Another 'theory' wears thin
By Allen Myers
The Japanese ruling Liberal Democratic Party on October 11 announced plans for the government to spend ¥67 trillion rescuing and/or taking over banks threatened with collapse by massive bad loans. The sums involved are truly staggering: ¥67 trillion is almost A$1 trillion — roughly the entire gross domestic product of Australia for two years.
To help the banks out of their difficulties, the Japanese government is handing over to them this huge sum, collected as taxes. Where the banks are no longer a going concern, they will be "nationalised" — in reality, the government will buy a bankrupt bank from its owners, rescuing the individual capitalist owners rather than the bank itself.
Governments of other developed capitalist countries have been pressing the Japanese government for months to adopt some such rescue package, as have virtually all the economic commentators in the business press.
At first glance, this approval may seem strange. After all, these are the same governments and writers that have been telling us, since the early 1980s if not earlier, that we are all better off when the free market is allowed to determine winners and losers, and governments don't intervene.
Japanese banks, as banks do, loaned money to various businesses in order to receive interest. Unfortunately for a large number of them, they loaned too much money to businesses that couldn't repay the loans. As a result, many of the banks are now themselves on the edge of bankruptcy, and they are calling in their loans even to sound businesses and refusing to lend more, thus making worse the current Japanese recession.
So letting the market determine everything turns out not to be such a good idea after all. It doesn't make everyone better off. Sometimes, it doesn't even benefit those who normally do benefit from it, namely the capitalists.
Of course, the governments that have been telling us about the wonders of the market knew better all along. So did most of the economics writers, although some of them are just gullible rather than dishonest.
Capitalist governments see their main job as protecting and increasing capitalist profits, but they don't like to tell us that bluntly. So, with the aid of well-paid "experts", they invent seemingly objective or impartial reasons to do things "for the good of all" that just happen to protect and increase profits, at the expense of the majority.
Neo-liberalism was only one among many ideologies used to justify governments doing the wishes of big capital — which for the last 10 or 15 years has sought to make it easier to move capital around quickly.
Now, in a changed economic climate, business may well start looking for greater government regulation — but not the sort of regulation that, for example, would stop banks from closing less profitable branches.
No, the kind of regulation that big business will seek — and get — from capitalist governments is the sort of "interference" that Japanese banks are now experiencing: all sorts of disguised and semi-disguised handouts, paid for by working people.
And you can be certain that governments and media will be promoting thoroughly respectable theories justifying precisely whatever measures governments decide on, theories that prove that these measures are exactly what's best for everyone. And especially for billionaires.