who are responsible for this crisis, which, in reality, stems from the chaotic, unplanned nature of modern capitalism.
In the last five years the profits of the super-rich have grown to unimaginable levels. Last year the bonuses of the City fat cats grew by a quarter to an incredible £26.4 billion - more than the country's entire transport budget.
The City and finance sectors' mega-profits have been based on utterly blind, short-term gambling, with no thought for the consequences other than how to maximise their bottom lines. Northern Rock has been hit hardest because it was particularly reliant on gambling on the money markets - for 70% of its funds - but all the banks and building societies are vulnerable. Barclays has twice had to go to the Bank of England for emergency credit in the last two months.
However, it will not be the banks' chief executives that pay the price for a further development of crisis. As ever, it will be ordinary mortgage and credit-card holders, savers and bank workers who pay the price.
The government has responded by underwriting Northern Rock in order to allow another rapacious high-street bank to buy up what remains of it at a bargain-basement price.
We demand that the major banks and building societies are brought into democratic public ownership with individual savings guaranteed. However, there should be no pay outs to the billionaire fat cats; compensation should be paid to shareholders on the basis of proven need.
Instead of being run for the profits of a few fat cats who are prepared to endanger the entire economy to maximise their short-term profits, the banks should be run in the interests of society as a whole.
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Banking crisis (15)
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New workers parrty (6)
Northern Rock (34)
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Article dated 20 September 2007
The Socialist, weekly newspaper of the Socialist Party
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