There appears to be widespread consensus about the need for Government to make deep cuts in public expenditure in order to reduce government borrowing. Not only have the Labour, Conservative and Liberal Democrat parties agreed that this is necessary, but also most political and economic commentators and, indeed, public opinion. The only difference of opinion (and therefore the only area for debate) seems to be around how soon to cut and where. This is widely touted to be one of the key issues in the forthcoming general election and may even turn out to be the only thing differentiating the three parties.

Although the conservatives are always in favour of cutting public expenditure in principle and ‘New Labour’ has, from its birth, been a ruthless promoter of privatisation and market forces, the spur for this particular round of me-tooism has been the deluge of public money thrown at the financial system since the debt/credit crisis began to unravel in 2008 plus the extra spending on benefits and drop in tax income due to the resulting recession. Government borrowing is anticipated to reach £175bn as a result and there is widespread agreement that this has to be reduced as quickly as possible (although the reasons why this is so necessary are usually obscured and taken for granted).

The scale of cuts being envisioned by the three main parties will mean not just the axing of high-profile projects such as ID cards or Trident missile submarines (and good riddance to those), but also across-the-board cuts in basic services (education, healthcare, social services) and public sector pay and pensions. Cuts in Government spending will also prolong the recession and maintain high levels of unemployment (currently 2.5 million and rising, the highest level since 1995).

So it is the people who use public services or who lose their job who will bear the cost of rescuing the financial system and bailing out the banks but, oddly, no corresponding contribution from the people and institutions at the centre of the bail out. In fact, as we now know, “bonuses are back” for bankers (even where the banks are, for all intents and purposes, owned by the public!). One social commentator, Maurice Glasman, has described the bail out as “the biggest transfer of wealth from poor to rich since the Norman Conquest” (‘The common good’ in What Next For Labour, Demos).

Neither are there any serious proposals to control or regulate the financial sector to prevent a recurrence of such crises. So how to explain the determination of Government to return to ‘business as usual,’ and the one-sidedness of bearing the cost?  The New Labour project is founded on the idea that extra funding for the public sector can only come from faster growth and bigger profits in the private sector.  Gordon Brown is a long standing admirer of the private finance sector, its risk taking and the income it generates for government.  He would clearly like to be seen as the person who rescued the system and returned to the status quo ante.

The one-sided burden of paying for this rescue, though, is a classic example of ‘lemon socialism.’ This is a term used to describe those occasions when the state intervenes to rescue some failing part of the private sector (‘lemons’). But it also exposes the way in which capitalism is adept at avoiding the risks of the free market while retaining all the rewards. Another way of describing this is “socialism for the rich, capitalism for the poor.” Other examples that spring to mind include the Government’s Private Finance Initiatives, the privatisation of the railways, and the “rescue” of MG Rover.

Why then, given the catastrophic failure of finance capitalism, and the widespread public anger with the banks and support for action, is there so little being offered in terms of fundamental change? To find an answer to this you need to acknowledge both the hegemony of neo-liberal capitalist ideology (“there is no alternative”), and how the balance of power has steadily shifted over the last thirty years away from democratic institutions, trade unions and civil society. Global finance capital is now too big and powerful to be easily restrained by governments acting alone to implement social democratic reforms. And, since the profitability from the (‘real’) productive economy has been stagnant for some time, the pressure is still for increased growth of finance capital due to the higher returns from its speculative bubbles. Even with the increasing likelihood of crises, crashes and the wipe out of wealth when bubbles burst, given the application of lemon socialism, this is a low risk strategy for the rich.