Conclusion:

The real imbalance is power.

And this is not just a European disease. There is a generalised perception of a world out of balance. We have got Arab Springs, Occupy Wall Street movements, and protests all over Europe. Why? Imbalances: everywhere I look in the Western world, the public sector is too small; we have privatised too many essential public sector functions – our arts, culture, prisons and punishment, military in Iraq, increasingly our education, our motor vehicle departments, our pensions. All privatised. Even responsibility for full employment. And supervision of our banks – we let them self-regulate, and even self-prosecute and self-punish.

What happens? Fraud, unemployment, inequality, poverty, and inadequate healthcare, retirement, and welfare. If you think about it we chose the worst of all possible times to embark on the great Neoliberal experiment – downsizing government, privatising many of its functions, slashing the safety net. In the West we are aging – which creates the twin problems of the need to devote more resources to aged care and at the same time a private desire to accumulate financial resources for individual retirements.

And that in turn led to the accumulation of unprecedented financial wealth under management by professionals. Current and future retirees demand higher returns to increase their security and what Minsky called Money Manager Capitalism responded by pouring more resources into the financial sector, doubling its share of value added and capturing 40 per cent of all corporate profits in the U.S. It is too much. Finance is at best an intermediate good that might in the best of circumstances contribute to production. At the same time, financial wealth represents a potential claim on output but does not guarantee output will be available as needed. We need old folks’ homes but finance is more interested in gambling on CDOs squared and cubed.

But it is worse than that. Modern finance, at least what is practiced at the biggest banks, is about fraud. So finance is not even a zero sum game – it largely makes a negative economic contribution.

The imbalance is one of power – not financial imbalances. The disease is Money Manager Capitalism. The symptom is the subprime frauds in the U.S., the austerity imposed on Greece and Ireland, the stagnation of incomes in most developed nations, the rising inequality and poverty in the midst of plenty, the growing despair and feelings of hopelessness.

There are no quick fixes, no magic bullets. The solution is not to slash government spending in Greece. Even reform of Maastricht rules plus bigger bailouts is not a solution. Nor can it be found in some new international monetary system based on a Bancor and run by the Money Manager Neoliberals.

No, the reforms must be fundamental. They must be of Babylonian, even Biblical scale: cancel the debts of homeowners, of Mediterraneans and Irish and Icelanders, of students and credit card users and of the HIPCs (heavily indebted poor countries). Creditors must be downsized, bankrupted, wiped out. Fraudsters should be prosecuted and punished. The share of real income and wealth of the bottom 99 per cent must be increased. The power of the European neoliberals must be vanquished, with the EMU either dissolved or reconstituted. The Predator State has to be replaced with a government of the people operating for the public purpose.