Concern for the plight of others is normal; it is part of being human. People recognize what it means for someone else to be cold or wet, or face thirst or hunger. Accounts of what we should do as a society have a place for empathy. The over-arching political philosophies, conservatism, liberalism and socialism are built around ideas of what responsibilities citizens have (and do not have) to each other, though this does not mean it is easy to reach agreements about how to provide shelter, and sustenance to those in need.

As Ireland is finding out, there is no place in the bond market for empathy. Speculators smell out an economy that is weakening, and “go short” with Irish government bonds. The short sales drive bond prices down, and interest rates up. Eventually the high interest rates will attract people willing to forgo the risk of default, in order to pocket better rates of return than available elsewhere.

The dominant capitalist ethic is “whatever you can get away with.” Concern for oneself is enough. If I look to my own self-interest, that is the limit of my responsibility to others. When each looks to herself and himself, none need worry about anybody else. However problems are inherent to capitalism, for a start, because it does not work for everybody, and it is prone to crisis.

Financial crises have their own logic grounded in the ideology and practice of banking. An economic boom generates feelings of prosperity. Bank lenders let consumer spending gets out of hand, fueled by easy credit, low interest rates, and the boom itself. In Ireland, as in the U.S., it was housing prices that sped upwards, creating sentiments of new found wealth among home owners. Others were encouraged to buy into a rising market.

The idea that the capitalist market is self-regulating is demonstrably false. When the Irish housing bubble burst, it was the Irish and European banks that were left holding mortgages — they had themselves written — on properties that were now worth less than the outstanding principal. Meanwhile, unemployed owners could not make their mortgage payments.

Underlying any spending boom is access to decent paying work. When unemployment rises, and the economy tanks, the bank loans are revealed to be bad debts. The call goes out for a bailout, but nobody should be fooled. The money is for the banks, the Irish just get the bill.

Traditionally conservatives were no great fans of markets and competition because they upset the natural order of society. Conservative believed in thrift, and expected banks to lend savings to creditworthy borrowers. Banks provided a public service but needed strong regulation.

Liberals embraced capitalism, and (at one time) recognized that winners in the open market of competition had a responsibility to compensate losers, and were prepared to sanction welfare state policies where none did without, while all conservatives had to offer those left behind was charity.

A continual recycling of income from those with more than they need toward those who have less than they require to make ends meet, would be a boon for capitalism, but it is does not fit with the capitalist ethic of whatever you can get away with. Unable to integrate a concern for others into its operating rules, capitalism carries within itself the seeds of its self-destruction.

Social democrats wanted to equalize conditions under which people competed under capitalism. Like conservatives they favoured regulation of competition; like liberals they knew equality required income distribution (and strong universal public education). Social democrats believed the capitalist beast could be tamed. But without widespread public ownership; a flourishing co-operative, and worker self-management culture; strong non-governmental organizations; and well funded public services, the social democratic alternative is unable to resist the forces of financial capitalism.

The lesson of the Irish crisis, like those in Iceland, Greece, and the U.S. is that banking is too important to be left to the bankers. Banking — the process of lending to those providing for needs and offering services, and accepting deposits from those with idle funds — is a public utility, and that banks should be publicly owned, and controlled.

Duncan Cameron writes weekly on politics and is president of rabble.ca.

Duncan Cameron

Duncan Cameron

Born in Victoria B.C. in 1944, Duncan now lives in Vancouver. Following graduation from the University of Alberta he joined the Department of Finance (Ottawa) in 1966 and was financial advisor to the...