Crony capitalism in action

25 06 2011

Capitalism is a system whereby wealth can be distributed through an economic system by means of private entities competing for profit. In theory it is an efficient system of managing the flow of money through an economy, except if it subject to bias. When those at the top of the system interfere in the workings of capitalism, because of the narrow interests of one group, it becomes something different. Its called the highly inefficient system known as crony capitalism.

This is the background that has to kept in mind when understanding the crisis in the Greek economy today. ‘The Troika’, the high priests of European finance (the ECB, the IMF and the European Commission) are obstructing Greece from following the rules of capitalism. The Greek economy is drowning in a sea of debt that has been rolled up like a carpet over the years. They need to default on their loans and then start again, free from the burden of debt. Anybody who is owed money from the collapse will have to form an orderly queue and they will get whatever is leftover from the mess.

The Greek government has now had more stringent austerity measures rammed down their throat, images such as this will be repeated many times in the coming months and years ahead.

If your local baker starts selling mouldy cream cakes, his revenues then fall off a cliff and he borrows more and more to keep the bakery open, he will go bankrupt. The above is the set of rules set out to deal with aftermath of the bakers (or a country’s economic) failure.

But that is not acceptable to the archbishops of finance, because many of the mega banks in the world are exposed. However, it is not true to say that those dastardly Greeks took advantage of their international financiers. In fact they couldn’t have done it without them, as we discovered when the ‘creative accounting’ services offered by Goldman Sachs exposed how the Greek government and international finance have conspired to hide the true level of Greek debt.

In this story, nobody is truly innocent. The big banks have a lot of money sunk into the Greek economy, and they want it back, with interest. They do not care who pays, whether its Greek, German or French taxpayers.

The financial masters of the universe have a simple argument which they are willing to defend at all costs. Basically they bet a lot of money on a horse that came 12th in a race. Now they are back in the betting shop banging their fist on the counter demanding their winnings. Nobody told them the horse had one leg shorter than the other, in fact the horse was supposed to have bionic super legs, its not their fault.

The major banks deemed the horse in the foreground of this image their best chance,
it has now had the audacity to come last in the race

So our wise elected officials should tell them where to go right? The financial masters have an answer to that of course. If anybody defaults, the ATM’s could freeze, the world economy could suddenly grind to halt. The politicians buy this because that is what nearly came to pass after the collapse of Lehman Brothers in 2008.

To avoid disaster the politicians had to subsidise the banking systems so that they could continue to operate. This is where the cronies come in, banking is a now a publicly underpinned business given special treatment, in a similar way to farming.

European farmers are protected from the wrath of capitalism by public subsides, basically so that there is food on the shelves in the shops. Now bankers operate without fear of failure, safe in the knowledge, that if governments ever get tough with them, all they need do is begin prophesying armageddon.

An Irish dole queue, ordinary citizens must line up for their social welfare payments,
the ‘bankers dole’ is a much more civilized affair, usually drawn down over coffee and biscuits in government buildings.

This is what Germany tried to do with the latest Greek bailout when they tried to impose losses on the banks involved. But the bankers steadfastly refused, warning the sky would fall in if such a thing happens. The politicians backed down and now the banks can make ‘voluntary’ losses, what moron would voluntarily lose money?

So ordinary Greeks are not allowed capitalism, they are in need, but the high priests of finance in Frankfurt, Paris, London, New York and Brussels are deemed more worthy. Go to the back of the line and wait patiently, or the four horsemen will come riding over the hill.

Interestingly, the Irish bank AIB defaulted last week and nothing happened. The ATM’s kept working, the grass kept growing and the sun rose the next day. Remember, the emperor is stark bollock naked.