I'm angry. And when I'm angry I sometimes struggle to express myself, in writing, moderately and temperately and coherently. That Spain should choose to bankrupt itself bailing out banks that are too large for the state to afford, that it should do so having seen the example of Ireland before it, and that it should cross the Rubicon to doing so because it would be politically embarrassing for the ruling party to allow Bankia to fail because Bankia's establishment in 2010 was the pet project of the ruling party's regional governors is…shameful.
The concept of private property seems to have become devoid of meaning. Somehow if a rich person is going to lose money because she lent money to the wrong bank – either in the form of large deposits or the bonds bought by her pension fund, or whatever – it's become unthinkable that she should lose any of it. It isn't simply her money to lose – her business; her private property. Somehow it is a common political duty of the whole country – maybe the whole developed world – to keep her rich. Her property is ours. "Su casa es mi casa."
I don't get it. I just don't get it any more. At the start I thought policymakers were honestly terrified by the spectre of the events of the 1930s and had become seduced by some fancy story that they could avoid those events by this or that trick from someone's (probably Ben Bernanke's) PhD thesis. I thought they were wrong. I thought what they were doing was immoral – and obviously immoral. I thought they were destroying private capitalism, and said so loudly and at every opportunity. But at least at the start I thought they believed that what they were doing wasn't simply a matter of taxing the poor to keep the rich rich (even though, in truth, that's exactly what it always was).
But five years in, I can't believe that any more. They can't seriously believe that the policy is working. And they can't really believe that the problem is that we just haven't done it quite enough – as if if there'd only been rather more bailouts rather earlier, everything would have been better. As if the problem in Spain, Portugal, Greece etc has just been that they stubbornly refused to bail out their banks enough. Some of us thought that providing a few trillion to the banks might have been rather more than was justified. But no! It appears we were wrong.
They can't really believe that. And it isn't that they don't know what to do instead. The right policies – debt-equity swaps; depositor preference; deposit access funds ("resolution funds") - have now become the official policy for "next time" (some time after 2018, apparently, according to the European Commission's paper published yesterday).
The closest I can get to an explanation is that they have been suckered into one of those desperate pool games where you keep losing to a hustler but double your money every time in the hope that eventually the other player will lose by accidentally potting the black off the break. They think that if they keep ploughing in more and more money then eventually they will get lucky. If that's what they think, they might be right. In these sort of situations one can't definitively say of such a strategy that it will fail in its own twisted terms. But will their populations keep the faith long enough to keep doubling the bet until the lucky break comes?
Why should they? Why should ordinary people subject themselves to the risk of national bankruptcy, international humiliation, and generations of indebtedness in a wild gamble to try to keep some rich people rich? Somehow the tale goes that if those rich people don't stay rich then the rest of society will suffer – a kind of reverse trickle-down effect. Everyone else is suppose to believe that the world couldn't continue if those rich people lost some (we're probably talking about of the order of 20 per cent) of their money.
Somehow this lie – and it is a lie – has been sustained now for five years, whilst economies collapsed. Somehow a tale has been perpetuated that if bank creditors had ever been allowed to lose their money, things would have been much worse. Really? Remind me again: which was that terrible depression we avoided by bailing out the banks and then bailing out the banks and then bailing out the banks and then bailing out the banks? I'm not convinced the folk of Ireland or Greece have any idea which depression they avoided. In Britain we have had, in GDP loss terms, a much worse depression than the 1930s (though not as bad as the 1920s, yet), including the single worst year of contraction (2009) since 1921. And things may well get much worse here yet.
It is this kind of behaviour by governments that creates justified revolutions. People will put up with losing their money, losing their jobs, becoming poor, if they feel that their doing so was a consequence of bad luck or bad judgement. But if you impoverish folk in order to keep the foolish or unlucky rich rich, despite their folly and errors, you will create lasting hatred – and rightly so – and may provoke justified violence.
Astonishingly, the British government policy is to encourage more and more of this same wickedness abroad, despite eschewing it at home. Her Majesty's government (mercifully!) insists that it will not bail out British banks if they get into further distress (a resolution that may soon be tested if recent reports are correct that UK banks have £40bn in further undeclared losses). But at the same time it chastises the government of Germany for being reluctant to bail out all the banks of Europe, either through Eurobonds or a "banking union". Does the naked inconsistency of this policy not stick in their craw? If the British and Americans are so eager that someone else pay the debts of Italy, Spain and others, why don't they volunteer their own taxpayers to do it? I'll enjoy listening to Obama on TV explaining to the good folk of the Appalachians why they ought to pay higher taxes to guarantee Italian debts. And once he's had a go at selling that, maybe he'll think again about how "unreasonable" or "incomprehensible" is Angela Merkel's reluctance to tell her taxpayers they have to do it.
A key form of social mobility, in a capitalist system, is that sometimes the rich become poorer. It isn't all one way. Just because you or your parents or grandparents accumulated some money, you aren't automatically entitled to keep it and to call on the instruments of the state to ensure that you do. How has the Western political system forgotten this?
This situation is not simply a policy failure. A policy failure could not be sustained for so long when the failure was so obvious. This situation reflects a rottenness deep in the heart of our whole political culture. It is a failure of the Western democratic and constitutional order. When these matters are finally resolved, it will not simply be a matter of banking regulation looking different. The politico-constitutional map of the Western world will be transformed, and in Western political models either the place of democracy or the place of private property will be significantly diminished. Democracy with a universal franchise appears not to coexist comfortably with private property. In a number of countries, one of them will have to give.