Reclaim the sovereignty lost to the financial markets!

Column published in the newspaper Helsinki Times

According to the German philosopher G.W.F. Hegel all social progress proceeds through conflict. His student Karl Marx said that the markets go through one crisis after another. Indeed, that is what they seem to do. Even with regards to the financial crisis there was nothing new, we knew to expect it.

We also know what the crisis gripping the financial world is about: an incredible amount of unsecured loans. Therefore the question goes: if we expected a collapse, why couldn’t we prepare for it? The answer is that the markets don’t learn anything. They proceed according to the same logic of capitalism from here to eternity. Only man can learn. Only man knows how to regulate the markets.

But do we want to do it? Aren’t politicians saying that they have lost all true power to the faceless global markets? Forest companies are running away from Finland to countries with cheap raw materials. Politicians simply spread their hands even though national property, financed by tax payers’ money, vanishes into thin air.

Indeed, the stock market is a global virtual marketplace that is difficult to control. In order to control the international financial market we should not only understand the complicated relationship between stocks, bonds and their derivatives, but also know how to predict the rise and fall of these rapidly changing trends.

By itself, the stock market is complicated, but it is still possible to regulate it. In his speech to Americans debtors, President Bush admitted that he had first intended to let the markets handle the financial crisis. He said that he had listened to the experts, however, who had told him that the collapse would be too costly for America unless the federal government intervened. According to present information, the government purchase of toxic assets will cost American taxpayers 500 billion euros.

The markets are not independent from people’s actions. This is eagerly admitted when economic collapse threatens to paralyse society. When the collapse comes it is taxpayers, not markets, who are summoned to help. This was done in Finland as well in the 90s, when banks that had granted unsecured loans went bankrupt. The politicians saved the banks with state money, but it was the taxpayers who paid the final bill.

Even though politicians claim to have lost their power to the faceless economy, in reality the financial markets are thoroughly political as well. Wherever someone gets rich and another one simultaneously becomes poorer, there will always be politics involved.

Someone always profits from short term speculation, even if it were known that a collapse was imminent. The more the economy grows in a short time span, the more bankers and politicians distributing “cake” to “hungry” voters profit from it. Short term economic growth is maximised by using vague and misleading models of risk management. People are granted housing credit based on their debt history without checking the applicant’s actual ability to pay, or evaluating the effect of business fluctuations on the applicant’s ability to pay back his debt.

It is only possible to increase market supervision and predictability if the markets’ political nature is used as a basis. Markets also can be regulated with laws. It the markets transcend national borders, the laws regarding markets must also be intergovernmental and international. That political power legislates laws, with which market activity can be better supervised, is a requirement for restoring sovereignty to political power.

Outi Alanko-Kahiluoto is a first term Green MP, the chairperson of the parliamentary ATTAC caucus and a researcher in her civilian profession.

Translated from Finnish by Michael Nagler