From News Review, Socialist Review, No.275, June 2003, p.5-6.
Copyright © 2003 Socialist Review.
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The last time there was a crisis in the international stockmarket they made a film about it. It was called Wall Street. Michael Douglas played Gekko, the intended villain of the piece, a greedy gambler who had made a fortune on the stockmarket chiefly by buying and bribing inside information, and then betting on it, knowing it to be true. The film was such a realistic indictment of the market and its values that it quickly became a cult movie for thousands of yuppies swarming like bees round the honey of the stock exchange. When Gekko is finally captured by the regulators of the Securities Exchange Commission, most of his admirers felt sorry for him. The film was a close portrayal of the rise and fall of the stock market gangsters and insider dealers of the time. Those critics who saw it as a fair rendering of what really went on in Wall Street were told that the scandal it revealed was exceptional, the old story of the rotten apple in the otherwise unblemished barrel of Wall Street and the City of London.
It took a decade for the market to start falling again, and for the same sort of scum to rise to the surface of the barrel. In 2001 came the Enron scandal, in which a massively hyped international trading company duped the wealthy world by the time-honoured process of fiddling its accounts. Huge profits recorded in the accounts simply did not exist. The company went bust and the accountants who fiddled the accounts and shredded the evidence – New Labour’s close friends Arthur Andersen – were disgraced, bankrupted and quickly absorbed by other big accountants such as KPMG, which has a similarly questionable record. Apologists for capitalism argued that Enron was a ‘one-off’ – an unfortunate slip of the regulators that was unlikely to happen again.
Now, less than two years after Enron, comes a scandal every bit as shocking. For years the US regulators have been investigating the role of the country’s top investment banks, the very core of the capitalist system. Of special concern was the method used by the banks to prise investment out of the US bourgeoisie. Their technique was to hire ‘analysts’ who circulated ‘research studies’ on the value of various stocks, recommending whether or not they were worth buying. The regulators soon discovered that the ‘analysts’ were not at all interested in the value of the stocks they were ‘researching’. All they were interested in was getting more money for the banks who hired them. So thousands of gullible investors were conned out of many billions of pounds by bogus research that the analysts knew to be bogus, solely in order to drum up more business for the banks who paid them. In one of the hundreds of incriminating e-mails unearthed by the regulators, an analyst from the big US bank Lehman summed up the whole scam: ‘Yes. The little guy who is not smart about the nuances, may get misled. Such is the nature of my business.’ Like Gekko, like the millionaires who played the market in derivatives, hedge funds, split capital investment trusts, it was the ‘nature of his business’ to lie and cheat in the interests of his paymasters.
The names of the liars and cheats in this area are the household names of modern finance capital: Citigroup, Credit Suisse First Boston, Merrill Lynch, Goldman Sachs, Salomon, Piper Jaffray, UBS Warburg (a special favourite of the New Labour government in Britain), Lehman, Bear Stearns, etc, etc. The total fines against these banks comes just short of a billion pounds, but the banks coughed up in huge relief. They will not be prosecuted and even when disgruntled investors sue for compensation, the banks can unleash their unimaginably expensive lawyers to defend every suit. Gekko went to prison, but none of these professional liars and cheats need lose a night’s sleep.
Socialists who study this story (and that in itself is difficult – the newspapers and commentators of the ruling class are reluctant to expose the fraud of those who feed them) are inclined to pass by on the other side, their noses in the air. The whole sty stinks, they argue, so why worry about the smell of any particular pig? Who cares about the swindling of the petit bourgeoisie by the big bourgeois? That approach is easy to understand, but it misses the point. The point attacks the root of the argument that capitalism is the best available system to sort out the problems of supply and demand, to ensure that the right things are made to fit people’s needs and aspirations, and that the proceeds are fairly distributed. The fantastic scandal of the investment banks (like all the other similar scandals of modern capitalism) proves exactly the opposite. It proves that the people who run the system couldn’t care less about the real value of anything, but will take any course, twist any figures, tell any lies and engage in any amount of cheating so long as their already comfortable nests are further feathered. Gekko rides again, and this time he rides free.
Last updated on 28.11.2004