Sozialalmanach - Caritas Luxembourg

usiness collapsed and the wife lost her job as an accountant, they could no longer pay
the loan instalments. The house was sold in July 2009 for €50,000. They must continue to
repay the huge sums borrowed for a house that is no longer theirs. The bank has the legal
right to sell at its own convenience.
A Latvian association of borrowers, Lakra, estimates that 40,000 people find themselves
in a similar situation, in a population of between 2 and 3 million. Lakra explains that the
lending banks recover these houses at prices that have fallen by up to 70%: if and when
the economy recovers they will be able to resell, making profits of about 300%. The banks
gain in proportion to the people’s losses. This is not some unique malevolence on the part
of banks, but is how banking sometimes works.
Swedish banks control 90% of the Latvian banking sector. Of course these banks have
no vested interest in seeing the Latvian economy collapse: on the contrary. The effects of
their business model are unwanted. Nevertheless, the influx of capital into Latvia helped
launch this precarious real estate boom, rather than financing (for example) industrial
development, so that Latvia is now ill-equipped to recover from the slump. The banks
helped stoke the crisis, and encouraged excessive personal loans. The political question
(in part, a question between Latvia and Sweden) is whether they can now share the cost.
Meanwhile, it is reported that the accident and emergency units of Latvia’s hospitals
are so starved of public funds that they can function only every second day. In other words,
the crisis is already disproportionately affecting the poor, and will continue to do so. Those
sectors of the population, and those countries, which are already marginalised, will be
pushed further into exclusion from the mainstream.
Is a deeper systemic cause identifiable?
We noted certain allegations of moral failure. On the other hand, is it more helpful to
think of the crisis in terms of macro-economic systems, so that moral language becomes
simply irrelevant? From this standpoint the core problem is that the global market lacks
global regulation. That is a function of the intractable complexity, especially in the face
of the constant invention of new macro-financial instruments by the corporate actors. It
is also impeded by our continued adherence to the ‘default’ political concept of national
sovereignty. This framework will not easily be rejected: no one expects the governments of
China or the USA to submit to any external system of economic – or any other – governance.
However, the crisis shows that ‘sovereignty’, in the sense of a nation’s power to control
events, is an illusion. Japan’s economy, for example, has been struggling largely because
other countries cannot absorb its export capacity.
The second problem is that our form of capitalism rests on the principle (or fetish) of
constant growth. We take this for granted. The respected British journal The Economist
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