Reactions to Northern Rock nationalisation, rounded up

One minor problem with my last post. Or rather, the title of it. I should of made reference to the railways rather than the energy companies, since there’s something of a consensus on the former.

Anyhow, here’s the official reactions to the official nationalisation that I have unofficially compiled:

David Osler betrays his roots as a subversive:

Finally Alistair Darling has gotten the message. The erstwhile bearded Trot himself has brought the UK’s number five mortgage lender within the ambit of proletarian property relations. Only another 199 of the top 200 monopolies to go and Britain becomes a workers’ state, comrade. Shame the government didn’t see things the same way when Rover was going tits up. But in the financial services-driven British economy of today, grubby little manufacturing concerns seem somehow not to count. What this episode proves is that nationalisation really is no worse than, say, bestiality, ebola, paedophilia, diabolism or any given combination thereof, and could at least be seriously discussed in other contexts.

David Lindsay reminds us of historical instances of public ownership:

Nationalisation is not a party point. Labour and the Tories have both done it repeatedly, and it is the Tories whose record in this regard is more uniformly successful. Admittedly, they have used the device much less frequently. But their nationalisation of electricity was a great success, and their nationalisation of Rolls Royce was a triumph in the long term.

However, if the money can now be found to nationalise Northern Rock, then it should be found to renationalise the railways (which only make a profit at all because of guaranteed public subsidies – give that a moment to sink in) and the rip-off utilities.

Lenin (not the “late, great…” but the “living, great…”) hints at the company he keeps:

A friend of mine who works in the City and is knowledgeable about the laws, regulations and internal procedures of investment banking said to me the other day: “Investors are the most pampered people in the world. There are so many laws and regulations designed to protect their rights, it’s unbelievable.” Laws designed to protect the property rights of the owners. Who would have imagined such a state of affairs? Well, today investors are predictably furious about the temporary nationalisation of Northern Rock. If a neoliberal government like ours undertakes a nationalisation, you know it’s serious. But the owners aren’t happy. Their shares, their shares! The socialistic government has stolen their money! Somehow they promise to mount a legal challenge, just as the shareholders in Railtrack did when the government allowed the company to go bankrupt rather than bailing it out with yet further billions in public money. The City is also alarmed. The government exists, as far as they are concerned, to defend their interests and as far as they are concerned that means the guarantee of private profits with public money, and private ownership with public risk. This sort of thing gives people ideas.

Nevertheless, there cannot be too much shock. Practically everyone knew that nationalisation was the only option in this case, and it was simply not plausible to continue ploughing in billions – the Bank of England has loaned the company £55bn, which is eleven times its value at its peak last year, and many more times its present value of £380m, while – while the owners floundered and frittered it all away. If anything, it would have been an obvious decision several months ago, long before a single penny of subsidy had been issued. The government has tried desperately to avoid it. And after all, the nationalisation is only a temporary measure designed as much to protect the institution and return to private capital in good condition once the economy gets back into good shape. And it will be run by highly paid individuals from the banking industry, such as Whatever the shareholders say, the rentier class will probably be quite relieved as a whole. Even Martin Wolf of the FT backs the nationalisation and gives a few reasons why the grasping bastards who have run the thing into the ground shouldn’t be given any compensation. The Tories are arguing that this decision amounts to a ‘humiliation’ for Alistair Darling, and are raising the spectre of a return to the 1970s (a much maligned and underestimated decade). On the one hand, it’s faintly embarrassing in itself that to change your mind is supposed to be a source of embarrassment, but on the other hand, Darling has sort of brought that on himself by straining so hard to avoid nationalisation. Anatole Kaletsky is predicting catastrophe on the absurd grounds that nationalisation is a form of market ‘distortion’ and anyway the government is crap at running things. Are there really people who still believe in the free market fairytales? Does he not know how his employer pays the bills? […]

We were told that privatising utilities would bring us more efficient, lower cost services. British Gas has just jacked up the prices and is making record profits, while energy companies like Npower do the same. The privatization of water has been disastrous in many places, and in the UK it has led to exorbitant costs and low maintenance. The privatised airports are uncomfortable and overcrowded because they allot most space to commercial facilities and provide little seating or other amenities. Privatization also led to increased unemployment and diminished bargaining power for labour. In each of the industries privatized by the Tories, employment fell dramatically – in steel by 75%, in railways by two thirds, and in electricity and water by about a half. Right-wing economists complain about over-employment, but the danger was always in the contrary temptation – to cut necessary staff and make the service unsound. And what is the point of having ‘competition’ in the banking industry when they all provide much the same lousy service and rip you off? Wouldn’t a publicly owned and accountable industry be better for customers? And why should we have to pay for their crisis? If a company can’t or won’t keep its business running to keep people employed, shouldn’t the government use its initiative, nationalise, defend jobs and engage in industrial conversion if necessary? Oh, Jesus no, don’t start thinking like that! Winter of discontent, remember? You don’t want to go back to the bad old days, especially not when everything is so fabulous.

Permanent Revolution, while not permanently right, isn’t wrong:

“Anybody who suggests that the Labour government has gone back to 1970s socialism deserves ridicule.”

That’s how the Financial Times greeted chancellor Alistair Darling’s decision yesterday to nationalise Northern Rock.

Like the rest of the intelligent bosses’ press the FT along with the Economist long ago advocated what the Labour Party leaders hated having to think about. […]

Of course the FT is right; this nationalisation –, like the first big one the Tories carried out in 1951 of the ailing British steel industry – has got nothing to do with socialism. Like that measure the NR move is designed to rescue capitalism from its self-inflicted wounds.

But unlike – British Steel, this nationalisation is intended purely as an intensive care measure, designed to put the patient back on its feet with a transfusion of public money. I don’t suppose the chancellor will be asking future private owners for the £90,000 a month (!) Ron Sandler will be paid to oversee the operation.

If the nationalisation was a socialist measure it would first guarantee the jobs of the NR staff and put the running of the company in their hands; they could hardly come up with a worse business plan that previous managers. It would be an opportunity to use the fact of public ownership to extend social housing schemes.

The truth is that NR’s nationalisation should be the first step in the nationalisation of the whole financial sector. The high-risk profit making imperative of the system is responsible for the current mess, something that is even encouraged by the gun-to-the-government’s-head attitude the banks have when the markets collapse.

ReeSWPect:

Now the government has had to admit that the market has failed. Twice. Once when the bank collapsed, and again when no private sector firm would come up with a decent offer to save it.

But now the danger is that New Labour’s nationalisation will just concentrate on making the bank profitable once more and then privatising it again.

But if this nationalisation is to mean more than plumping up the profits ready for re-privatisation the government should be focussing on the needs of Northern Rock’s staff, it’s borrowers and the tax payer.

Northern Rock should now be run in their interest. Firstly there should be no redundancies. Second, the government should use the weight of this massive bank, which controls 23 percent of all mortgages, to assist in a genuinely affordable housing programme.

New Labour’s private market ideology, inherited from the Tories, is now in tatters. It failed when Railtrack was effectively nationalised, it failed when tax payers paid £2 billion to failed tube privatiser Metronet, and it has now failed again with Northern Rock.

Lindsey German, Respect’s candidate for London Mayor, said: “The whole labour and progressive movement now needs to demand that New Labour change course. New Labour should stop representing the interests of the rich to the poor and start representing the needs of the poor to the rich.”

The Campaign for Public Ownership, welcomes the belated nationalisation:

For the last 29 years, British governments of both Conservative and Labour persuasion have put the interests of capital, before those of people. It’s time the pandering to banks and big business ended. If the government can bring a failing bank into public ownership, why can’t they do the same to Britain’s railways and public utilities? The vast majority of the public would like to see renationalisation back on the political agenda, yet their wishes are ignored by our political elite.

Proponents of privatisation claimed that the selling-off of Britain’s public utilities, public transport and infrastructure would improve efficiency and benefit the consumer. In fact, the opposite has occurred. Britain‘s privatised railways are the most expensive in Europe, despite receiving four times more in taxpayers subsidy than British Rail. As prices have rocketed, services have deteriorated with commuters who have paid thousands of pounds for their season tickets being forced to stand in toilets. Railways in Britain are no longer run as a public service as they are in the rest of Europe, but in order to maximise profits for shareholders.

British householders meanwhile face massive hikes in gas and electricity prices imposed by privately owned utility companies, such as Npower, which recorded profits of £377m in 2007. Yesterday, the Sunday Express revealed that British Gas, which recently imposed a 15% price hike on its customers is making £1,200-a-minute in profits. Thirty years ago, utility bills were a very minor item in the household budget, now millions of Britons are struggling to afford them.

It’s clear that while proving a bonanza for the banks and wealthy shareholders, privatisation has been a disaster for the majority of the British public.

Northern Rock’s nationalisation should not be a ’one-off’ temporary measure but the start of a new programme of public ownership.

The Morning Star says it’s been A mucky business:

THE whole Northern Rock fiasco has been a mucky business from beginning to end.

What was, a year ago, the darling of the Stock Exchange, with shares priced at over 1226p each, is now a crisis-ridden mess with shares priced at under 90p.

Despite all of the hot air pumped out by the money-men in the stock market, this fiasco is solely and exclusively the responsibility of greedy, profit-fixated speculators prepared to take any risk for a fast buck. And, boy, have they come unstuck.

Chancellor Alistair Darling claims that he is now “nationalising” the bank because that is the only way that the taxpayers’ money, which he so freely used to underwrite the failing enterprise, can be safeguarded.

But those of us who hold nationalisation dear, as a step towards the elimination of speculation and predatory capitalism, must step carefully here.

What Mr Darling calls nationalisation holds about the same relationship to the real deal as a farmyard chicken does to a golden eagle.

Bear in mind our treacherous Prime Minister’s description of the Chancellor’s brand of nationalisation. “We want,” he said, “a successful company that we can pass onto the private sector at the earliest opportunity.”

He insisted that the problems in the US sub-prime mortgage market which, he claimed, had led to the collapse of Northern Rock, could not have been foreseen.

But, despite all the talk, it was not merely the US sub-prime crisis that triggered Northern Rock’s problems. It was British banks losing their nerve and pulling the rug out from a company that had taken one gamble too many.

And it is not Mr Darling’s brand of nationalisation that will save it.

The issues that are important in this situation are the jobs of Northern Rock employees, which the unions are rightly concerned about.

And don’t forget the stability of the British economy, which will hardly be guaranteed by stripping out the problems of Northern Rock and handing it back to the same gang of speculators that screwed it up in the first place, the vultures of the City.

Putting Ron Sandler in charge of the company at over £1 million a year, with a deputy on very little less, is hardly a good sign.

It is to hoped that Mr Sandler’s reputation for toughness will mean that he can stand up to the hedge-fund profiteers who, having bought and increased their shareholdings after the share price dropped through the floor, are now the loudest in their protestations that the government is trying to rip off shareholders and demanding massive compensation for their supposed losses.

Hedge funds RAB and SRM involvement in campaigning for a fair deal for shareholders has raised eyebrows in light of the timing of their purchase, with many of their shares bought after the bank’s troubles began last autumn.

The hedge funds have, in fact, been increasing their stake in recent days and clearly hope to talk their sticky fingers into the public purse.

It will help if Mr Sandler resists both that and the temptation to cut jobs in order to slim the company’s costs.

But any real solution rests on messrs Brown and Darling resorting to real nationalisation, not the cosmetic exercise that they are contemplating.

And the chance of that happening with this new Labour gang is about the same as a farmer rearing golden eagles in a chicken run.

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2 Responses to “Reactions to Northern Rock nationalisation, rounded up”

  1. David Lindsay Says:

    Yesterday saw the demand for a fire sale of one of this country’s largest mortgage lenders from a man with no mortgage on any of his three houses, and from his sidekick who presumably divides his time among the several properties that he will inherit with a baronetcy.

    And on came Ken Clarke last night, crowing away that the EU state aid laws would do for the People’s Bank. Where DID the demented idea that the EU is a Socialist project ever come from?

  2. charliemarks Says:

    I’ve never understood the notion that is prevelant with right-wing Eurosceptics that the EU is in some way left wing or even some kind of attempt to construct the USSR in western europe.

    As Lenin said, the call for a United States of Europe was and is “a reactionary slogan, one that signifies a temporary union of the Great Powers of Europe with the aim of enhancing the oppression of colonies and of plundering the more rapidly developing countries”


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