Belfast Trades CouncilMayday Lecture

Dr. Conor McCabeEquality Studies Centre

UCD School of Social Justice2 May 2013

1. Monetary policy

2. Financialisation

3. Finance, Insurance, Real Estate [FIRE]

4. Privatisation

5. TINA

11 May 2010

Dear Chief Secretary,

I'm afraid to tell you there's no money left.

Sincerely,

Liam Byrne.

chief secretary to the Treasury.

“The British Government has run out of money because all the money was spent in the good years.”

George Osborne, 25 February 2012

“So we cannot just carry on as we are. Unless we reform our economy - rebalance demand, restructure banking, and restore the sustainability of our public finances - we shall not only jeopardise recovery, but also fail the next generation.”

Mervyn King, TUC Conference, 15 September 2010.

5 March 2009. QE : £75 billion

10 October 2011. QE : £75 billion

2009 – 2011. corporate bond purchase via asset purchase facility : £375 billion

2012: Monetary Policy Committee approve a further £50 billion.

“So we cannot just carry on as we are. Unless we reform our economy - rebalance demand, restructure banking, and restore the sustainability of our public finances - we shall not only jeopardise recovery, but also fail the next generation.”

Mervyn King, TUC Conference, 15 September 2010.

“In the European context tax rates are high and government expenditure is focused on current expenditure. A “good” consolidation is one where taxes are lower and the lower government expenditure is on infrastructures and other investments.”

Mario Draghi. 24 February 2012.

“The ideal fiscal consolidation ... must be focused on spending cuts and not tax hikes.

It is essential that [this consolidation effort] is perceived as credible, irreversible and structural to have impact on sovereign debt spreads.”

Mario Draghi. 15 November 2012

Long Term Refinancing Operations (LTRO)

21 December 2011: €489.2 billion to 523 banks – 3yrs @ 1 per cent

29 February 2012: €529.5 billion to 800 banks – 3yrs @ 1 per cent

Long Term Refinancing Operations (LTRO)

21 December 2011: €489.2 billion to 523 banks – 3yrs @ 1 per cent

29 February 2012: €529.5 billion to 800 banks – 3yrs @ 1 per cent

“Some banks, particularly in Spain and Italy, used portions of those funds to buy higher-yielding bonds issued by their governments at a time when most investors remained skittish, and it helped reduce government borrowing costs.

But many banks primarily used the funds to pay down maturing debts or simply deposited the money at other banks or with the ECB itself, even though they yield less. The infusion fell short of some politicians' hope that it would stimulate bank lending to customers in struggling European economies.”

Wall Street Journal, 1 March 2012

Financialization refers to the increasing importance of financial markets, financial motives, financial institutions and financial elites in the operation of the economy and its governing institutions, both at the national and international levels.

Gerald Epstein, ‘Financialization, Rentier Interests, and Central Bank Policy’,2002

1970s – The Monetarist revolution

1980s – war on labour

1990s – Credit as a substitute for wage increases

2000s – Credit solution for wage stagnation fails

Present day – open conflict over monetary policy once again

Some characteristics of Neo-liberalism -

Attacks the post-war compromise between producer capital and labour – compromise that put severe checks on free movement of capital

- Great Britain and Northern Ireland = Social Democratic Welfare State

- Irish Republic = Corporatist State / Rerum Novarum (Vocationalism)

• Pushes a monetary policy designed to benefit financial rentiers

• Privileges asset-price speculation over producer-led employment

• Needs to kill inflation in order for asset price profit-seeking to work

“In the case of the United States, financialization during the 1990s led to a closer alignment of large industrial and financial firms in the U.S., leading to a greater emphasis by Alan Greenspan and the U.S. Federal Reserve in financial asset appreciation as a goal of monetary policy.”

Gerald Epstein (2001)

“In the case of the United States, financialization during the 1990s led to a closer alignment of large industrial and financial firms in the U.S., leading to a greater emphasis by Alan Greenspan and the U.S. Federal Reserve in financial asset appreciation as a goal of monetary policy.”

Gerald Epstein (2001)

“The goal of monetary expansion has been to do just enough to stabilize financial asset prices without going far enough to produce catch-up growth in the labor market”

Matthew Yglesias, Rentiers and Financialization (2011)

“What [the wealthy], businesses and banks share is a common interest in supporting asset prices, a lack of interest in seeking full employment unless it is a prerequisite for supporting asset prices, and an aversion to any policies that can trigger wage inflation.”

Ashwin Parameswares (2011)

PPP and Northern Ireland

Most public expenditure in NI funded under the assigned budget – adjusted to reflect changes in per capita expenditure in England

Capital spending funded through the use of NI resources or through direct borrowing is tightly constrained. The capital used with count against NI’s capital budget.

“In contrast, under current Treasury rules as long as a PPP is off-balance sheet (i.e. the project is recorded as a contract for services rather than a financial lease in the public sector’s accounts), there will be no direct impact on the NI capital budget, while annual charges count against the revenue budget as they are incurred.” (NIPSA, p.9)

“Let the good times roll for those who are on the ladder.”

Alan Bridle, Bank of Ireland Head of Research NI. 21 Sep 2006.