Blackmail capitalism

Robert Brenner said it well: the financial collapse of 2007-2008 set the template for government responses to crises that threaten citizens' livelihoods. Whether it's a global financial meltdown, a deadly pandemic, or energy bills that are too high for many to pay, the policy instrument of choice is a bailout.

Both during the financial crisis and in the early months of the pandemic, there was a broad consensus that governments needed to make extraordinary fiscal interventions to preserve citizens' livelihoods without jeopardizing the economic status quo. Extraordinary financial packages were used to stabilize the crisis, along with measures such as the so-called quantitative easing (increasing the money supply), paid leave or - in the UK - a reduction in real estate tax, which caused real estate prices to rise faster than before covid.

Financial aid is the ideal intervention for neoliberal politics in disarray: it maintains capital flows, rising asset prices and upward redistribution of wealth, while providing support for the minimum needs of enough of the population to prevent total social breakdown.

The reactions of British politicians to rising energy prices are in line with the consensus on financial assistance. Boris Johnson promised "extra cash" but left it to his successors to work out the details (Liz Truss and Rishi Sunak have mostly proposed tax cuts so far). Ed Davey, the leader of the Liberal Democrats, recently proposed an "energy suspension plan": the government would absorb the costs of rising energy prices and pay some of that money back through a short-term tax on extra profits. Labor soon came up with its own solution: a similar cap on energy prices, which would be financed through somewhat more creative accounting.

In either case, energy companies would receive large sums of public money (at least £29bn) which would enable them to continue sending their customers bills that many cannot pay. From these proposals, just after financial aid packages in the pandemic, which were supported by all parties, it is obvious that there is broad support for emergency interventions with very little thought about the causes of the crisis - not counting the criticism of the personality of the outgoing prime minister.

The consensus on financial aid is strikingly similar to the model by which neoliberal capitalism has operated globally for decades. Producers and distributors of electricity and energy extract profits from the state while waving bills that citizens cannot pay, practically threatening to deprive millions of people of their means of living. That process, capital blackmailing the public, has been going on for decades in the global south, where countries facing financial, energy, and even public health crises face blackmail from the IMF, the World Bank, and multinational corporations based in the US or Europe. The money to ease the imminent social breakdown is provided on the condition of structural reforms and repayment agreements that push generations of citizens into decades of debt, economic restructuring and austerity to ensure corporate profits.

As Kodzo Koram and others have argued, IMF/World Bank interventions undermined the growth of alternative political movements and ushered post-colonial nations into an upwardly distributed capitalist system. Practices that were once applied by empires to their colonial subjects are now directed at the native population. Crony capitalism and bailouts are not new, but their scope has expanded.

According to the consensus on financial assistance, as in the case of IMF interventions, the state and its citizens are expected to pay the blackmail of private companies without getting anything significant in return. There is no suggestion that the company could acquire a stake in the company in exchange for the money it is handing over. Shareholders and CEOs receive "protection" or "compensation" instead of facing the downside of the risk supposedly inherent in the investments. The financial assistance package prevents the crisis, but keeps the situation favorable for capital.

The underlying assumption is that at some point there will be a return to the "normality" of self-regulating markets of private actors. But financial aid to those actors, without structural changes, pushes us into ever-increasing losses for society just to maintain a bare life, while preserving a failed market system that not only generates crises, but also limits their possible solutions - as many states of the global South has been experiencing for decades.

Not only does the UK have high inflation, but capitulation to the blackmail of energy companies seems particularly acute here, as does the real rate of cost growth. France can lower prices through its state energy company, Spain and Germany have intervened to reduce public transport costs, and many of the proposed measures across Europe include takeovers in energy companies or tighter regulation. The United Kingdom, however, has stepped too deep into the neoliberal hole to accept even mild social democratic policies.

The new prime minister might be tempted to reject blackmail from energy companies and let people suffer and die, but chances are Tras will be forced into some form of bailout package for the companies. Center-left opposition parties could seize the opportunity to reject this consensus and instead consider substantive political and economic alternatives, such as public ownership, as conditions for another major fiscal intervention. Without those alternatives, especially in conditions of climate collapse, there will always be only new crises, more financial aid and bigger blackmails to be paid in order to protect the means of existence of huge parts of society. The key difference between the IMF bailout and what is happening in the UK now is that there are no calls for major structural reform - instead, there are calls for business as usual. In this way, the blackmail money continues to flow.

(London Review of Book; Peščanik.net; translation: M. Jovanović)