1988. The IPCC is born
The Intergovernmental Panel on Climate Change (IPCC) is established in response to record heat levels, droughts and studies that point to carbon dioxide as a factor in global warming. Set up by the World Meteorological Organization (WMO) ant the United Nations Environmental Program (UNEP), the panel is seen as both a political and a scientific body. Through the review and assessment of the scientific, technical and socioeconomic information, it aims to enhance global understanding of climate change and the consequences thereof.

1990. Experts warn of a pressing need to tackle global warming
In its first assessment report, the IPCC predicts a rise in global mean temperature of some 0.3 degrees Celsius per decade throughout the 21st century. The increase would be greater than the experienced over the previous 10,000 years. The panel warns that the trend towards serious global warming can only be stopped if ‘strong measures’ are put in place to tackle it.

1992. US shows first signs og going it alone
Rio de Janeiro hosts the Earth Summit which leads to 154 nations signing the United Nations Framework Convention on Climate Change (UNFCCC). The aim of the convention is to reduce emissions from industrialized countries to 1990 levels by the year 2000. While the majority of signatories call for mandatory limits on greenhouse gas emissions, US President George W. Bush insists that any targets or timetables must be entirely voluntary and non-binding.

1995. Berlin mandate paves the way for the Kyoto Protocol
In the spring of what is the hottest year on record thus far, Berlin hosts the first UNFCCC Conference of the Parties (COP). Industrialized nations agree on the need for longer-term action to prevent climate change, and the session results in the Berlin Mandate. Under the terms of the declaration, which lays the groundwork for the Kyoto Protocol, legally binding obligations commit industrialized nations to reducing greenhouse gas emissions. By now, economic growth in China means it is en route to become the largest greenhouse gas polluter by 2010.

1997. Kyoto Protocol is adopted but not ratified
On December 11, the Kyoto Protocol is adopted in the Japanese city of the same name. According to its core principle of «common but differentiated responsibility,» industrialized countries responsible for climate change have to do more to solve the problem than developing nations. The document agrees legally binding emissions cuts for industrialized nations and sets a target of reducing 1990 levels by 5.2 percent before the year 2012. The USA says it will not ratify the Protocol until it sees developing countries do their bit.

2001. President George W. Bush pulls the US out
Despite campaign promises to tackle the problem of America’s greenhouse gas emissions, when George W. Bush enters the White House, he pulls the US out of the Kyoto Protocol, which he describes as «fatally flawed in fundamental ways.» He justifies the move on the grounds that Kyoto fails to address two major pollutants –black soot and tropospheric ozone– and would have «a negative economic impact.» The Bush administration’s decision not to ratify the Protocol forces the delays of its implementation.

2002. Russia is put in a decisive position
In order to come into effect, Kyoto has to be ratified by nations collectively responsible for 55 percent of emissions from the industrialized world. European Union countries and Japan press ahead with ratification, but with the US no longer in the game, there is little room for anyone else to back out. Australia follows Bush’s lead, leaving Russia holding the final card.

2004. Moscow finally agrees to ratify Kyoto
After a long period of uncertainty, on November 18, Moscow ratifies the Kyoto Protocol. Although there are fears that the agreement could have a negative impact on economic growth, talk of stronger EU support for Russia’s bid to become a member of the World Trade Organization helps to tip the scales.

2005. Kyoto comes into effect but its limitations are clear
Kyoto comes into effect seven years after it was agreed. Ratified by 144 countries, the treaty aims to reduce the emissions by 5.2 percent by 2012. Major developing nations, such as India and China, are not yet required to meet targets. The European Union launches its Emissions Trading Scheme (EU ETS), limiting levels of greenhouse gases from large industrial emitters of carbon dioxide. Under the scheme, companies are given emissions allowances to buy and sell among themselves. The plan is to cut allowances gradually to reduce emissions.

2007. Bali talks start a critical countdown
Tensions reach a boiling point at the 2007 Climate Conference in Bali. Countries’ failure to reach consensus on a successor to Kyoto proves too much for UN climate chief Yvo de Boer, who dramatically breaks down in tears. Nerves fray as China appears to walk out and the US chief negotiator is openly jeered. The world eventually agrees to pursue two tracks of negotiations: one on extending Kyoto and another on a potentially new agreement. Delegates give themselves two years to settle the question.

2009. Copenhagen descends into farce
Hopes abound that Copenhagen will conclude with a tough legally-binding agreement for the planet. Not since the Paris Peace Conference of 1919 have so many world leaders come together in one place. With Barack Obama in the White House, there is speculation of grater US commitment and many hope China and India will sign up to targets. The talks end instead in acrimonious chaos. The most to emerge are references to significant financial incentives for poor countries, and grater –if voluntary– pledges to cut emissions under the Copenhagen Accord.

2011. The death knell for Kyoto
Government representatives and climate experts meet in Durban for COP17. With the first phase of the Kyoto agreement due to expire at the end of next year, the need to decide on its future looms large. Japan, Russia and Canada have said they will only sign if all major economies, including China (now the world’s largest emitter) and the US are bound by mandatory targets. UN climate chief Christiana Figueres has already made clear that it is too late for Kyoto and that an interim solution will have to be found.

These firms consider that these rules could affect their ability to compete against other companies from China, India or Russia, which have different standards. But precisely a hundred years ago, the International Labour Organisation was created to establish standards that everyone would agree to meet.

It goes now beyond the rights of workers. Some suggest e.g. a set of standards, such as the right to a healthy environment. But businesses and their respective states do not want to hear about it. They say we must leave the markets go without putting rules that may impede business operations. Otherwise, facing too many binding rules (eg. taxes), they are afraid they will make less profit. There’s the rub.

A country where standards should urgently be implemented is the Democratic Republic of Congo. Navanethem Pillay, the High Commissioner for Human Rights, has repeatedly criticized the serious violations of human rights in the region, breaches connected to the mining activities and the extraction of natural resources, which are often contracted with transnational industries.

Many armed groups control these areas and they do it for economic reasons. They want to make a lucrative profit because these regions are rich in minerals. It is very well described in the meddling report to the Office of High Commissioner for Human Rights. It is precisely in these pockets controlled by armed groups that mining is organized. They manage resource exploitation in situations of terrible abuse that could be defined as international crimes. In addition, international companies and companies located in other countries buy these minerals and are therefore involved in transactions. So there are different levels of involvement of foreign companies. And the international community does little to change that.

Yet the situation in DRC is closely followed by the Security Council. It has established codes of conduct and asks corporations to pay particular attention to the fact that minerals mined in the DRC do not benefit armed groups and do not help fueling the conflict. Companies should have clearer objectives in terms of respect for human rights. It should set more rules to ensure that the entire chain, all activities in any way, do not violate human rights. And that in addition they do not contribute to ensure that others do so.

Last June John Ruggie’s mandate ended. The first Special Representative of the UN for Business and Human Rights has succeeded anyway adopting common principles. However, he did not want that these principles were binding. Thus, only the goodwill shall prevail. That is a bit thin in the competitive world of these often lawlessness areas where victims have often no remedy at law.

No wonder the site of the meeting — the French city of Cannes — is completely locked down to any ordinary citizens, while banks and large corporate CEOs have all access passes to tell our governments what to do.

Corporations and banks have captured our governments, winning vast bailouts after helping to create the crisis. Now they are buying their way into the very meeting that could decide the world’s financial future.

The line between corporate power and responsible government has steadily blurred, undermining our democracies and our economy. Politicians take money from corporations for their campaigns, make policies that reward them when in office, and then take high-paid jobs with them after they leave. It’s venality, plain and simple.

Now Société Générale, a French bank that received a public bailout and has a vested interest in Europe’s financial policy, is an official sponsor of the summit. This bank and 20 other corporations have paid large sums of money in sponsorship for a seat at the table of our governments.

The only way to get policies that protect jobs, tackle speculators and guarantee a fair future for us all is to kick back against the lobbies and prise our leaders away from corporate interests.  The global economic crisis resulted in large part from reckless banks that were no longer regulated effectively by governments because of the control banks stress over our leaders. This corporate capture of government is the major threat today, both to democracy, and to an efficient and fair economy.

When you ‘undergo’ the film that keeps track of the effort of the Chinese for export, it comes to my mind what Deng Xiaoping evoked: « It doesn’t matter if a cat is black or white, as long as it catches mice. » It is true that in 1978, at the beginning of Deng’s reforms, China exported in a year what it now sells abroad in one day. But this success in catching mice – in other words, the transformation of China into a global largest exporter – is being done through an unsustainable human and social cost.

Last Train Home is touching, really inspiring, and documentary film-making at its best. Director Lixin Fan forces no comment, on no occasion partisan, as he tracks the lives of two Chinese migrant workers over a gap of two years. The camera is merely an observer- it’s this kind of focused observational film-making that makes this film so moving and poignant.

Proposed solutions to the financial crisis tend to involve more regulation and the break up or separation of banking activities, but these merely scratch the surface. The financial sector is not only too big; it embodies massive contradictions. In particular, the social role of finance makes it impossible for monetary authorities to let the system fail. This creates moral hazard on an epic scale, ‘Wall Street socialism’ with massive benefits for the financial elite and costs and liability for the many.

Given that the public nature of money makes the financial system a public liability, there is no case for its private ownership and control. As bank credit issue is the main engine of money creation in modern societies, how that money is issued and circulated is a crucial question. The allocation of that credit determines economic priorities.

Under free enterprise system the only priority is private profit. On this basis global speculative ventures are supported while local, particularly social, businesses are marginalised.

The allocation of credit is only part of the problem, however. The main question must be why the private banking system should have control of the monetary system at all. Historically this was developed through the link between trading money, promissory notes and bills of exchange, which were exchanged for bank credit notes designated in the national currency (legal tender). More recently the system has shifted to ‘sight accounts’, money records rather than cash in hand. The question that needs to be asked is: why is the private issue of notes and coin (counterfeiting) punished by law while the private creation of sight accounts is seen as a natural function of banking?

Capitalistic control of the financial system has played a major trick on the public. Given that bank credit is created out of fresh air, like fresh air it should be a public resource, not a private horn of plenty. Decisions about the allocation of that credit should be made democratically. Private profit should not be the only criterion for money issue.

Nor should all money be issued as debt with the interest charged accruing to the issuing financial institution. Debt-based money builds in a growth dynamic that prevents the emergence of a more socially and ecologically sustainable economic system. Instead money could be issued without debt as grants or interest-free loans. The only reason this is not done is that capitalism has ideologically captured economic reasoning. The right of banks to issue money for profit is not challenged.

If people demand to issue money themselves or demand that social and ecological priorities come first they will be told that ‘this cannot be afforded’. The trick is that the market puts some kind of brake on money creation and allocates it most efficiently. The recent crisis shows that neither of these claims is true. Any money creation by the public is decried as inflationary, while massive inflation of the capitalist financial system was given the euphemism ‘capital growth’. The public were to be grateful for the few portions of taxes that were reluctantly extracted from the financial sector.

In fact, there is no reason why money should be issued through the private banking system. It may be that with money under democratic control the public would vote to give financial resources back to the private sector, but it is more likely that social expenditure would be prioritized. The private sector would then have to re-orient its activities to serving public needs. This could form the basis of an economy in which growth would occur in response to social need, rather than the demand for ever expanding profits. Money circulation would return to the production of goods and services and not the never never land of perpetual financial growth. The idea that the whole of society could secure itself on constantly inflating financial assets is a total illusion.

The financial crisis has revealed the financial system’s enormous power and lack of democratic control. Money and finance, nationally and internationally, must be socially and politically re-embedded to enable socially just and ecologically sustainable economies to emerge. Rather than asking ‘can the financial crisis be the basis of radical change?’ the crisis must be the basis of radical change if we are not to continue on the capitalist financial merry-go-round until we all fall off.

Financialised capitalism rests on its capacity to create credit to lend to itself to inflate its speculative profits and financial assets. But financial asset inflation is always a pyramid scheme, whose value will collapse as soon as there are no new investors.

Traditionally states had a concentration of financial power through their ability to issue money as currency and tax it back. Capitalism has similar power through its control of financial resources. It creates money and calls it back with interest. This puts a growth dynamic into the economy. More money must come back than has been issued; this in turn demands that more money be created.

The neoliberal rationale for private control of money issue is that the market is more ‘efficient’. This is despite the endemic tendency to crisis in financialised capitalism. People have been encouraged to trust their future security in terms of pensions and savings to the financial markets, which in itself creates the conditions for a boom.

While hedge speculators can make money on rising or falling assets, for most people money can only be made on inflating financial assets such as housing or equities. This requires constant creation of credit to fuel the new buyers, a phenomenon that was clearly seen in the mortgage market. When the market has peaked and no one is willing to take on more credit, or the borrowers can no longer pay, the value of the financial assets must fall. Even in the case of hedge speculators, winners will be balanced by losers.

Why were the banks so desperate to lend money recklessly to homebuyers and to develop such complex financial packages? The answer lies in the demand for increased profits to raise dividends and share prices. The bonus strategy of payment in shares also drove this. In such a situation banks engaged in the most profitable aspect of banking, which was also the most risky. It is not without irony that financialised capitalism fell because of its exploitation of the very poor. As capitalism runs out of a market for its goods, services or investments, all that is left is the poor. In the case of financialised capital this was the subprime householder. However, the subprime borrowers did not cause financialised capitalism to fail; the cause was its own contradictions.

Profit-driven banks must always be tempted towards speculation, no matter how many firewalls are put up between deposits and investments. For this reason the calls for narrow banking or smaller banks will not work. As long as the companies running the banks are driven by capitalist values they must be driven by the drive for profit, and therefore risk. This would not be so important if the activities of the privatised banking sector were not a liability on the public. But the financial system is interconnected and the only way to save some parts is to save the whole. The speculative sector can only be separated if the deposit-based sector is not part of the capitalist system and if its credit creation capacity is brought under democratic control.

The private control of banking and finance is fundamentally flawed in that its neoliberal claim to financial freedom is in contradiction to the social foundation of money systems. The crisis has also undermined the claim that through global financialisation a substantial portion of national populations can sustain their economic future through appreciating financial assets. Far from ‘rolling back’ the state, the implosion of deregulated finance has directly contradicted the neoliberal case that the market and its money system is a self-regulating process that would be distorted by state intervention.

Under the illusion that money was a neutral representation of the wealth of the market, financial institutions operated far and wide. Financial traders speculated on currencies and borrowed from low-interest countries to invest in higher-interest ones. Claiming that their industry was global they played off countries against each other, demanding favourable tax status or lodging themselves in tax havens. In doing so they undermined the conditions of their own existence, the public authority of money.

A major problem for countries such as Greece or Argentina is that they have considerable problems in raising tax with substantial informal economies and high levels of tax avoidance. Finance may have escaped regulation but it has also separated itself from the legitimisation of money through public authority. This led the sector to expand to such an extent that the amounts of money at risk threatened the solvency of countries that had residual responsibility for their activities.

The Greek government has become reconciled this week to adopt a new set of austerity measures, in exchange for a €8 billion check, without which the country will end up insolvent in October. But even if the EU, with Angela Merkel and Nicolas Sarkozy on top, continues to ensure that Greece is not going into bankruptcy, experts now believe that the country only has three options, from the most optimistic to the darkest one.

Greece succeeds in landing on its feet

The most optimistic scenario – the country succeeds to level off in the end – is the most improbable as well. Despite the burst of rescue packages lined with austerity measures, Greece does not show any sign of progressive rearrangement of finances so far. The unfulfilled promises of Papandreou government have discredited this option, as well as country’s fiscal permissiveness. Social tensions that prevail in the Greek state – no public transport on Thursday, a call for a 24 hours general strike on October 19 and, before that, a public sector strike on October 5 – does not encourage this path .

A well-ordered payment default

By this option, the failure of Greece takes place under control, as part of an “orderly default”, which witnesses Athens officially recognizing it is not able to pay off all or some of its debt. Well prepared and controlled, the voluntary bankruptcy offers the ability to limit panic and overheating in financial markets – avoiding possible contagion to other countries affected by the debt crisis, Italy and Spain on top. This perspective has the unofficial support of Germany, the Netherlands and Finland, but not France’s and it means to make a cross on much of the advanced funds, given that the current Greek debt comes up to € 350 billion.

Total disaster with the collapse of the euro area

Worst-case scenario: Greece is in default, but without structure. Asphyxiated by debt, Athens no longer reimburses, no longer pays its officials and anger earns more than ever on the street. Contagion to other countries at risk would appear then imminent, and Greece should probably leave the Eurozone. All the same, returning to the drachma would mean ruin, poverty and unemployment, and GDP possibly could be halved. The possible Greece’s exit by the back door could give the idea to the strongest EU States (Germany, Austria, Netherlands, Finland) to slam at first, or even to start up each other a new mini-euro area. This would be the epilogue of sixty years of European integration.

Things could become clearer after a possible referendum on austerity, which Greek government envisages at autumn.

© JP Morgan

With the figures of a well-known toy manufacturer, the child assembles a chart that the European bosses would be well advised to review, as a ripple to their actions. The following is an echo on Peter’s composition. Lines and arrows interacting with minifigurines should be noted.

[1] The bullfighter and the pilot of Formula 1: Spain, Italy and the rest of the Euro Periphery believe the ECB should buy bonds, prevent spreads from rising and give them time to implement austerity plans.   Italy is the flash point, with sovereign debt equal to 25%of GDP rolling in the next year,.  Italy has undergone austerity before (1990’s), but that was when the promise of EMU integration was the carrot.

[2] The three little men with helmets, shields and medieval weapons, are the CDU, CSU and FDP, the 3 German parties which control the Bundestag and are against doing more than what Germany has already committed to.  They are strongly opposed to premature introduction of Eurobonds.

[3] By requiring collateral for its share of EFSF exposure to Greece, Finland (the sailor in blue and white) raised the ante on France and Germany, whose banks have much more exposure to the Periphery.  Finland wants the bailout to reflect actual exposure, rather than ECB capital weights.  The Dutch now want the same treatment.

[4] The Social Democrats and Greens (the woman with the carrot and her friend with a spade) are opposition parties in the Bundestag, but if an early election were held today, polls suggest they would be in control.  Both parties support expanding the EFSF.

[5] The Wotan Bundesbank is the ultimate protector of German monetary and fiscal interests, and is very concerned with steps already taken to deal with the crisis.  Their strong preference would be for EMU countries looking for aid to first implement austerity and pension and labor market reforms (i.e., German Reunification steps).  Bondholder losses (“creditor participation”) should take place before shareholders are subsidized by taxpayers.

[6] The IMF piggy bank has taken a mostly passive role, lending money and overseeing austerity plans in Greece that are failing miserably.

[7] The European Central Bank is purchasing Spanish and Italian bonds in the secondary market to bring yields down with the intention of facilitating better primary auctions.  This not work in Ireland, Greece or Portugal.  Spain and Italy yields declined by 1% once the ECB began buying, but have since drifted higher. The ECB does not like its current role as fiscal agent, and believes that EU taxpayers should bear the cost of solving the crisis.

[8] Poland (the barber), after a long period of wanting to enter the EMU, is waiting for a clearer picture of who will bear the costs of the sovereign debt crisis.   The Polish Finance Minister is calling for more ECB buying of sovereign debt, a much larger EFSF, and warned that Poland will not want to join the EMU until the Euro is earthquake-proof.  “The fundamental problem of the Eurozone is not an economic but a political one,” he explained.

[9] Artists from France are relying on the ECB to handle what the EFSF cannot.  While France supports greater fiscal federalization, if this were done via further EFSF enlargement, it could risk France’s AAA rating.

[10] EU taxpayers – the outraged — in Core countries would be affected by various efforts to federalize costs of the EMU sovereign debt crisis, either through EFSF expansion, or introduction of Eurobonds.  Lots of arrows point in this general direction.

[11] The assault troops at the bottom of the chart: the EU Commission and Euro Group Finance Ministers, chaired by Jose Manuel Barroso and JeanClaude Juncker, support ECB bond buying and fiscal federalization in a variety of forms.   They oppose Franco-German incrementalism, but may not have enough power to change it.

[12] The great white-collar theft. So far, EU bondholders and shareholders have been subsidized by the ECB and EU taxpayers.  The latest EU bank stress tests called for an additional Eur 2.5 billion of capital.  This is not a misprint.

We must recognize Peter’s acuity of visual synthesis, who at  9 has accomplished to  scaffold what is perhaps the best map of the financial crisis – with very likely characters, actions and intentions.

The financial system is concerned with the issue and circulation of money. Within capitalism the purpose is to direct money to the most profitable use.

Money is a peculiar phenomenon, real and not real so far. In essence it is a promise. Holding money is a claim on any resources, goods or services that are categorised in money terms. However, for these claims to be realised, the sellers of resources, goods or services must trust in the persistent value of that money.

Historically, money has been made of a commodity that can itself be resold, such as gold, but today it mostly consists of base metal, paper, or merely electronic records. People trust it because convention and experience tells them it will be honored. It is also backed by a public monetary authority as legal tender that has a stated value.

This is critical to public responsibility for money. For example, all monetary activities designated in pounds are collectable from the British banking system (or its international agents). Underlying the whole banking system is the Bank of England. Despite it having been made independent in policy terms, the Bank’s authority rests on the financial viability of the nation in terms of its productivity (GDP) and its ability to collectively assemble money through taxes.

As has been shown in Iceland, the people, through the state, are forced to take on financial liabilities created by the private sector. If a company produces a car that ceases to function, the owner does not go to the state asking for a new one. With money, however, this is exactly what the holder of that money will do. People invested in Icesave, the Icelandic online bank, because it offered higher interest. Despite the fact that the bank was linked to a small country of only 300,000 people, investors did not see it as a risky investment.

When the parent bank failed, depositors turned all together to the British government and demanded payment in full. In order to secure the safety of its own banks, the UK lent Iceland the money to repay deposits – a huge debt on the Icelandic people against which they are now protesting.

How could Iceland’s banks have financial commitments several times larger than its economy? Partly this was because the banks took in deposits from around the world, but mainly it was because banks can themselves create money. They do this by issuing bank credit – loans.

Free market has been built on bank credit. Traders and companies have borrowed bank money to set up their businesses. Recently most credit issue has been related to consumption or financial investments such as housing. The illusion is that banks act as intermediaries between savers and borrowers, but that is not so. Banks take in deposits, some paying interest. They also issue loans and charge interest. There is no direct relationship between savers and borrowers.

All deposits are returnable, regardless of what loans are still outstanding. Banks can also lend much more than they have in deposits, traditionally up to ten times more and even more in recent years. This is how financial sectors can explode in total value, eclipsing the productive economy and inflating financial assets.

Recently bank lending has contributed to the vast use of ‘leverage’ to enable the investments of the rich to go even further. Hedge funds, private equity investments and the investment arms of banks use borrowed money to inflate their speculative gambles. Some of these may even be gambles against the banks themselves or the national currency. As more money is issued it floods into the financial system and becomes part of the waves of money looking for a profitable home. As it is impossible to separate the interests of bank depositors or pension holders from financial speculators, in a crisis the whole system must be secured.

In such a crisis, the public groundwork of the money and banking system becomes clear. As all bank-created credit is designated in the national currency, this becomes a liability on the state. The logic would be that such a public liability should also be seen as a public resource. If the people are to be made ultimately responsible for whatever money is issued in their name, should they not have a say about how this money is used?

Far from having democratically controlled access to the process of credit issue, the public, as represented by the state, has itself to borrow from the capitalist owners and controllers of the nation’s money supply or tax money for public expenditure as it circulates. Today more than 95 per cent of money issue is through bank credit. Historically states controlled much higher levels of money issue as coinage. As expenditure on social or public needs are seen as secondary to privatised economic forces, the private sector determines how much public expenditure can, or cannot, be ‘afforded’.

Privatised control of money issue creates the impression that it is the private market that is creating wealth. Certainly it is making money, quite literally, largely through issuing it to itself as leverage to swell speculative trading. Private ownership and control of money issue has created huge differences of wealth. The mass of the people can only hope for a trickle down of economic activity through the consumption of the champagne-swigging traders and increasing numbers of billionaires. On the illusion that the manipulators of money have actually generated the wealth they gamble with, those playing the money markets demand a huge percentage of the product. The levels of pay and bonuses have become so obscenely puffed that they have become an economic ‘gated community’ set apart from ordinary mortals by their wealth. In fact they have stolen what should be a public resource and harnessed it for private benefit.

The global economic crisis in progress has naked the contradictions of privatised finance. If taxpayers have to bolster the system when it fails, why should they not also have control over the supply and allocation of money in the first place?

The UN's Economic and Social Commission for Asia and the Pacific (UNESCAP) painted a grim picture for the region overall in the wake of the global financial crisis

At the height of the financial crisis, the total public financial exposure in rescuing the world’s financial systems was around $15 trillion – a quarter of world GDP. Most of this was not operated, but the existence of public aid prevented a worldwide collapse of financial institutions. This vital role of the public sector has in practice been ignored, as the surviving banks return to the bonus culture, benefiting from reduced competition and additional state support through, for example, quantitative easing/ facilitation (increased money supply).

Not all states could support their bloated financial sectors. Iceland collapsed with financial commitments up to ten times its GDP. Britain, with a financial sector worth around five times GDP, could have faced similar problems. Globally the financial sector eclipses world GDP by at least ten times.

Why do governments feel compelled to spend uncountable billions rescuing the banks and financial sector when other businesses are often left to fail? The answer is that the financial sector is not a private sector at all. It embraces a public function, the issue and circulation of money – something that has been appropriated by private capital.

The contemporary banking and financial system has appropriated this public doings for its own benefit. However, when the financial system goes into crisis, the need to retain this public function means that it becomes a liability on the public, as represented by the state or equivalent monetary authority. As John McFall, chair of the UK Treasury select committee, wrote (Guardian, 9 January 2009):

 ‘After the extraordinary self-induced implosion of the financial system, the future of the market system now rests in the hands of governments. The politicians are the only show in town.’

The financial crisis and the public response have revealed both the instability of the global financial system and the importance of a public monetary authority of last resort.

The latter half of the 20th century saw a rapid growth in the financial sector as people became entangled in debts (particularly consumer debts and mortgages), as collective and public financial security was abandoned in favour of personal investments (particularly pensions), and because there was benefit to be had from inflated financial assets (particularly housing). Even institutional investors were tempted by the promise of higher profits in the most speculative areas, such as hedge funds.

With such a large proportion of the population entangled in the financial system, a demand for public rescue became more likely. A collapse in the financial system is much more threatening to social order than failures in the productive sector. If one factory fails it does not automatically close the rest (they may even benefit from less competition). But if a bank fails the panic threatens to become systemic as people lose confidence in the banking system. This alone was a major reason why states had to get involved.

The need for state intervention has exposed the contradictions of financialised capitalism and its reliance on ‘Wall Street socialism’. A pivotal point was the rescue of the US investment bank Bear Stearns. The US monetary authorities were not only bailing out the retail banks, but finance capital as well. When the US Treasury later tried to isolate the investment sector by letting Lehman’s fail, there were nearly fatal consequences for the banking sector. The financial sector was so interconnected that a crisis of default in the US subprime sector could bring down a relatively small bank in the UK, France or Spain via the functioning of the global money market and the drying up of credit.

An Egyptian army band plays music in Cairo's Tahrir Square during celebrations marking one week after Egypt's long-time president Hosni Mubarak was forced out of office

In the wake of uprisings in North Africa, West may be forced to make a choice between much-needed reform or stable dictatorships. NATO will need to reconsider its newest partnerships, beyond the interest of its allies, and start guaranteeing actual security.

Doused in paint thinner, Mohamed Bouazizi set himself alight in Tunisia on Dec. 17, sparking a string of protests throughout northern Africa. The 20-year old college graduate, angry after the government confiscated his source of income- a fruit cart- and beat him, has been credited as the beginning of a series of uprisings in North Africa.

Protests have now spread to Egypt, Libya, Syria and Yemen, as well as Morocco and Algeria. Citizens have taken to the streets in protest of high food prices, and even higher unemployment rates, and general discontent with, in many cases, decades of inefficient dictatorial regimes.

With protests mounting from country to country, igniting passion for reform in nations’ citizens, the uprisings of North Africa may be the 21st century’s Berlin Wall. NATO Secretary General Anders Fogh Rasmussen recognizes the potential effect the uprisings could have on the world order, but says, “The outcome of this turmoil remains unclear.”

Resource-rich North Africa has become a strategic battlefield among the US, Europe, China and Russia. The US and Europe seemed to prevail under two NATO initiatives: the Mediterranean Dialogue and a military alliance with the 53 countries of the African Union (AU).

Member nations of the AU and the Mediterranean Dialogue are believed to benefit from the initiatives under the broad public goals of countering security threats against Africa and using NATO as a model for the African Standby Force. But NATO members will receive more concrete benefits, such as limiting Russian and Chinese expansion and blocking arms suppliers of non-NATO members.

The interests of NATO fake ahead, devoid of serious regard to its public objectives. Rasmussen has outlined his concerns with the uprisings in terms of its impact upon the Middle East peace process and a possible increase of illegal immigration to Europe, validating NATO-centric concerns to the world under a “we don’t interfere in domestic politics” stance. Forget about partnerships, dialogues, and goals.

This lack of response from NATO is only amplified by a muted response from the US, with Europe following suit. Though Obama exercised caution in denouncing violence against peaceful protesters in Libya out of fear that the Gadhafi regime would target American nationals in Libya, Washington was also slow to react to protests in Egypt earlier in February.

Only after receiving strong criticism in the media did Obama denounce Mubarak, a long-time ally to the US, calling for transition “now.” Washington has supported up dictatorial regimes, such as that of Mubarak, for decades, benefiting from such stable relationships with dictators. In Egypt, which has been known to hold and torture terrorist suspects for the US, there has been a “protect us in our war and we will forgive your human rights abuses” policy. It seems US policy is in support of stable dictators, rather than fledgling democracies. Why would the US and NATO, which so avidly promote democracy, not have supported it in North Africa?

“The US and allies pull out no stops to prevent democracy because of major energy resources,” says Noam Chomsky, a well-respected American intellectual. In fact, as the protests spread to Libya, the major concern in the US was rising gas prices, not Gadhafi dropping bombs on his own citizens and executing Libyan soldiers who refused to kill their compatriots. Oil prices, which could reach $220 per barrel if Libya and Algeria, both dealing with internal protests, were to cut off oil supplies, could slow down economic recovery.

Both NATO and the US have screened selfish intentions behind national sovereignty, but after decades of support for allied dictators and more recent initiatives for a firm grasp on African affairs, perhaps it is not an honest stance to take. And if the US and NATO do not take a stance, we should hope they set aside potential gains and focus on allowing the internal movements of Africa choose the next step.

Recently, NATO has urged all parties to stop violence and ensure peaceful transition to democracy. A little less recently, Mubarak urged protestors for ‘orderly transitions’ that only served to postpone change. While we can hope and urge for peaceful transitions, we must remember that NATO should not be just a collection of military power, but also a political entity with a widely stated goal to “promote democratic values to build trust and prevent conflict in the long-run. To prevent conflict in the long run, might it be in the best interests of North Africa to allow reform?

West cannot both call for stability and advocate reform. It will need to reconsider its newest partnerships, beyond the interest of its allies, and start guaranteeing actual security.