Bryn Jones on casino capitalism
The Global Casino: How Wall Street Gambles with People and the Planet by Ann Pettifor published by Verso
The casino is Keynes’s famous metaphor for the Stock Exchange: essentially a gambling den for speculators betting on changing share prices. Ann Pettifor exposes the history, dynamics, and socio-economic consequences of an analogous, global “shadow banking system – “Non-Bank Financial Intermediaries” (NBFI) – driving massive global financial forces. These dictate UK government finances, encourage wage-cutting, job shedding, and create inflationary (and deflationary) pressures, creating mind-boggling extremes of wealth across the world. A kind of Jet Stream of wealth that floats monstrous deviants like Jeffrey Epstein and maroons compliant social democratic governments on reefs of hand-wringing impotence.
Pettifor traces this shadow system’s $238.8 trillion of global assets back to Clinton and Blair’s deregulation policies. Now a near-global system of investment in spheres dominating human life under capitalism: incomes (such as pensions), housing, food, energy, and climate change. Property portfolios of Wall Street NBFIs not only provide consistent income streams from occupiers’ and users’ rents, but also relatively secure assets for collateral against more borrowing. They hike rents from users and residents to meet high “rates of return” expectations.
Private equity fund Blackstone is now the largest landlord in the USA and the world’s biggest single-family home landlord. Local buyers cannot compete with the global shadow banking system’s vast capital sums; hence, crises of “affordability” and “housing shortage’.
Constraints to which Labour’s obsession with planning permissions for building homes is irrelevant. (UK housing supply has exceeded notional demand, but much is bought for investment opportunities.)
Meanwhile rising daily cost of foodstuffs, partly triggered by “exogenous” shocks like loss of Ukrainian supplies, stems from speculators’ massive trading in futures markets for grains, meat and beans. The US government’s deregulation encouraged huge speculation on prices for “derivative” securities based on future produce supplies. Such trading, via the Chicago Mercantile Exchange (the world’s biggest food futures market), netted $1.9 billion profit for ten hedge funds, with corresponding rises in actual food prices.
Similar scenarios shape energy supply and carbon-induced climate change. Natural gas prices set the pricing yardstick for other sources, even renewables. NBFI speculation in the elaborate markets in gas “futures” – tradable bets on the price of future stocks – raises actual resource prices. Oil speculation during COVID created a 24 to 48% price increase on US markets, which the current Iran war replicates. Speculation during preceding crises also increased carbon emissions: nations switched from expensive oil and gas to coal burning. Vladimir Putin was rescued by speculation that raised prices for Russia’s oil.
Official regulation of “High Street” banks by central banks, like the Bank of England, prioritises inflation control via interest rate setting; a charade irrelevant to the dynamics of the shadow system. Except that its representatives prefer higher interest rates that increase the revenues from their lending. NBFI capital comes mainly from credit lines with other “shadow” institutions, with only 14% from mainstream banks. The virtually unregulated shadow system probably now “owns” nearly 50% of global financial assets. Yet it pocketed trillions of central bank emergency finance during the 2007-9 financial crash and the 2020-22 COVID crisis. NBFIs often drive those anonymous “bond markets” that plagued Liz Truss and Rachel Reeves: NBFI funds use purchases of government securities, especially in the USA and UK, to provide secure collateral for their lending. This system has imposed huge costs on public finances, industry, housing needs, the environment and ordinary consumers. What to do about it?
Pettifor has three ambitious proposals:
First – “Compartmentalise” the global system so regional and national jurisdictions have more regulatory control to prevent generalised global crises like that of 2010/11, with accountability to governmental/parliamentary institutions. Regional trading and monetary blocs, like the fledgling Pan-African Payments and Settlements System, would thus evade the distorting hegemony of the US dollar.
Second – Refocus central banks’ priorities onto nations’ public needs; broadening their remit beyond anti-inflation interest rate juggling. Interest rates should otherwise be lowered as higher rates transfer wealth from debtors to NBFI creditors. (I would add widening the Bank of England’s Monetary Policy Committee to include qualified representatives from industry, trade unions and civil society.)
Third – Tax speculative purchases of reserve currencies like the US dollar and UK sterling. This, Pettifor argues, would provide revenue for public spending and restrain risky speculative trading.
Although political and financial elites would aggressively resist such reforms, changes are already looming. Current international realignments, like the Brazil, Russia, India, China (“BRICS”) pacts for alternatives to the US dollar, plus static economic growth and governments’ vulnerability to global financial forces, demand radical solutions. NBFI-fuelled global debt ($486 trillion) may be four times global income ($110 trillion). This is a financial time bomb. The politico-economic catastrophes of the 1930s and 1940s facilitated Keynes’s radical Bretton Woods reform of international financial governance. Today, global disruption from the US-Israel-Iran conflict could be the crisis that precipitates equally radical reforms.