STEPHEN BYERS' RISK-FREE CAPITALISM
British transport secretary Stephen Byers wrote 'letters of favour' for potential investors in the new railway company promising to underwrite any losses. In effect, Byers is offering a one-way bet, where money begets more money, without any risk of loss. How this remarkable state of affairs came to be is a melancholy tale of the state of contemporary capitalism.
Last year Byers surprised everyone by refusing to underwrite Railtrack plc's losses from government funds, leading to the collapse of a company that was sustained only by the expectation that the government could not afford it to collapse, and would always bail it out. Brought into receivership, Railtrack was a pointed object lesson in the failure of the programme of privatising state-owned services. Railtrack's management had raided the company's considerable accumulated assets to pay dividends to shareholders, but then protested that they could not afford to make the needed investments in track to keep the train companies running.
Old Labour backbenchers cheered Byers as loudly as Tory free-marketers condemned him for 'nationalising the railways'. But Byers is a confirmed 'Third Way' Blairite, and it was never possible that he would head up a return to state-ownership. Pressured by the City, who said that no-one would invest in a new government enterprise if shareholders were not 'compensated' for the government takeover, Byers succumbed and paid them off. Then, to overcome the timidity of private investors, Byers drafted his 'letters of favour'.
The Thatcherite myth that private capital was straining to get free from the constraints of state control was never true. Rather the impetus behind state regulation and subsidies has generally been a consequence of capital's defensive demand for legitimisation, support and guarantees. Since the de-regulation boom of the eighties, private capital has demanded over and over again that the state step in to cover its losses, from the American Savings and Loan collapses of the eighties right up to the post September 11 bailout of European airway companies.
Byers' 'letters of favour' mark a new turning point, though, for the Third Way mantra of public-private partnership. Always intended to blur the ideological conflict between market and state, the public-private partnership was understood by critics as a cover to hide privatisation. In truth the partnership is working the other way: private capital is becoming more like a public sinecure as the burden of risk - surely the capitalists' raison d'etre - is socialised, while the enjoyment of the value stream that comes from it remains private property.
BOOK OF THE WEEK: ITALY AND ITS DISCONTENTS
Despite qualifying for membership of the group of seven top industrial nations, Italy has always been distrusted for its exotic political nature. The events of 68 that shook the European capitals exposed the weakness of the Italian ruling classes in the face of militant protest. With changes of government on an annual basis, terrorism in the north and the mafia in the South, Italy has lacked the stability to be entirely trusted. In 2001 the election of the media magnate Silvio Berlusconi's Forza Italia party, widely reviled for its opening to the far right Gianfranco Fini's National Alliance party, seemed to mark the country's withdrawal from the international equivalent of polite society. But despite attempts Berlusconi has resisted being isolated like Austria's Jorg Haider, and has forged links with Britain's Tony Blair in an effort to frustrate the German-French axis in Europe, and made a play to rally to US president Bush as a trustworthy European ally.
Paul Ginsborg's Italy and Its Discontents tells the unlikely story of Italy's political crisis in the last decade of the twentieth century, prefaced by an excellent account of her economy and society. Broadly sympathetic to the left alternative to Berlusconi, Ginsborg, despite his excellent command of the historical detail, remains bemused by Forza Italia's success. In his weaker moments Ginsborg leans on the old clichés of media brainwashing and macho football culture to explain away, but not explain, Berlusconi's admitted appeal to Italians, especially the young.
Unspoken is the left's belief that it, and not Forza Italia, was the proper heir of the collapse of the mainstream parties in the Tangentopoli (city of bribes) crisis of 1992-96, when their leaders, socialist (PSI) Bettino Craxi and Christian Democrat (DC) Giulio Andreotti were arraigned for trial on corruption charges along with hundreds of other leading politicians, officials and leading businessmen. Good as Ginsborg's description is, a better one can be found in the Italian Guillotine, written by creepy American Stanton Burnett of the Centre for Strategic and International Studies and Luca Mantovani, Forza Italia press officer.
While Ginsborg sees the revolt of the magistrates against official corruption as the righteous wrath of the people, Burnett and Mantovani's cold war paranoia leads them to see a conspiracy by the communist judges of the Magistraturia Democratica (MD) to do what they could not at the ballot-box, depose Andreotti and Craxi. For all its retro-Cold War reasoning, Burnett and Mantovani are right that the MD were politically motivated in their witch-hunt against the political establishment. As they argue, it is not that their was no corruption, but that it was exposed selectively, to attain a political goal. Burnett and Mantovani point to the extraordinary suspension of civil liberties involved in the 'Clean Hands' cases - imprisonment pending trials that were indefinitely postponed, release of prisoners indicting others, use of hearsay evidence and more. Even Ginsborg has to report that after years in prison, Andreotti was quietly freed last year, without any of the ostentatious charges of mafia corruption sticking, but broken nonetheless.
To the frustration of the leftists of La Rete and the Olive Tree coalition, though, the ultimate success from the scandals went not to them but Silvio Berlusconi's cobbled together, media branded football style Forza Italia, which won the elections first in 1994 and then again last year. What the left failed to realise was that the corruption scandals could only achieve a change of ruling elites, but never any political clarification that would empower popular movements. The growing number of trials left ordinary Italians cheering on the judges from the sidelines. Not immediately tainted by the web of connections made by the DC and PSI, Berlusconi, and even the fascistic MSI and National Alliance, as well as Umberto Bossi's northern regionalist tax-revolt gained from the humiliation of the old order more successfully than the left.
Facing charges himself, Berlusconi caught the public mood when he turned on the magistrates, and said enough is enough, Italy cannot be made ungovernable. The leftists of the Olive Tree alliance were bemused to see Berlusconi rise above the conflict and promise national unity. But it was they who had sabotaged any popular alternative by turning to the courts.
Italy and its Discontents, Allen Lane Press, 2001; The Italian Guillotine, Rowman and Littlefield 1998
-- James Heartfield Sustaining Architecture in the Anti-Machine Age is available at GBP19.99, plus GBP5.01 p&p from Publications, audacity.org, 8 College Close, Hackney, London, E9 6ER. Make cheques payable to 'Audacity Ltd'. www.audacity.org