Dark pools of iniquity

I just finished reading a book by François Morin, L’hydre mondiale: L’oligopole bancaire (“The banking oligopoly: a global hydra”), that was published in 2015. Morin is a distinguished professor of economics at the University of Toulouse in France, who also used to be a member of the “Conseil général” and the “Conseil d’analyse économique” of the Bank of France. He dedicated his book to the research program in political economy (LEREPS), to which he belongs, and to the memory of Bernard Maris, his former colleague in the same program who was assassinated by Islamic terrorists at Charlie Hebdo in Paris (2015).

Morin’s book is a very convincing attack on the (at last count) 28 major banks in the world (eight from the USA, 16 from Europe, three from Japan and one from China), that have taken over almost total control of the world financial system since the mid 1990s. Although there are over 40 000 banks on this planet, only those that belong to this world-wide oligopoly of financial institutions control not only the most important official markets, such as the bond market, but also most of the unofficial markets, like shadow banking and the “dark pools” of high-frequency trading. The currency market, with its unbelievably huge volume (thirty times greater than the World Bank figure for total world GDP), is also firmly under their collective control, giving them an overwhelming influence on the setting of exchange rates between the world’s most important currencies. Institutional collaboration between all those banks, which is deliberately overlooked in most purely quantitative economic analyses of such phenomena, also means that they have complete control as well of the most important interbank markets (Libor, Euribor, Tibor).

They also have a much greater influence on the setting of interest rates than do the overrated central banks, like the USA’s Federal Reserve, still officially “in charge” of that all-important function. In addition, the same private banking oligopoly also controls the astronomically large derivatives market, set up to protect investors from risk after all the world’s neoliberal governments collectively decided to abandon state control, and almost all useful regulation, of world financial markets. In other words, for ideological reasons, they simply handed all that responsibility over to the private sector, and the oligopoly-hydra was the inevitable result.

According to Morin, the total worth, on and off the official balance sheets, of those 28 colossally large banks, in 2012, was 50 000 billion dollars, a sum more or less equal to the total accumulated public debt of the world’s 200 nation-states. The afore-mentioned debt having accumulated especially rapidly in recent years, when the world’s governments and central banks tried to mop up the gargantuan financial crises caused by the afore-mentioned oligopoly, during and after the Great Recession of 2008. In 2013, the so-called notional value of all the market contracts covered by the world’s financial derivatives amounted to 710 000 billion dollars, about ten times as much as total world GDP in 2012. (That same notional value was only about 500 billion dollars back in the 1970s.) Apparently, the banking oligopoly’s off-balance derivatives these days are worth 15 times as much as the official on-balance-sheet figures. In 2017, two years after Morin’s book was published, those numbers have undoubtedly increased to even higher figures than the ones just mentioned.

All the members of that enormously powerful financial cartel are theoretically considered “too big to fail”, at least since the 2008 crisis. During that colossal upheaval, when Lehman Brothers was allowed to fail anyway, the ensuing panic came very close to destroying the world financial system completely. Which means that very few people in power tend to object when most of the world’s governments spend most of their time nowadays competing with each other to attract foreign investment, by cutting taxes on the world’s most important banks and multinational corporations, or allowing them to avoid paying taxes altogether. Not to mention trying to pay for all that largess by imposing austerity on all government spending not directly related to bailing the “corporate welfare bums” of Big Business out of whatever colossal crises they keep on causing.

Needless to say, in order for a system like this one to function at all requires fantastic levels of denial, most of the world’s governments, central banks and international regulatory institutions, constantly proclaiming that all is well, that the lessons from the 2008 crisis have all been learned, and that no such “accident” could every happen again. The most important traders, who still see themselves as “masters of the universe”, are convinced that they can all get away with driving up short-term profits as high as they want, forever and ever, since all the public institutions in the world seem to agree that unlimited “private enterprise” is the only way to run the world economy. Even when officially recognized criminal elements are constantly being protected by such “borderline” banks as the British-based HSBC.

Morin’s remedy for this completely unprecedented financial boondoggle is a return to days gone by, with the return of government control over the entire financial system, fixed exchange rates and the like, as prevailed in the world’s most prosperous countries from 1944 to 1971, before the inflation crisis of the 1970s touched off the neoliberal counter-revolution. His proposals also include the abandonment of the US dollar as any kind of international reserve currency and its replacement by a new kind of non-exclusive, common currency, similar to the one that Keynes was proposing back in 1944. But Morin is not foolish enough to believe that such a remedy would be willingly accepted under current conditions. The only event that might eventually bring about any kind of re-nationalization of world finance would be an economic catastrophe of colossal proportions. Like the one that Morin believes is going to take place, just as soon as traders tied to the 28-bank oligopoly run out of any further options and push profit maximization beyond the physical limits of the world economy.

Unfortunately for everyone on this planet, Morin is convinced that even after such a collapse, it would still take a certain amount of time just to get the neoliberal paradigm out of all the rich and powerful people’s (brainwashed) heads. During which time, an enormous escalation of the current epidemic of “radicalized”, ethnic-nationalist and religious identity projections would probably plunge the world into an aggravated dystopia of external and internal geopolitical confrontations, accompanied by several new financial crises. Which would not only be an unprecedented disaster in itself, but would also rule out any possible financing of the ecological transition our planet so urgently requires. For him, it would be much better if a mobilized citizenry obliged the people in power to adopt his suggested reforms before the final blow-out of the world financial system, even though that does not seem very likely.

That entire relationship between the banking oligopoly and the world’s most important governments reminds me a lot of the lyrics in one of Gordon Lightfoot’s popular songs, “That’s what you get for loving me” (1966). It may very well have been the most unloving love song ever written, telling the all too typical story of a very unequal tryst between a hippy philanderer and, presumably, a much too trusting young woman. “Everything you had is gone, and you can see, that’s what you get for loving me.” (Most such narcissistic philandering is of male origin, but quite a few women are also capable of behaving in the same uber-egotistical fashion.)

The fact that most governments in the 1970s decided to abandon the “thirty glorious years” of joint public-private control over the world economy, in favour of total privatization and individualization of almost everything, has now come back to haunt us all. As in the song, they initially decided to jettison government “intervention” into the economy altogether because they naively believed that trusting one’s partner completely was, after all, the right thing to do. But their only reward for being so totally infatuated with their demon lover has been an unending series of financial disasters: the inflation crisis, the public debt crisis, the private debt crisis, the public austerity crisis and the biggest income gap in human history, between the ultra-rich overclass and the ultra-poor underclass. Not to mention the upcoming collapse in every kind of financial investment, which will make the Great Depression of the 1930s look like a Sunday school picnic by comparison.

Come to think of it, “that’s what you get for loving me” is also an appropriate metaphor for the similarly unequal relationship between all the world’s right-wing populist regimes and the much-maligned “ordinary people” who have been expertly manipulated into supporting such regimes. Supposedly in order to free themselves from the politically-correct “liberal elite” that set up the thoroughly anti-democratic banking hydra, and still officially runs such plutocratic “democracies” as Canada, Britain, Australia and most of the countries within the neoliberal European Union. The world’s best-known example of right-wing populism nowadays is the increasingly unstable “Trump-ocracy” in the USA, still desperately trying to make its erratic control over that huge country complete, and permanent. A process that all started last year, when most of his 63 million voters, from the stagnating middle-class, suffering from zero real income increases since 1972, suddenly agreed with that atavistic billionaire that white supremacy, old-time religion and traditional misogyny were really good formulas for making America great again.

In so doing, the Trump movement has allied itself ideologically with a grab-bag of previously established populist regimes (“illiberal democracies”, “electoral theocracies”, constitutional monarchies and “popular dictatorships”), all trying to make dozens of other empires great again, in such otherwise dissimilar countries as Mexico, Brazil, South Africa, Nigeria, Morocco, Egypt, Serbia, Russia, Turkey, Iran, Pakistan, India, Myanmar and Indonesia. Right-wing populism has also overtaken several EU member nations, such as Hungary and Poland, as well as having a very strong influence in Japan. In hindsight, even the State-capitalist dictatorship in China seems to have been following a similarly populist strategy since its divorce from Mao Ze Dong-thought during the late 1970s. The only thing bringing all those countries together in the same list being their disparate attempts at combining imperial regeneration, religious revival and (slightly-disguised) neoliberal elitism, with phoney promises of “liberation from liberalism” based on an endless series of confabulated “alternative facts”.

“That’s what you get for loving me” even seems to apply to the slightly-undercover support given to the Islamic terrorist movement by many different Muslim states, especially the theocratic, absolute monarchy known as Saudi Arabia, and its Sunni-Muslim allies, including the military dictatorship in Egypt and the little group of feudal Gulf states under Saudi influence. Which helps to explain the recent diplomatic rift between that group of countries and the Qatari regime, which allegedly crossed a line recently by supporting terrorism even more than it had before, and also adopting an even more accommodating approach toward the Shiite-Muslim countries, led by Iran. At least, that’s what Donald Trump himself supposedly told the Saudi king a week before the rift, apparently passing on “proof” of those allegations that was reportedly supplied by ubiquitous Russian intelligence. Not to forget that the unconditional support the USA has always given to Saudi Arabia, at least since 1945, is a lot like the unconditional support it has also given to Israel, at least since 1967, both American policies contributing greatly to keeping the Middle East a very dangerous place in which to live.

In reality, for the past several years, more than a few Muslim countries, not just those in the Middle East, have been involved, to a greater or a lesser extent, in officially fighting against, while unofficially supporting, all the different Islamic terrorist organizations that have so far been set up. The Saudi regime in particular has been using both hard power (terrorism) and soft power (funding schools in many different countries to teach Wahhabism) to make sure that its ultra-conservative version of Islam will be adopted, first by all Muslims, then by all human beings forced to choose (as supposedly happened several centuries ago), between conversion to the “appropriate” form of Islam, and instant death. Several Shiite regimes, particularly in Iran, also have their own version of this apocalyptic vision of the future, but the fact that only about 15% of Muslims have adopted Shiism means that their support for their own Islamic-terrorist organizations has had a lot smaller impact on the world. In any case, even when officially “hidden”, the love tryst between Islamic terrorism and many Muslim governments still looks a lot like the lyrics of the Lightfoot song.

Finally, the same metaphor may also apply to yet another form of iniquity that seems to be developing around the so-called “fourth industrial revolution”, the one involving artificial intelligence (AI). Up until the present, the use of robots to replace human labour in many different industries and services has been billed as an extremely positive tendency, liberating workers from doing the kinds of often boring, often dangerous, tasks that can now be done by machines instead. Thereby allowing millions more people to spend a lot more time in much more fulfilling leisure activities. Which sounds like nothing more than an older version of Donald Trump’s “alternative facts” as soon as one realizes that the real reason for robotics is the same as the real reason for shipping industrial jobs to low-wage countries, namely making a lot more money for really rich people, and a lot less for everyone else.

Many leading lights in the AI movement also seem to be implementing their fourth industrial revolution by using rhetoric that closely resembles the language used to promote free trade and the replacement of the welfare state by a “much more efficient” use of capital. In other words, artificial intelligence is being turned into an important new branch of neoliberal elitism, in which the world’s smartest people will use their increasingly intelligent, robotic allies so as to even further downsize the already downtrodden.

Some of them are even advocating a guaranteed annual income (GAI) for “displaced persons”, the same ones that sociologist Saskia Sassen calls “excluded people”, displaced by “parallel power”. But neoliberal AI advocates also want to “help those people help themselves” by keeping the GAI at a very low rate, even lower than the sums paid to today’s austerity-ridden welfare recipients. Instead of allowing billions more people to finally enjoy more leisure time, this would oblige all those “useless eaters” to scrounge around in the “informal economy”, like most of the population of India is already doing, to provide them with just enough income to ensure mere physical survival. Those who “refuse” to scrounge “efficiently enough” will be free to starve to death, like such unworthy people have always been allowed to do in the past.

AI may therefore be used to take neoliberalism to a whole new level of iniquity, thereby greatly intensifying the current trend among “socioeconomic refugees” to seek their own artificial happiness, not just by taking drugs, but by supporting even more intensive forms of populist neofascism than they are currently supporting. Which will also fulfill François Morin’s prediction about an enormous increase in ethnic-nationalist and religious identity projections, military confrontations and even more disastrous financial crises. And also resembling the lyrics of “That’s what you get for loving me” even more starkly than in any of the other metaphorical comparisons mentioned earlier.