The Socialist 21 February 2008 |
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The Socialist Editorial
Northern Rock - Labour's reluctant nationalisation
The nationalisation of Northern Rock was met with howls of outrage from some of its shareholders, who screamed about 'theft' and 'immorality'. This was a major blow against the concept of an unfettered market-driven economy and a small foretaste of further blows that workers will inflict on it in the future.
"At last we're enacting the 1983 manifesto" and "one down, 249 to go" joked Labour MPs, in the latter case referring to Militant's call in the Labour Party in the past for the nationalisation of the top 250 monopolies. Unfortunately there is no chance of that programme being carried out by this government; it will take the building of a new workers' party to again champion such measures.
The bank's nationalisation was also a humiliating retreat for the government, after it had shamefully spent five months desperately trying to avoid the one measure that would offer some way out.
Selling the bank to either of the two final bidders, the Virgin Group and Northern Rock's own management team, could have led to huge shareholders' profits and little reimbursement of the massive public funding put in. This funding included a direct loan of £25 billion and guarantees of over £30 billion of savers' deposits. The press shrieked that total exposure to the public finances could be as much as £100 billion, but this would only be the cost if all of the bank's mortgage loans failed to be repaid.
Chancellor Alistair Darling and prime minister Gordon Brown have been seriously wounded, with this episode coming on top of other dithers. It will be workers though who pay the biggest price, including through the possible future return of a ferocious Tory government as a result of the self-discrediting of New Labour.
Much of the capitalist media, including the Financial Times and the Economist called for nationalisation of Northern Rock as the best strategy. However, they now also warn that it should not be allowed to develop as a nationalised company to the detriment of the private sector. Martin Wolf, the associate editor of the Financial Times, complained that under public ownership, Northern Rock is now able to "expand its loan book, by offering generous terms to future borrowers".
The Socialist has always argued for publicly owned banks that could offer cheap credit to ordinary people and struggling small businesses. However, Martin Wolf, on behalf of the top financiers who fear "unfair competition", decried such a course of action as a 'big danger' that would "distort" the mortgage industry. In other words, it would reveal the parasitic, capitalist-serving nature of the banks, so helping to threaten their very existence and leading to more questioning of the capitalist system itself.
Instead, big business wants Northern Rock's loan book to be deliberately run down, to ensure that the nationalised bank cannot be too successful or popular. In this vein, Wolf bemoaned the fact that Alistair Darling wants to run the Rock as a 'commercial' operation, and pointed out the contradiction between being commercial and being state owned. There is indeed a contradiction and there should be, as being 'commercial' is largely about exploitation, competition and profit, whereas being publicly owned should be about serving public interest - with the public being the majority of people in society and not the super-rich minority!
Fear of European Union pro-market legal intervention is being whipped up, but EU treaties are just scraps of paper when vital class interests are at stake. The bosses can simply ignore them, and through struggles, working class people in Britain and throughout Europe can place their own limits on them, and also to some extent through the ballot box as the voters of Holland and France did in 2005 when they rejected the European constitution.
However, the top financiers need not worry too much about the government's intentions, as it plans to deliberately limit the services and help that Northern Rock could provide to ordinary people.
Ron Sandler, appointed the new Rock chairman on an incredible £90,000 a month, said he "will require returning the bank to a more sustainable size". This means branch closures and job losses - of possibly half the bank's 6,500 workers. In addition, funding for the Northern Rock Foundation, a north east charity that finances employment and youth projects, is being halved and only promised for three years.
With these actions, far from being a socialist or democratic form of nationalisation, the government can use it to deliberately discredit nationalisation.
Reflecting the misery these policies will cause, instead of welcoming nationalisation, the TUC's northern region secretary voiced unease over the rejection of the private sector bids. But allowing private sector fat cats to fleece the bank was no solution for the workers dependent on it. The Socialist has always demanded nationalisation, but on the basis of safeguarding all jobs as well as giving favourable deals to ordinary depositors and mortgage holders. And it should be permanent, not the temporary nationalisation called for by the capitalist representatives who advocate it.
Also, the government is handing over the calculation of shareholder compensation to an arbitrator, with the result expected to be virtually no compensation given. Despite their howls of protest, even the Financial Times's Philip Stevens commented that shareholders "should see any compensation as a bonus". Super-rich shareholders such as the owners of the hedge funds SRM Global and RAB Capital should rightly receive nothing. However, The Socialist has always demanded compensation for genuine small-scale shareholders who depend on the dividends and their relatively modest savings tied up in the bank's shares. The 180,000 small shareholders own just 20% of the total stock.
That the government can suddenly choose to enact emergency legislation to nationalise a major company (and has given itself the power to do this to any financial institution needing state help during the next 12 months) shows how fast it can nationalise. And this is the biggest nationalisation in financial terms in British history.
There have been disguised nationalisations in the not far distant past, such as that of Railtrack in 2002, but it is necessary to look back to the 1970s, when Rolls Royce, British Leyland and the aircraft and ship building industries were nationalised, for similarly overt examples.
New Labour is desperate to avoid being associated with the policies of that period, and a Financial Times editorial came to their aid when it said: "anybody who suggests that the Labour government has gone back to 1970s socialism deserves ridicule".
Working class people will certainly see no evidence of an iota of socialist policy, but observation of the Rock nationalisation will increase consciousness on the potential benefits of public ownership. When factory closures are threatened, workers will say that if public ownership can be used to save a bank, why not their companies? Also, any idea that Gordon Brown's government can overcome capitalist crises in the economy has been hugely dented, and will help raise the urgent need for a workers' political alternative.