PLATFORM:THE WORLD didn't come to an end when the scientists at Cern fired up the Large Hadron Collider near Geneva last week. The beams of subatomic particles sped off in opposite directions to smash into each other at near light-speed and the planet continued to spin blithely on its axis as it has for millions of years.
As far as the scientists are concerned, the switching on at Cern heralds a brave new world of physics which will, according to the European Organisation for Nuclear Research, “challenge those who seek confirmation of established knowledge and those who dare to dream beyond the paradigm”.
I’m hopeful that the scientists’ dreams of “beyond the paradigm” are ultimately less cataclysmic than those of the world’s bankers, whose vision of a new paradigm didn’t quite include the nationalisation of Freddie Mac and Fannie Mae as well as the collapse of Lehman brothers and the fight for survival at AIG.
Bloggers are almost united in their rejoicing at the demise of the 158-year-old investment bank, while expressing their delight that its “greedy bankers” are finally getting their comeuppance.
Unfortunately it’s not really the “greedy bankers” who are being battered by the storm – it’s the ordinary employees; the receptionists, the desk clerks and others who are facing the future without having had the cushion of excessive bonuses. Everyone who has a pension fund which has halved in value is being punished for the actions of a few.
When there are events which we cannot control and which leave us worse off, we always want to apportion blame. It’s easy to blame the bankers and there’s no question that the prospects of seven-figure “compensation” packages led to the chase for profit through financial engineering rather than old-fashioned good banking. However, within the crisis are the seeds of our own desires to buy houses we couldn’t afford and to fudge our earnings so that it looked as though we could; the incessant programmes on television which allowed people to think that buying property was an easy route to instant riches, and the over-reliance on one sector of industry to prop up everything else.
After finding someone to blame, we need to find someone to put things right. Yet, as far as world markets are concerned, the only people who can put things right are the people who brought us the excesses in the first place. Wall Street started the party, Wall Street is bringing us the hangover and ultimately it will be Wall Street that brings us the cure.
The big question is whether it can cure itself at the same time. The western economic model is not built on financial institutions being scared to lend to each other, or on ordinary people being afraid to put their money on deposit in a bank. It is built on the confidence that we have in the institutions, and the confidence they have in each other.
Currently that confidence is at rock bottom, and it’s difficult to have faith in the authorities and the politicians who – at various points since the crisis first started last year – have announced the light at the end of the tunnel, the end of the beginning and the beginning of the end.
Alan Greenspan, the retired Fed chairman, who wasn’t able to constrain “irrational exuberance” on his watch and so ultimately embraced it, has said that these are once-in-a-century events. The last century’s one-off event brought the quote: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate . . . will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.”
Those “liquidationists” believed that the depression was a penance for the excesses of the 1920s and that it was deserved. But although hard work and (possibly) a more moral life might have followed for a time, greed inevitably returned to boardroom tables.
The brilliance and the tragedy of Wall Street is that it has, and always will, put its own interests above anything else. And so, when the dust settles, whether by being interventionist or liquidationist, I have absolutely no doubt that the financiers will put the past behind them and start wondering how they can shift assets around the globe so that they can make the most money possible again.
After all, they have another century to go before it all goes completely pear-shaped again.
www.sheilaoflanagan.net
