The 2008 financial crash: Punishing the victims, rewarding the perpetrators

Saturday, August 11, 2018
By Paul Martin

Neil Clark
10 Aug, 2018

The 2008 financial crash should have marked the end of a neoliberal era marked by greed and inequality. But it ushered in even more iniquitous economic policies which have benefited the super-rich at the expense of the majority.

It was the worst economic disaster since the Great Depression of the 1930s. However, unlike then, the crash of 2008 did not lead to the adoption of progressive New Deal-style policies, but the exact opposite. The massive bankers’ bailouts that were introduced following the collapse of Lehman Bros were paid for by ordinary taxpayers, who then saw their living standards plummet as governments imposed harsh austerity measures, which led to important public services being cut. Let’s look at what happened in Britain.

In the 2010 General Election, the Conservatives, out of office since 1997, promoted themselves as the party most serious about “cutting the deficit.” The election was all about ‘the deficit’. The ‘d’ word was everywhere. The Tories scraped home, but could only form a government with the support of the Lib Dems, who, under the leadership of banker’s son Nick Clegg, were now enthusiastic neocons.

New Chancellor of the Exchequer George Osborne introduced an emergency “austerity budget,” which we were told was going to “rebuild the economy.” Cuts in public spending would reach £17bn (US$21.7bn) by 2014/5. There was a public sector wage freeze and an announcement that a rise in the state pension age would be brought forward.

The following winter, local authorities across the country announced cuts in public library provisions. I was involved in a campaign to save my local library. We were told that councils couldn’t afford to keep professionally staffed libraries open, given the reduced money they were receiving from Whitehall. But ‘austerity’ was a sham, a failure even on its own terms, as the figures show. Public sector net debt was £1.1bn in 2009/10, the last year Labour were in power.

By 2016/7 it had risen by 53 percent. Public finances were in a far worse state after seven years of Tory austerity than they were at the start, when so much fuss was made about the need to “balance the books.” That’s even after a number of state assets, including the Royal Mail, in public/state ownership since its inception in 1516, were privatized.

Rather than being a serious attempt to improve the public finances, as indeed genuinely ‘free market’ libertarians had wanted, ‘austerity’ was used as a pretext for redistributing wealth upwards and destroying the last vestiges of the social democratic post-war settlement. There was still money to spend on projects favored by the elites, like bombing Libya in 2011 (£320mn) or backing ‘rebels’ in Syria, but not enough money to support much-needed public services.

As Andrew Murray of ‘Stop the War’ put it: “the calibration of a state big enough to impose its military will on the Middle East but too small to keep the local library open is a study in the contradictions of neoconservatism worth pondering as David Cameron brings the ‘big society’ to Benghazi with a bang.”

The greed which fueled the financial crash in the first place was encouraged still further. The super rich got even richer from privatization, state handouts, and tax cuts.

Meanwhile, British workers suffered the biggest drop in real earnings since the Victorian age.

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