Quis custodiet ipsos custodes? The answer, it would appear are the credit rating agencies, whose powers to topple governments and attempts to dictate to continents have reached a zenith.
Three companies with scant regard for what in other institutions passes for corporate social responsibility appear to rule the world when it comes to deciding whether an economic policy is acceptable or not. Acceptable, that is, to the markets they manipulate rather than any democratically elected body or mass of people’s interest.
Governments stand in thrall and fear of the oligopoly of Fitch Ratings, Moody’s, and Standard and Poor’s. Their over-arching power over the policy-making process of government has become an unquestioned part of the narrative that is the ongoing financial crisis. Thus, the London Evening Standard reported without qualification
that Chancellor George Osborne’s autumn statement, in which he resorted to £100 billion of extra borrowing and further austerity measures, was designed to “preserve the nation’s prized triple-A credit rating”. It is nothing less than the Government’s economic holy grail.
Our democratic custodians are besieged by the barbarians at the gate to whom the ordinary citizens are thrown in sacrifice.
After confiscating the United States’ “precious” triple-A rating, Standard and Poor’s levelled its sights on the entire eurozone bloc, telling countries including Germany, France, the Netherlands, Austria, Finland and Luxembourg that they could be downgraded because of the failure of leaders to resolve the debt crisis. Greece, Ireland Spain, Italy, Cyprus and others already
lie victim of the CRAs’ unforgiving judgements, with radical changes of government in most – in Italy’s case, to a government without elected representatives which met with the CRAs’ approval to gauge by their subsequent ratings.
On the 17 eurozone countries, a leaked paper from Standard and Poor’s said: “The lack of progress the European policy makers have so far made in controlling the spread of the financial crisis may reflect structural weaknesses in the decision-making process within the eurozone and European Union.”
That jars the very heart of democratic decision-making. But it would only amount to just another think tank’s opinion if the CRAs were not anointed with such ethereal power by the markets whose song-sheets they try to sing from. And that opinion would carry less weight if their performance record were to be given a little more weight. Between them, for example, the credit rating agencies got the 1997 Asian crisis and the 1998 Russian default completely wrong and have been all over the place on Argentina. As the Wall Street Journal put it a few years ago: “When the CRAs gave ratings that were catastrophically misleading, the large rating agencies enjoyed their most profitable years ever during the past decade.”
So it’s win, win for them and lose, lose for the people for whom austerity and more austerity is the undemocratic order of the day.
