Don’t blame capitalism – blame bailouts

Wednesday marks a grisly 10th anniversary. It was on August 9 2007 that BNP Paribas froze three funds specialising in US mortgage debt. The credit crunch that followed did more to transform our politics than anything since the end of the Cold War. It prompted the rise of Donald Trump and Bernie Sanders, Marine Le Pen and Geert Wilders, Syriza and Podemos – and, come to that, Nicola Sturgeon and Jeremy Corbyn. It destroyed a generation-long consensus around liberal capitalism.

The disaster lay not so much in the bank failures themselves as in the political response to them. In their panic, politicians turned to the one set of people who wouldn’t give them disinterested advice: bankers. The bankers told them to subsidise bankers, just as bakers would have told them to subsidise bakers. A trillion dollars was raised, much of it from low- and medium-income workers, and given to… Well, no one is exactly sure where it is now.

Suddenly, the free market looked like a racket. Marxists had always argued that capitalism was a smokescreen, a cover that allowed the already wealthy to become wealthier still. The credit crunch

– or, rather, the bail-outs – appeared to vindicate their critique. Gains had been privatised, but losses were nationalised.

So it is important to stress that what happened was not capitalism. In a capitalist system, bad banks would have been allowed to go under. Bondholders, shareholders and some depositors would have lost money, but taxpayers wouldn’t have contributed a penny.

For a decade now, public policy has prioritised stability over everything else. Stability obviously suits those who were already doing well.

Low interest rates and quantitative easing have caused massive asset inflation, transferring wealth from the poor to the rich. It’s no surprise that a lot of people are angry. But it’s not capitalism that should be the target of their wrath; it’s corporatism.