FORMER Bank of England governor Mervyn King this week called for heavily indebted ‘zombie’ companies to be allowed to ‘disappear’ taking with them, although he didn’t mention it, millions of workers’ jobs.
King was governor of the Bank during the world capitalist banking crash of 2008 and was responsible, along with the Labour government of Gordon Brown, in organising the billions of pounds in Quantitative Easing (QE) to bail out the banks.
With all his experience King clearly knows a catastrophic crisis when he sees one, and he used his speech at the Royal Economic Society’s annual conference on Monday to make an increasingly desperate call for governments and central banks to take action to try to avoid an even greater capitalist crash.
King warned central bankers and finance ministers that they had become addicted to ‘stimulus’ – printing trillions of worthless paper money that, along with near zero rates of interest, made loans freely available to companies, corporations and banks.
The ready availability of cheap loans has led to an explosion of ‘zombie’ companies. These are companies that survive entirely through loans from banks and, increasingly during the coronavirus pandemic, from government support schemes.
Zombie companies can just about manage to stagger on and pay interest on their debt but can never repay their debt in full. What is scaring King is that this never ending production of valueless paper money by central banks must inevitably lead to a massive rise in inflation as currencies lose their value.
On the other hand, if they raise interest rates making debt unaffordable while cutting back on QE they will kill off all those companies and industries that survive solely through debt.
King has now decided that the time has come for capitalism to bite the bullet and let the zombies crash, along with the jobs of millions of workers.
Of course, King doesn’t put it quite so brutally. Instead, he opts to cover up the savage damage this will inflict on the working class by saying that a bloodbath of companies and businesses will be just what the economy needs to have ‘a significant reallocation of resources’ to healthier sectors and firms.
King pointedly didn’t specify what companies or sectors he expects to survive and thrive out of the carnage of the wholesale ‘weeding out’ of the weak and unprofitable companies.
Indeed, listening him talk you would think that only small hospitality companies are doomed to go under. In fact, the entire manufacturing industry in the UK has been zombified.
British Steel is on the verge of collapse under the weight of debt, taking with it 5,000 jobs. The motor industry is on its knees with the last remaining Vauxhall factory facing closure, while the airlines and airports are reliant on government support through the various schemes.
What about the banks that have existed solely through taxpayer handouts and low interest rates to carry on since 2008?
King’s recipe to try to avoid capitalism collapsing into an inflationary spiral is the one being followed by the Tory Chancellor Rishi Sunak, who intends to ‘balance the books’ by cutting back government borrowing to finance the recovery loans and end them completely by the end of the year.
This will certainly weed out the weak – in fact it will collapse the entire British economy and herald an era of mass unemployment on a scale that will dwarf the poverty of the 1930s Great Depression.
The powerful working class will not tolerate being driven back to the Hungry Thirties. Already a strike wave is developing across the country over wage cutting attempts by the bosses as they strive to impose even greater exploitation on workers in the pursuit of profit.
This will just be the start, as the working class confronts a bankrupt capitalist system determined to make workers pay for their crisis.
The only solution for the working class is to make ‘zombie’ capitalism ‘disappear’ by organising a general strike to kick out the Tories and going forward to a workers’ government that will expropriate the capitalist class and advance to a socialist society.
