Financial crisis should spur discussion of economic alternatives

by John Minto from The Press 21 October 2008 You're unlikely to have heard of Sanitarios Maracay but by the end of this column I hope you'll take the time to find out a bit more. The international economic crisis has been in the headlines for two months now. For the most part, New Zealand has watched developments from the sidelines of a crisis centred in the arcane world of shareholdings and risk, confidence and speculation, guessing and gambling. This is John Key's world where reckless speculation makes you wealthy but honest labour makes you poor. His Merrill Lynch company is now at the front of the queue for billions in corporate welfare. The most insightful statistic which backgrounds the crisis in the US goes as follows: In 1980 the value of US financial assets (bank deposits, government and private sector securities and shareholdings) was 120 per cent of gross domestic product (GDP). By 2007 this had grown to 356% of GDP. Thus the value of financial assets had bubbled far beyond the real value of goods and services produced by wage and salary earners. It was value based on financial hot air but like an insane pyramid-selling scheme the value grew as speculation and greed were fuelled by US government-sanctioned stupidity. As the artificial bubble collapses the crisis will shift from financial markets to the real economy. Early warning signs here have been the collapse of 27 of our 70 finance companies and falling house values. However, when commentators and politicians talk about hard times ahead it will not only be smaller investors with some spare cash who will be hit. The greatest impact, as always, will be on wage and salary earners. These are the people who create the only real wealth, as measured by GDP, but are now being asked to bail out the parasitic financial markets. It's another case of no gain without pain as Minister of Finance Roger Douglas said back in the 1980s. The pain then was reserved for the most vulnerable workers while the huge gains were reserved for a small wealthy elite. This time round will be no different. It will be the most vulnerable who suffer the most. Low-wage workers will be laid off as production declines, people conserve their cash and the service sector takes big hits. With such a dramatic crisis unfolding the level of debate has been abysmal. Nowhere in the mainstream media is there more than the most superficial criticism of the markets. The prevailing mood seems to be that once this crisis is over things will more or less return to normal with the current economic structure essentially unchanged. More government regulation will be proposed but not much more will change. Back in the 1980s Douglas also told us ad infinitum there is no alternative to the free market. This is as untrue now as it was then. At least two of the minor parties are promoting real economic alternatives for New Zealanders to consider and these deserve a good airing during the election campaign. The Workers Party and RAM (Residents Action Movement) are fielding candidates around the country. They both offer socialist alternatives to the capitalist system of running an economy. The Workers Party slogan is Workers should be running the country while RAM has a whole host of policies to redirect the economy so it works for people rather than market mandarins. Its worth spending 11 minutes to check a video clip on the Workers Party website which focuses on a company called Sanitarios Maracay in Aragua, Venezuela. Its a ceramic bathroom products factory which the owner tried to close down. Instead, the workers occupied the factory and restarted production. They have taken on a Herculean task. In the middle of a capitalist society it will be almost impossible for the factory to survive because it needs to get raw materials and find markets which are themselves controlled by other capitalist companies who are determined to see the workers' venture fail. The factory works with a flat structure whereby the workers themselves make decisions about all aspects of the production, distribution, pricing and marketing. The workers say it is producing for human need rather than private greed or government directive. The workers are asking the Venezuelan Government to nationalise the company so they can continue to operate it as a worker- controlled business. New Zealand workers are no less capable of running a factory as a democratic enterprise. The next time Fisher & Paykel wants to close a plant here we know there are alternatives. The only benefit of the global financial meltdown would be if it spurred a real discussion of economic alternatives. Let's be brave enough to listen to the workers at Sanitarios Maracay.