ANALYSIS: Bankocracy [John Lanchester/Mazen Labban]

nyc06h82 Lehman Brothers on Broadway, NYC NY 2006

Image by CanadaGood via Flickr

After a meeting with Nicolas Sarkozy in the autumn, Angela Merkel stated her conviction that ‘no bank should be allowed to become so big that it can blackmail governments.’ She’s right – but unfortunately, that’s the system we have, and will continue to have for the foreseeable future. It is a monstrous hybrid in which bank profits are privately owned, but are made possible thanks to an unlimited guarantee against losses, provided by the taxpayer. Goldman Sachs, the biggest of the investment banks, was rescued from insolvency by a taxpayer injection of $10 billion last October; then it collected another $12.9 billion in credit default swap insurance, also provided by the taxpayer, thanks to the bail-out of AIG; then it announced that it was paying itself $16.7 billion in pay and bonuses for the first three quarters of this year. The lack of competition (from imploded rivals) and that taxpayer guarantee against failure made this possible. This is the world that the collapse of Lehman made.


A response:

It is curious that John Lanchester should propose ‘bankocracy’ as the ‘name for the new economic system, which certainly isn’t capitalism’ (LRB, 5 November 2009). In a passage in chapter 31 of the first volume of Capital, Marx describes the emergence of ‘modern bankocracy’ (along with the international credit system, the modern system of taxation and ‘stock-exchange gambling’) from the creation of national debt. The national debt endowed ‘barren money with the power of breeding’, giving rise to agiotage and creating the ‘class of lazy annuitants’ – ‘this brood of bankocrats, financiers, rentiers, brokers, stock-jobbers etc’. Capitalism has always been one form or another of a modern bankocracy, at least since the founding of the Bank of England in 1694.

Mazen Labban
University of Miami, Florida

Also read:

Blog posts by John Lanchester:

Kaboom! The SEC v. Goldman Sachs
Chess on Ice Wall Street’s Favourite Sport

Articles and reviews by John Lanchester:

The Great British Economy Disaster: A Very Good Election to Lose · 11 March 2010
Short Cuts: Kraft eats Cadbury · 7 January 2010
Bankocracy: Lehman Brothers · 5 November 2009
Short Cuts: Caster Semenya · 8 October 2009
It’s Finished: The Banks · 28 May 2009
Short Cuts: Google Street View · 9 April 2009
Short Cuts: the demise of Woolworths · 29 January 2009
Cityphobia: The Crash · 23 October 2008
Cityphilia: the credit crunch · 3 January 2008


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