A Global People’s Bailout For The Coming Crash

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When the global financial crisis resurfaces, we the people will have to fill the vacuum in political leadership. It will call for a monumental mobilisation of citizens from below, focused on a single and unifying demand for a people’s bailout across the world.


A full decade since the great crash of 2008, many progressive thinkers have recently reflected on the consequences of that fateful day when the investment bank Lehman Brothers collapsed, foreshadowing the worst international financial crisis of the post-war period. What seems obvious to everyone is that lessons have not been learnt, the financial sector is now larger and more dominant than ever, and an even greater crisis is set to happen anytime soon. But the real question is when it strikes, what are the chances of achieving a bailout for ordinary people and the planet this time?

In the aftermath of the last global financial meltdown, there was a constant stream of analysis about its proximate causes. This centred on the bursting of the US housing bubble, fuelled in large part by reckless sub-prime lending and an under-regulated shadow banking system. Media commentaries fixated on the implosion of collateralised debt obligations, credit default swaps and other financial innovations—all evidence of the speculative greed and lax government oversight which led to the housing and credit booms.

The term ‘financialisation’ has become a buzzword to explain the factors which precipitated these events, referring to the vastly expanded role of financial markets in the operation of domestic and global economies. It is not only about the growth of big banks and hedge funds, but the radical transformation of our entire society that has taken place as a result of the increasing dominance of the financial sector with its short-termist, profitmaking logic.

The origins of the crisis are rooted in the early 1970s, when the US government decided to end the fixed convertibility of dollars into gold, formally ending the Bretton Woods monetary system. It marked the beginning of a new regime of floating exchange rates, free trade in goods and the free movement of capital across borders. The sweeping reforms brought in under the Thatcher and Reagan governments accelerated a wave of deregulation and privatisation, with minimum protective barriers against the ‘self-regulating market’.

The agenda was pushed aggressively by most national governments in the Global North, while being imposed on many Southern countries through the International Monetary Fund and World Bank’s infamous ‘structural adjustment programmes’. A legion of books have examined the disastrous consequences of this market-led approach to monetary and fiscal policy, derisorily labelled the neoliberal Washington Consensus. As governments increasingly focused on maintaining low inflation and removing regulations on capital and corporations, the world of finance boomed—and the foundations were laid for a dramatic dénouement in 2008.

Missed opportunities

What’s extraordinary to recall about the immediate aftermath of the great crash is the temporary reversal of those policies that had dominated the previous two decades. At the G20 summit in April 2009 hosted by British Prime Minister Gordon Brown, heads of state envisaged a return to Keynesian macroeconomic prescriptions, including a large-scale fiscal stimulus in both developed and developing countries. It appeared that the Washington Consensus had suddenly lost all legitimacy. The liberalised global financial system had clearly failed to provide for a net transfer of resources to the developing world, or prevent instability and recurrent crisis without effective state regulation and democratic public oversight.

Many civil society organisations saw the moment to call for fundamental reform of the Bretton Woods institutions, as well as a complete rethink of the role of the state in the economy. There was even talk of negotiating a new Bretton Woods agreement that re-regulates international capital flows, and supports policy diversity and multilateralism as a core principle (in direct contrast to the IMF’s discredited  approach).

The United Nations played a staunch role in upholding such demands, particularly through a commission set up by the then-President of the UN General Assembly, Miguel d’Escoto Brockmann. Led by Nobel laureate Joseph Stiglitz, the ‘UN Conference on the World Financial and Economic Crisis and its Impact on Development’ proposed a number of sensible measures to protect the least privileged citizens from the effects of the crisis, while giving developing countries greater influence in reforming the global economy.

Around the same time, the UN Secretary-General endorsed a Global Green New Deal that could stimulate an economic recovery, combat poverty and avert dangerous climate change simultaneously. It envisioned a massive programme of direct public investments and other internationally-coordinated interventions, arguing that the time had come to transform the global economy for the greater benefit of people everywhere, including the millions living in poverty in developing and emerging industrial economies.

This wasn’t the first time that nations were called upon to enact a full-scale reordering of global priorities in response to financial turmoil. At the onset of the ‘third world’ debt crisis in 1980, an Independent Commission on International Development Issues convened by the former West German Chancellor, Willy Brandt, also proposed far-reaching emergency measures to reform the global economic system and effectively bail out the world’s poor.

Yet the Brandt Commission proposals were widely ignored by Western governments at the time, which marked the rise of the neoliberal counterrevolution in macroeconomic policy—and all the conditions that led to financial breakdown three decades later. Then once again, governments responded in precisely the opposite direction for bringing about a sustainable economic recovery based on principles of equity, justice, sharing and human rights.

A world falling apart

We are all familiar with the course of action taken from 2008-9: colossal bank bailouts enacted (without public consultation) that favoured creditors, not debtors, despite using taxpayer money. Quantitative easing (QE) programmes that have pumped trillions of dollars into the global financial system, unleashing a fresh wave of speculative investment and further widening income and wealth gaps. And the perceived blame for the crisis deflected towards excessive public spending, leading to fiscal austerity measures being rolled out across most countries—a ‘decade of adjustment’ that is projected to affect nearly 80 percent of the global population by 2020.

To be sure, the ensuing policy responses across Europe were often compared to structural adjustment programmes imposed on developing countries in the 1980s and 1990s, when repayments to creditors of commercial banks similarly took precedence over measures to ensure social and economic recovery. The same pattern has repeated in every crisis-hit region, where the poorest in society pay the price through extreme austerity and the privatisation of public assets and services, despite being the least to blame for causing the crisis in the first place.

After ten years of these policies a new billionaire is created every second day, banks are still paying out billions of dollars in bonuses each year, and the top 1% of the world population are far wealthier than before the crisis happened. At the same time, global income inequality has returned to 1820 levels, and indicators suggest progress is now reversing on the prevention of extreme poverty and multiple forms of malnutrition.

Indeed the United Nations continues to face the worst humanitarian situation since the second world war, in large part due to conflict-driven crises that are rooted in the economic fallout of the 2008 crash—most dramatically in Syria, Libya, and Yemen. Countries of both the Global North and South remain in the grip of a record upsurge of forced human displacement, to which governments are predictably failing to respond to in the direction of cooperative burden sharing through agreements and institutions at the international level.

Not to mention the rise of fascism and divisive populism that is escalating in almost every society, often as a misguided response to pervasive inequality and a widespread sense of unfairness among ordinary workers. It is surely reasonable to suggest that all these trends would not be deteriorating if the community of nations had seized the opportunity a decade ago, and acted in accordance with calls for a just transition to a more equitable world order.

The worst is yet to come

We now live in a strange era of political limbo. Neoclassical economics may have failed to predict the great crash or provide answers for a sustained recovery, yet it still retains its hold on conventional academic thought. Neoliberalism may also be discredited as the dominant political and economic paradigm, yet mainstream institutions like the IMF and OECD still embrace the fundamentals of free market orthodoxy and countenance no meaningful alternative. Consequently, the new regulatory initiatives agreed at the global level are largely voluntary and inadequate, and governments have done little to counter the power of oligopolistic banks or prevent reckless speculative behaviour.

Banks may be relatively safer and possess a bigger crisis toolkit, but the risk has moved to the largely unregulated shadow banking system which has massively increased in size, growing from $28 trillion in 2010 to $45 trillion in 2018. Even major banks like JP Morgan are forewarning an imminent crisis, which may be caused by a digital ‘flash crash’ in which high frequency investments (measuring trades in millionths of a second) lead to a sudden downfall of global stock markets.

Another probable cause is the precipitous rise in global debt, which has soared from $142 to $250 trillion since 2008, three times the combined income of every nation. Global markets are running on easy money and credit, leading to a debt build-up which economists from across the political spectrum agree cannot last indefinitely without catastrophic results. The problem is most acute in emerging and developing economies, where short-term capital flowed in response to low interest rates and QE policies in the West. As the US and other rich countries begin to steadily raise interest rates again, there is a risk of a mass exodus of capital from emerging markets that could trigger a renewed debt crisis in the world’s poorest countries.

Of most concern is China, however, whose credit-fuelled expansion in the post-crash years has led to massive over-investment and national debt. With an overheating real-estate sector, volatile stock market and uncontrolled shadow banking system, it is a prime candidate to be the site for the next financial implosion.

However it originates, all the evidence suggests that an economic collapse could be far worse this time around. The ‘too-big-to-fail’ problem remains critical, with the biggest US banks owning more deposits, assets and cash than ever before. And with interest rates at historic lows for many G-10 central banks while the QE taps are still turned on, both developed and developing countries have less policy and fiscal space to respond to another shock.

Above all, China and the US are not in a position to take the same decisive central bank action that helped avert a world depression in 2008. And then there all the contemporary political factors that mitigate against a coordinated international response—the retreat from multilateralism, the disintegration of established geopolitical structures and relationships, the fragmentation and polarisation of political systems throughout the world.

After two years of a US presidency that recklessly scraps global agreements and instigates trade wars, it is hard to imagine a repeat of the G20 gathering in 2009 when assembled leaders pledged never to go down the road of protectionist tariff policies again, fearing a return to the dire economic conditions that led to a world war in the 1930s. The domestic policies of the Trump administration are also especially perturbing, considering its current push for greater deregulation of the financial sector—rolling back the Dodd-Frank and consumer protection acts, increasing the speed of the revolving door between Wall Street and Washington, D.C., and more.

Mobilising from below

None of this should be a reason to despair or lose hope. The great crash has opened up a new awareness and energy for a better society that brings finance under popular control, as a servant to the public and no longer its master. Many different movements and campaigns have sprung up in the post-crash years that focus on addressing the problems wrought by financialisation, which more and more people realise is the underlying source of most of the world’s interlinking crises. All of these developments are hugely important, although the true test of this rising political consciousness will come when the next crash happens.

After the worldwide bank bailouts of 2008-9—estimated in excess of $29 trillion by the US Federal Reserve alone—it is no longer possible to argue that governments cannot afford to provide for the basic necessities of everyone. Just a fraction of that sum would be enough to end income poverty for the 10% of the global population who live on less than $1.90 a day. Not to mention the trillions of dollars, euros, pounds and yen that have been directly pumped into financial markets by central banks of the major developed economies, constituting a regressive form of distribution in favour of the already wealthy that could have been converted into some form of ‘quantitative easing for the people’.

A reversal of government priorities on this scale is clearly not going to be led by the political class. They have already missed the opportunity, and are largely beholden to vested interests that are unduly concerned with short-term profit maximisation, not the rebuilding of the public realm or the universal provision of essential goods and services. The great crash and its aftermath was a global phenomenon that called for a cooperative global response, yet the necessary vision from within the ranks of our governments was woefully lacking. If the financial crisis resurfaces in a different and severer manifestation, we the people will have to fill the vacuum in political leadership. It will call for a monumental mobilisation of citizens from below, focused on a single and unifying demand for a people’s bailout across the world.

Much inspiration can be drawn from the popular uprisings throughout 2011 and 2012, although the Arab Spring and Occupy movements were unable to sustain the momentum for change without a clear agenda that is truly international in scope, and attentive to the needs of the world’s majority poor. That is why we should coalesce our voices around Article 25 of the Universal Declaration of Human Rights, which proclaims the right of everyone to the minimal requirements for a dignified life—adequate food, housing, medical care, access to social services and financial security.

Through ceaseless demonstrations in all countries that continue day and night, a united call for implementing Article 25 worldwide may finally impel governments to cooperate at the highest level, and rewrite the rules of the international economic system on the basis of shared mutual interests. In the wake of a breakdown of the entire international financial and economic order, such a grassroots mobilisation of numberless people may be the last chance we have of resurrecting long-forgotten proposals in the UN archives, as notably embodied in the aforementioned Brandt Report or Stiglitz Commission.

The case of Iceland is widely remembered as an example of how a people’s bailout can be achieved, following the ‘Pots and Pans Revolution’ that swept the country in 2009—the largest protests in the country’s history to date. As a result of the public’s demands, a new coalition government was able to buck all trends by avoiding austerity measures, actively intervening in capital markets and strengthening social programs for the less privileged. The results were remarkable for Iceland’s economic recovery, which was achieved without forcing society as a whole to pay for the blunders of corrupt banks. Yet it still wasn’t enough to prevent the old establishment political parties from eventually returning to power, and resuming their support for the same neoliberal policies that generated the crisis.

So what must happen if another systemic banking collapse occurs of even greater magnitude, not only in Iceland but in every country of the world? That is the moment when we’ll need a global Pots and Pans Revolution that is replicated by citizens of all nationalities and political persuasions, on and on until the entire planet is engulfed in a wave of peaceful demonstrations with a common cause. It will require a huge resurgence of the goodwill and staying power that once animated Occupy encampments, although this time focused on a more inclusive and universal demand for implementing Article 25 and sharing the world’s resources.

It may seem far-fetched to presume such an unprecedented awakening of a disillusioned populace, as if we can expect a visionary leader of Christ-like stature to point out the path towards resurrecting the UN’s founding ideals of “better standards of life for everyone in the world”. However nothing less may suffice in this age of economic chaos and confusion, so let us all be prepared for the climactic events about to take place.

  • tibetan cowboy

    No more Bail Out next time the collapse happens, next year. New Draconian laws just passed by the Senate Banking Committee, which is owned by the banks of course, now allow banks to confiscate all of our money in their banks upon the Great Depression of 2019 happening. This is termed a “Bail In” by the banks and senate. The banks know that another bail out, like Obama’s, is likely to start the revolution, and it would. So they have re-written the laws to allow them to take all of our money next time directly (likely to also start the civil war – I hope), instead of not passing GO and taking our money directly from Obama, still our money for the 2008 bail out, but more disguised and hidden from us. Here is the article. I talked to my local bank about this already:

    http://www.informationclearinghouse.info/50006.htm.

  • chetdude

    MOVE YOUR MONEY…

    To a Credit Union!

    If enough people moved their money out of the TBTF banks into Credit Unions, the Unions would get stronger and the TBTF banks would fold…

  • mwildfire

    I wonder. How much do they depend on ordinary depositors, and how much on corporations and pension funds and such, controlled by the elite?

  • mwildfire

    This piece, like so many talking about the US’s wars, has a problem with tone. There is an implicit assumption that the “deciders” to use W’s appropriate word, are stupid or blind and keep engaging in war because they “haven’t learned the lessons” and are on track to crash the world economy again because they are true believers in neoliberalism. More believable to me is that the wars have been a raging success in achieving their true objectives, and crashing the economy worked out very well for the elite, so why would they fear doing it again? As long as they have all the power–and they have been busy putting laws in place that allow them to suspend the Bill of Rights, for example, and using their critically important media wing to bring large minorities in many countries into a fascist mindset which can be used to fight uprisings, particularly given the typical mindset of police/private guards/soldiers, who are MUCH more likely to approve of racist and fascist actions than the public in general–they are going into this with their eyes open and their plans in place. I suspect a lot of it is about their awareness of climate and other environmental crises–there are two ways out. One is an extreme form of cooperation and the end of wealth and war, to allow us to muddle through the century without megadeaths. They will find such a prospect unacceptable and uninviting. The other involves chopping the human population soon, so that the remnant can continue to live more or less “modern” lives on the dwindling natural resources (including sinks).I think the elite–those of them who think of these things–have probably calculated how many other people they need to maintain a functioning economy, to provide artists and engineers and musicians and comedians and farmers, and now they’;re trying to figure out how to get rid of the rest of us, preferably without actively slaughtering us, and without risking the remnant of us they want to save much less risking even one of their own gold-plated asses.

  • Steven Berge

    Yes! As soon as I moved back to the u.s. and no longer needed the international banks, I went with much more local banks and a credit union. If people voted with their wallets, the world could be a much better place. I am boycotting many bad acting corporations. Let’s hit them where it hurts them the most, in their pocketbooks.

  • TecumsehUnfaced

    At the very least it would delay their seizing of your money, while they conjure up new laws with their bought legislators to give the TBTF banks control of the Credit Unions.

  • TecumsehUnfaced

    That’s why those accounts should be required to be placed in public banks, like in North Dakota. Will we have to threaten lynching of the legislators to get them to do that?

  • chetdude

    Good points…

  • mwildfire

    Yeah. And then the FBI will arrest us.

  • mwildfire

    There are no credit unions where I live, in rural WV. On the other hand, I hardly go into WalMart because I grow half my own food, trade for some more, and the other grocery store tries to supply what you want. There is still a little, old, non-chain hardware store with wooden floors and attentive clerks, and an auto supply place similar, with barstools up to the counter and other customers or clerks will opine about what you need, as well as the person waiting on you.

  • TecumsehUnfaced

    Why don’t you suggest another way to get the legislators to do the right thing?

  • mwildfire

    Thanks. I needed a laugh.

  • TecumsehUnfaced

    You’re welcome! That was whole point of the lynching idea.

  • marcia leister

    Implement Article 25!! I hear the other voices in these comments and agree with the level of corruption that is firmly entrenched at all levels in our world today with the power and resources that could just about nullify any attempts at positive, common sense and academic research based solutions/policies. But I myself am thinking of how to get the word out and to get people involved in social justice activism at the foundational levels where all the other symptomatic problems we face in the world today are originating from—THE FUCKING MONEY $$$$$$$—-And actually, this is the foundation of the bloodshed, treachery, monumental suffering, violence, corruption, obscene wealth accumulation on the backs of the poor and disenfranchised and on the back of creation in general—the destruction of creation to the point of our own annihilation and climate collapse. It is known through history by many names and currently goes by the term Neoliberalism/capitalism. I have been reading deep theology and have become an acolyte of the Hebrew Testament scholar, Walter Brueggermann. He calls it Empire and describes it as a driving force throughout all of history from ancient to present. Wealth and impoverishment of those not in the elite ‘system’/’class’ and the prevalence of violence and military buildup to protect the wealth of these elite groups. But the most devastating effect of Empire is its take over of our entire consciousness and the way we become our own ‘jailors’ in this system, we say there is nothing we can do about it, its always been this way, etc. It keeps us from even being able to imagine a better life for ourselves and all of creation or for that matter to even be able to imagine anything except what Empire feeds us and our imprisoned consciousness allows to enter in. So, I am going to encourage, everywhere I go—my social justice groups, my mission justice board/just peace committee at FCCB, my UCC church in Bellingham, WA, letter/emails to friends and families and professionals, academics, journalists, you name it, all of my communications—calling out this simple phrase: The Call For Article 25 NOW!!!!! Through ceaseless demonstrations in all countries that continue day and night, a united call for implementing Article 25 worldwide may finally impel governments to cooperate at the highest level, and rewrite the rules of the international economic system on the basis of shared mutual interests. In the wake of a breakdown of the entire international financial and economic order, such a grassroots mobilisation of numberless people may be the last chance we have of resurrecting long-forgotten proposals in the UN archives, as notably embodied in the aforementioned Brandt Report or Stiglitz Commission.

  • marcia leister

    I surely hear you—–whenever I hear the absurd bullshit of the ‘liberal’, ‘progressive’, ‘lefty’ lines like you share here about having not learned their lessons on war, or lessons on the economy or whatever—indeed, they have learned their lessons well and have found out, thanks to the imprisonment of our consciousness to Empire and its hypnotic powers that control it that keep most of us blind and/or paralyzed, that war/violence/ crises pay big bucks to the right ‘people’, that the
    Empire never loses but only accumulates, no matter the devastating event that ruins the rest of us, I mean if you can can sell toxic stock and make money off of others misfortune—-then you are untouchable and to understand anything, as my Occupy activist friends always say, just FOLLOW THE MONEY!!!!! Lots of money was made after 9-11, profits skyrocketed for some industries and now with the financial meltdowns and these entities that were bailed out with ‘my’ money are making more money than ever before and I didn’t get paid back anything during that time when I was told to tighten my belt and think of ways to cut costs at the Technical College where I worked which were cut!!!—— by cutting my work hours and benefits! Remember—-Article 25, say it loud and say it proud!!!–well, that’s what I’m going to try for awhile now anyway and pray for a Poor People’s Campaign uprising!!!!