By David Malone
Edited by Mark Tanner
Book review by
“Whoever has will be given more; whoever
does not have, even what he thinks he has will be taken from him.”
On 16 March 2004 a worrisome problem was raised at a US Federal Reserve
Bank meeting. There had been growing concern about potential overbuilding
and speculation in real estate markets, especially in Florida, with buyers
freely admitting they had no intention of occupying the units, just selling
them on at higher prices. This was an early indication of the expanding
financial bubble that was to lead to a massive failure within the banking
system. But a public debate about what was happening was stifled by the
then Fed chairman Alan Greenspan.
These were heady days for the banks. In a modern day version of Tressell’s
money trick, the banks could raise finance on the back of the property
boom, package debt up, sell it on and make huge profits from it. This
debt could be packaged again and again, being sold on and on, and sometimes
going around in a circular route and being bought once again by a speculator
who had sold it before. This was like pass the parcel in reverse, another
layer of worthless paper being added each time. An enormous amount of
debt was formed, based on nothing more than the original, hyped up, overpriced
equity in a building. Dollians collected in the vaults of finance houses
around the world, but times were good, economies were growing and money
was being made, for some.
We all know the next part of the story. And David Malone relays this
in an insightful manner, using a collection of his comments on the Guardian
website and from his blog, between 4 July 2008 to 11 May 2010.
The back of the book says that, “The Debt Generation is both a
compelling account of the crisis as it happened and a devastating critique
of the financial system and of our political leaders who bowed down to
it”, and I would agree with this.
He describes how the £billions earmarked for public services have
disappeared into the black hole existing in bank cellars. But this is
not the end of it; it’s not even the beginning of the end. According
to Malone the banks are still carrying masses of bad debt, but now they
have our money they can tell us what to do, and that means they can demand
more, meaning extra cuts to come.
Malone says the banks are like large ships, being holed below the waterline,
while carrying huge sweating cargoes of dynamite.
The owners, and those whose cargo is being carried, want to save their
fortunes. So, we have to pour in more and more money and effort in an
increasingly vain attempt to save them. What we should do, he says, is
let the boats sink to the bottom and use our money to build smaller, lighter
and safer ships to do the job better. We should do the same with the banks.
These financial institutions are above the law. Take the case of Goldman
Sachs the global investment bank. They knowingly sold dodgy securities
to pension funds and other investors, then betted on them going sour,
and when they did, took bailout money from the US government to cover
their loss. So they made money out of these deals three times! The authorities
know they did this but won’t prosecute because it may affect the
The Government role in this is to sell our democratic control to the
markets. “It has happened in developing countries for decades where
many governments have simply been the puppets of the IMF. Now we are going
to enjoy the same status. Major civil unrest may be some way off yet,
but some sort of significant protest now, even civil unrest, would be
better than keeping quiet until we have been herded into a state where
only extreme measures and huge disobedience can extricate us.”
Of course, governments hope we can consume our way out of this mess,
but under capitalism ‘growth’ or ‘development’
brings only conflicts over trade and currency, stagnation and unemployment.
It means devastation of the natural environment, poverty and war.
The only criticism that can be made of ‘Debt Generation’
is that it does not mention the sweated labour from which all wealth comes,
and that it is this which underpins the whole edifice of capitalism. Having
said that, David Malone has done a real service to all of us who want
to understand what is really going on. This is done with humour, creating
images and using analogies that allow the reader to follow his reasoning
easily. While all our politicians and most journalists have bought the
idea that there is no alternative to public sector cuts, Malone tells
us we have no alternative but to resist these plans, with civil disobedience
David Malone is in FACT on Wednesday 23 Feb to
answer questions after the film Inside Job.
Comment left by TD on 23rd February, 2011 at 17:23
Good that everyone is finding out what the bankers are up to. 'Resist The Cuts'...come to London on Saturday March 26th for the anti cuts march.All trains out of Liverpool fully booked, some coaches may be available.