Why the United States is Not a Bank-Owned State
How Al Jazeera’s Resident Economist Samah El-Shahat Has Got it Wrong
Jun 12, 2009
In the first article (5/06/2009) of her weekly column for the Qatar-based Al Jazeera media network, Samah El-Shahat draws on her experiences as a development economist in various ‘emerging economy’ countries. She points out that many development projects fail because they "went against the existing power structure in a village or industrial cluster". Those in power went out of their way to stop a project or "to make sure it benefited only them".
Claims that the Bank Bailout is a Public Swindle
El-Shahat then goes on to extrapolate from this, claiming that the situation in the United States is now very similar. "The more I look at the banking fiasco in the US, the more I see elements of an 'emerging economy' . . ." style of behaviour, in that "The bankers are manipulating the bailout to their advantage", and that the bank bailout "is a public swindle of astonishing proportions".
Claims that the United State Economy Has Been Captured by Bankers
In her second article (12/06/2009), ‘Why America is a Bank-Owned State’, under the sub-heading ‘Kept in the Dark’, she quotes from Robert Hunter Wade, professor of political economy at the prestigious London School of Economics, to make these points:
- 1% of American households have 25% of the country’s disposable income.
- Average workers’ earnings have been stagnating since 1980, while in 2007, ‘captains of industry’ earned 75 times more than the average worker, against only 17 times more in 1989.
- "90% of the American economy (sic) were financing their American dream on debt" while wages stagnated.
In fact none of this was kept secret, and surely many ordinary citizens must have been aware themselves that they heading for serious debt, yet did not act.
Why the US Bank Bailout was Necessary for Economic Recovery
About US$700 billion was spent to save the banks from the situation they got themselves into. But it is quite incorrect to say that this was done for the sake of the banks or the bankers themselves. It was done for the US (and world) economy. If the banks had collapsed America would be back in the state it was in during the 1930’s, when unemployment reached 25%, and the next group to suffer would have been the world’s poorest people.
After the Bailout - What El-Shahat Ignores
- It was the US government not bailing out Lehman Brothers that precipitated the crisis in the first place.
- When the economy recovers, and there are early signs that this is beginning to happen, the banks will pay back the money.
- In Sweden during the early 1990’s financial crisis, the government nationalised the banks, then privatised them again when the recovery came and the money was repaid.
- In the UK this is happening now, in the case of Lloyds Banking Group.
- On 9/06/2009, Aljazeera.net itself ran a feature entitled "US banks to repay bailout funds" and named 4 US banks thought healthy enough to start repayments to the tune of US$68 billion.
So America is not a bank-owned state behaving like some developing state kleptocracy, whatever its enemies say. It is a state that acted quickly enough to prevent the kind of banking collapse that happened in the 1930’s. Consequently, a potentially ruinous depression has been avoided, and the recovery will enable the banks to start paying back the money it owes to the government, thus relieving the tax payers’ burden.
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