Ransom Capitalism

Gareth Fearn

As Robert Brenner argued in NLR two years ago, the financial collapse of 2007-8 set a template for government responses to crises that threaten the means of existence. Whether it’s a global financial meltdown, a deadly pandemic or energy bills so high that many people can’t afford to pay them, the policy instrument of choice is the bailout.

In both the financial crisis and the first months of the pandemic, there was a broad consensus that governments needed to make extraordinary fiscal interventions to preserve the means of existence without threatening the economic status quo. Emergency bailouts were used to stabilise the crisis, followed by such further moves as quantitative easing, furlough schemes or – in the UK – stamp duty cuts, which saw house prices rising faster than before Covid.

Bailouts are an ideal intervention for a decaying neoliberal politics: they maintain capital flows, rising asset prices and the upwards redistribution of wealth, while supporting the minimum needs of enough of the population to prevent total social breakdown.

British politicians’ responses to soaring energy prices conform to the bailout consensus. Boris Johnson is promising ‘extra cash’, though leaving it up to his successor to work out the details (Liz Truss and Rishi Sunak have so far mostly offered tax cuts). Ed Davey, the leader of the Liberal Democrats, recently proposed an ‘energy furlough scheme’: the government would absorb the cost of rising energy prices and get some of the money back with a windfall tax. Labour soon followed suit, offering a similar cap to energy prices funded through some slightly more creative accounting.

In both cases, energy companies would receive large amounts of public money (at least £29 billion) to enable them to continue charging their customers sums that many cannot afford. With these proposals following so closely behind the pandemic bailouts, which had the backing of all UK parties, we can see there is broad support for such extraordinary interventions with very little thought being given to the causes of the crisis – beyond criticism of the outgoing prime minister’s personality.

The bailout consensus is strikingly similar to the model by which neoliberal capitalism has operated globally for decades. Energy producers and suppliers are extracting profits from the state by menacing the public with unaffordable bills, effectively threatening to remove the means of existence from millions of people. This process, of capital holding the public to ransom, has been going on for decades in the Global South, where countries facing financial, energy and even public health crises have been held to ransom by the IMF, World Bank and multinational corporations based in the US or Europe. Money to relieve immediate social meltdown was provided on the condition of structural reforms and repayment agreements that locked generations of citizens into decades of debt, economic restructuring and austerity to ensure the profits of corporations.

As Kojo Koram and others have argued, the IMF/World Bank interventions undermined the growth of alternative political movements and brought post-colonial nations into a capitalist system where wealth is distributed upwards. Practices once applied by imperial nations to colonial subjects have now been turned on their domestic populations. Ransom capitalism and bailouts are not new, but their scope has expanded.

Under the bailout consensus, as with the IMF interventions, the state and its citizens are expected to pay private companies’ ransom demands without taking anything substantive in return. There’s no suggestion that the public might acquire a stake in a company in exchange for the money they hand over. Shareholders and CEOs are provided with ‘protection’ or ‘compensation’ rather than being made to face the downsides of the risk supposedly inherent in investment. The bailout averts a crisis, but keeps things on terms friendly to capital.

There is an underlying assumption that at some point there will be a return to the ‘normality’ of self-regulating markets of private actors. But bailouts without structural change keep us on the path of ever-increasing losses for the public just to sustain the basics of life, while maintaining a failed market system which is not only generating crises but limiting responses to them – as many nations in the Global South have experienced for decades.

High inflation is not unique to the UK, but the capitulation to the energy companies’ ransom demands seems especially acute here, as is the actual rate of rising costs. France is able to lower prices through its state energy company, Spain and Germany have intervened to reduce the cost of public transport, and many of the proposed measures across Europe involve taking equity in energy companies or stricter regulation. But the UK is too far down the neoliberal rabbit-hole even to countenance such mild social democratic policies.

The next prime minister may be tempted to refuse the energy companies’ ransom demands and let people suffer and die as a consequence, but chances are either Truss or Sunak will be pressured into some form of bailout. The centre-left opposition parties could take the opportunity to buck the bailout consensus and instead consider substantive political and economic alternatives, such as public ownership, as conditions of another major fiscal intervention. Without these alternatives, especially in the face of climate breakdown, there will only ever be new crises, more bailouts and larger ransoms to pay to sustain the means of existence for huge sections of the public. A key difference between IMF bailouts and what is happening in the UK now is that there are no demands for major structural reform – rather, the demand is that things be kept as they are. That way, the ransom money keeps flowing.


  • 30 August 2022 at 9:02pm
    Tom Chance says:
    A useful analysis, but mention of public ownership - and the French nationalisation of the remaining portion of EDF - overlook the distinction between energy suppliers and producers. Just changing ownership structures misses the point.

    Bringing British Gas and Bulb into public ownership won't help with high wholesale gas prices. What's more remarkable is that our government is allowing companies with state-granted licenses to extract gas and oil to charge 'market prices' while the cost of extraction and transportation has barely changed.

    Nationalising the oilfields (and socialising the risk while presumably hugely reducing the socialised profit by holding down prices) would be a bold move. But one could equally cap the prices the private producers charge to achieve a similar effect. Rebuilding strategic gas reserves, doubling down on renewables and reforming the market so gas prices don't determine electricity prices, a mass insulation effort - more policies that would weaken the ransom demand.

    In a way, the left jumping straight for the 'nationalise' button as the alternative to paying the ransom plays into the hands of the ransom capitalists by avoiding any consideration of the wider structural issues.

  • 31 August 2022 at 2:22pm
    Matthew Robb says:
    Bailing out the financial system in 2008 at least made sense. The banks were effectively bust and the money was needed to prevent the collapse of the financial system. It may not have been implemented perfectly, but the alternative was chaos.

    Baling out the energy companies makes a lot less sense. BP is making record profits. Does it need or deserve further subsidy? We need a government and a regulator that in return for giving these companies oligarchic rights ca compel them to sell at a far rice. Note this isn't compelling selling at a loss. It simply stopping price gouging ,which is taking place on a massive scale.

  • 7 September 2022 at 6:12pm
    Jonathan Davies says:
    I don’t think “ransom capitalism” is right, because there is no captor and no hostage. “Capfare” maybe better captures the Truss approach of energetically directing all state capacity towards propping up big business in conditions of calamitous market failure.

  • 7 September 2022 at 6:33pm
    John Barrett says:
    This bailout is small potatoes compared to the US $1.3 trillion student loan debacle.

    These loans originate through private banks and can be repackaged and sold at high rates because there is no risk to these loans since they are 100% guaranteed by the US government.

    Who benefits? Banks, large international investors, for-profit ‘universities’, and even actual US universities that have ever-expanding, costly bureaucracies and high-end residences, and massive building programs on campus. Forgiving part of this debt with no structural reform on this system will guarantee it gets worse.

    Who pays? The 70% of the population that does not have a college degree, the poor, who are targeted by for-profit schools like Trump University and leave with crushing debt and a worthless degree, smaller schools that can’t compete with the opulence of the larger schools, and anyone who decided not to go to college because of the insane costs in the US.

  • 7 September 2022 at 8:43pm
    Denis Mollison says:
    The energy price crisis is quite different from the other finacial crises referred to.

    The problem is a price -setting mechanism (short-run-marginal-cost) that isn't fit for purpose. It not only screws customers, it works in favour of fossil fuels rather than the renwables we need to transition to.
    Michael Grubb has just published a good explanation - see
    - and promises a further paper outlining better ways of setting electricity prices.
    Some bailout element may be needed in the immediate future, but the longterm requirement on government is to change the price setting mechanism to one that sets steady and affordable prices for the consumer, and encourages as quick as possible a phasing out of fossil fuels.