Alan Kohler, the editor in chief of Business Spectator and the finance presenter on the ABC News, was blunt about who was to blame for the Europe debt crisis in his November 2 opinion piece on the ABC's The Drum.
He said: “The debt crisis in Europe is the fault of bankers, yet the people are the ones who pay.
“Greek PM George Papandreou’s apparently impulsive decision to put the bailout and austerity plan to a referendum merely highlights that tension between the public and bankers, and brings it to a head.
“The bankers, horrified at the thought of facing the wrath of those whom they have plundered, will make sure it never gets to that by exerting the power of financial markets to head it off. And if we have learned one thing over the past three years it is that financial markets are more powerful than governments.
“So after Papandreou announced his referendum plan, share prices slumped, bond yields soared and Eurozone politicians rushed into emergency meetings to try to save the rescue plan and continue to appease the financial markets.”
The referendum was called off.
Kohler went on to say banks need to “go back to basics” and bank owners and managers need to accept more risk for losses.
In the first half of the 19th century, when banking still existed in its original form, the capital put in by the owners of banks usually matched the amount of deposits. And bankers faced unlimited liability. They could, as in the Monopoly board game, “go straight to jail” for unpaid debts.
But in the 20th century, capitalist governments around the world limited the liability of bank owners, and shareholders encouraged bank managers to take bigger risks with the backing of less assets.
Kohler cited a recent speech by Bank of England director Andrew Haldane, who noted that if bank managers were rewarded according to the rate of return on the total assets they manage, rather than rising to 500 times median US household income, their pay would have fallen to just 68 times the median income.
Kohler ended with a plea to governments to “get on with radically reforming the way banks operate and bankers are rewarded, and they should not waste time discussing it with banks”.
But Kohler began his opinion piece by saying financial markets had become more powerful than governments. So where is this plea going?
The image of bankers and other corporate plunderers going to jail appeals, but we need a radical extension of democracy to get over this problem of who has the power. And to get there, we have to build a mighty people’s power movement.
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