Wednesday, September 17, 2008

The end of capitalism as we know it?


Morbid headlines are starting to appear in the Polish media just as they have elsewhere - we are facing the “worst financial crisis since 1970s…no, 1940s…no, the Great Depression!” What a load of nonsense.

A few months ago I was talking to a British bloke here in Warsaw. He was a member of the old Trotskyist Militant faction, an entryist organisation within the UK Labour Party that I knew well when I was involved in the Poll Tax unions of the early 1990s. That was quite a while ago but the rhetoric is undimmed by nearly two decades. “We are heading for a showdown,” said my Trotsky friend. “Environmental crisis, and capitalism is facing its greatest meltdown since the 1930s. We live in interesting times. It gives us great opportunities politically,” he said knowingly.

I couldn’t believe my ears. Did lefties still talk like this, these days? Are they still waiting for the inevitable collapse of capitalism?

That kind of thinking, then, might be still alive, but not so well, on what is left of the cranky leftwing. No surprise, really, I suppose. But my friend’s catastrophist thinking has become almost mainstream today. Everyone is talking about the crisis in the financial sector in the US and elsewhere as if it really was the greatest economic crisis since… well, the Great Depression.

See the skies raining bankers and brokers as they take their last step, from a tenth story window!

Last month, the British press reported that UK finance minister, Alistair Darling had “let the cat out of the bad” when he announced that Britain faced the worst economic conditions since…1948![?] Quite why the chancellor chose 1948 as his Year Zero is still a mystery to me. Why not 1947, or 1949?

Darling was quite obviously talking out of an orifice not designed for the talking out of.

My dad was alive in 1948 and I remember him talking of rationing, which was still in existence then in Britain. There were chronic shortages of many things, including labour. Those post-war years were dark and difficult for most.

Darling’s 1948 bull, however, looks almost sensible compared with some other doom mongers, who, like Mr Militant, think a new Great Depression is coming. But let’s look at that real Great Depression and see what it had in common with the banking crisis of today.

What they do have in common is that both then and now, problems started in the US. In the first ten months of 1930, 744 American banks failed. Prices and incomes fell on average around by 20 to 50 percent during those years. At its worst point in 1933, 25 percent of Americans couldn’t find work. Between 1929 and 1932 the Times index in New York declined by 89 percent. Poverty was endemic. More than half of Americans were living below subsistence level. In 1930, GDP shrank by 9.4 percent!

Sounds familiar today? No, it doesn’t, does it. And nobody is expecting growth to fall by nearly 10 percent. In fact, what is expected is that growth will remain sluggish in western Europe and the US…maybe even dipping below zero for a time. Unemployment today is not expected to rocket over 10 percent. Mass poverty is not about to return.

In Poland, they are starting to get media alarmist too. But it never will reach the hysteria that is now sweeping our great commentators and politicians in western Europe and the States. Poles remember hard times just gone past. Nothing is going to be worse than the 1980s. The economy is growing by 6 percent, will slow to something like 4 percent. And though the price of bread is rising like a particularly lively yeast culture, it won’t be going up by 100 percent overnight, as the communist had an annoying, and very dumb, habit of doing every ten years or so.

There is an unforeseen element in all this that is hard to predict. But if my friend Mr Trotsky, from Tunbridge Wells, wants a revolution then he had better sharpen up his ideology, and maybe even power of hypnosis - he‘s gonna need them - cause he will not be stepping from the ruins of capitalism and sweeping into the Presidential Palace, just yet.

24 comments:

ge'ez said...

I dunno how the dust will settle in Poland or if it will swirl up even more, but working folks in the US on the verge of retirement, ready to cash in on their retirement investments, are going to be hurting.

Folks who invested in tax-deferred education accounts who now have kids going to college are farked.

And who really knows how all this stuff is going to pan out in the next five, ten, fifteen years? Lotsa variables to consider and then some that are even unimaginable. And there's a lot to do with Chinese investment in these doings and it ain't gettin' any airplay.

Renegade Eye said...

It's a myth that socialists, believe that a capitlist cycle, is an automatic creator of a revolutionary situation. Marx is clear, after experiencing capitalist cycles in his lifetime, that capitalism is resilient, and the cycles are to fix itself.

We are living in interesting times, food riots, an emerging Russia etc.

This crisis is a blow to Reaganism, which is heading to dustbin of history.

beatroot said...

Renegade, you are simply wrong. Not all Marxists, even most, think that, but there have been and are many who think iminent collapse is coming.

Marx was enigmatic about this, but Luxernbourg etc did expect that capitalism would finally collapse. This is what she wrote reacting to revisionist Bernstein etc.

Socialist theory up to now declared that the point of departure for a transformation to socialism would be a general and catastrophic crisis…. The fundamental idea consists of the affirmation that capitalism, as a result of its own inner contradictions moves toward a point when it will be unbalanced, when it will simply become impossible . . . Bernstein began his revision of the Social Democracy by abandoning the theory of capitalist collapse. The latter, however, is the corner stone of scientific socialism. Rejecting it, Bernstein also rejects the whole doctrine of socialism . . . Without the collapse of capitalism the expropriation of the capitalist class is impossible.

Geez - I think some people will suffer, and I never said they wouldn’t. But Great Depression metaphors are just nuts.

Pangloss said...

Poles seem (I stress "seem") to have lost the backbone that kept them going through communism. There was a power cut in the Bydgoszcz (or Szczecin, I'm not sure) region a few months ago and the tales of woe they told about not having electricity for a few hours were a little pathetic. Of course the TV people helped create this impression (they helpfully found a stupid teenager to wail that she couldn't even use the internet) but older people too - easily old enough to recall martial law - were to be found whingeing and sobbing like it was the end of the world.

blutto blavatski said...

Marx schmarx.

It's all about electing the football captain and the prom queen and the principal and school board still run the show.

We're all still in fucking high school.

Emma said...

Of course the current crisis isn't riddling the obit sections with suicides. But it definitely is a crisis with unknown boundaries, although currently the joke's on the banks. Considering the headlines in the papers, it's believable that the Trotskyists (or however they're called) would react in the way you've seen, as it's not that hard to romanticize worldwide disaster. Looking at the front page of the San Jose Mercury this morning I can see several ominous words and phrases referring to the economy. This morning's news even involves a series of photos of broken down, withering homes with an article titled "Lenders pushed to keep homes in good condition, prevent blight in city." From a quick glance at this paper, a reader might see that the economic crisis has already taken an apocalyptic tumble! Although, the main headline "Nightmare on Wall St.," sounds like a pretty boring horror flick to me. And any self-proclaimed anti-capitalist theoretically should not be buying into the provocation of the media.

It's interesting to me that Polish news would be so foreboding. I'm curious to see how other Poles (not old Trotskyists) are reacting to it.

roman said...

beatroot,

Very interesting the way the human mind works. Many avowed anti-capitalists have way too much invested in the Marxist ideology. After a lifetime of being indoctrinated and then indoctrinating others in the struggle to attain a Utopian communist world society , it is difficult, if not impossible, to admit failure. Even when history itself screams to them that their quest is futile, they will not let go of it because to do so would be an admission that their struggle has been in vain. No one wants to admit that their life's work has been in vain. It's sad, really.

jannowak57 said...

Roman said: “is difficult, if not impossible, to admit failure”

I also share this observation; I also found that many “anti-capitalists” or Marxists viewed their ideology differently as less than reasoned thought but more as a religious orthodoxy.Therefore rational argument or self-evident fact was to be disregarded, seems a seriously flawed mental process.

jannowak57 said...

This is the most serious economic crisis since the depression, but if governments don’t screw up and intervene when necessary and stay out of it when common sense dictates, it will not be nearly as sever.

The economic system works and very well when its not abused, when that happens it brutally corrects itself which is what your seeing happen. The falsification of asset values is now being adjusted and balance sheets starting to reflect reality. Unfortunately the people at the bottom of the economic ladder and the middle class will bear the full burden.

This whole situation reflects how in a globalized economy there really is no safe harbour, just different levels of pain.

This problem is a made in America mess as a resulted of deregulation taking place in the financial sector by both democrat and republican administrations. Industry lobbyists bought and paid for legislators to vote for deregulation when it was clearly not in the public interest.

Unfortunately Americans don’t see this as a consequence of having a government so intensely subservient to special interests with lots of cash to spread around.

beatroot said...

Jan
This is the most serious economic crisis since the depression, but if governments don’t screw up and intervene when necessary and stay out of it when common sense dictates, it will not be nearly as sever.

Ok, so would you like to present some facts to back up the claim that “this is the most serious crisis…etc”?

Roman
Yes, of course, it is natural to cling on to a way of thinking, even as the world around them changes. This is, to stay with the lingo “theory divorced from practise…” and is one of the reasons why we, on the left, failed in the ‘project’, to use overused current lingo.

But not all Marxist inspired thought was so reductionist and determinist to believe that a utopia was just the other side of capitalist meltdown. There is a very broad tradition stemming from the writings of Marx and they deserve some intellectual respect.

But Mr Trot - who really does exist and is a very nice chap, actually - is slightly conditioned to expect the coming demise of capitalism. And that is not just some interpretations of Marx. It’s also about tapping into the current mindset. The Greens have it too. “The end is nigh and we are all DOOMED…”. It shows anomie and disorientation to rapid social change like we are experiencing globally.

So don’t just blame Marx.

Emma - hi! But Polish news is not as hysterical about this as what I have seen in UK, US etc. It’s there, as you can see by jan’s remarks. But it really is hard for most Poles to understand that things are somehow worse than they were in the 1980s. This was what the west would call a War Time Economy. The country was BUST.

Now that’s a real economic crisis. Isn’t it, Jan.

Anonymous said...

It's a bit early to say how bad all of this is, isn't it? Also, I'd love to think the joke was on the banks but it's the taxpayers that will bail them out even as they are thrown out of their foreclosed houses.

roman said...

This financial crisis is a direct result of the financial regulators falling asleep at the swich, if they were ever awake in the first place. I can imagine some poor senior in a shack in Kentucky was told that even though he does not have a job and can't afford a loan, he can have it anyway. Besides, his shack has been increasing in value over the last few years. So the senior takes a $50,000 mortgage and fixes up the shack. A year later, the somewhat improved shack is worth less than before the improvements.
The result: The old man loses his house as a result of foreclosure. The mortgage representative has earned a tidy commission and so did the local bank, who managed to re-sell the loan to a mortgage consolidator who, in turn, groups these loans and gives it a fancy sounding name (structured equity security) and re-sells it once again. The winners: predatory lenders. The losers: the old man sans shack and the rest of us when our governments have to make good for these loan guarantees which will have a huge default rate.
Our governments should be more consistent in the application of their "laissez-fair" style economics. Just the way they failed to regulate, they should now NOT bail out the failing financial institutions. This is the only way our politicians will be held to their duty to do their jobs and not rely on the lobbyists who finance their re-elections. The same lobbyists that wind up to be the winners each time there is a financial catastrophy. I get sick to my stomach when I think of this cyclical economic betrayal by those politicians and special interest groups that find the loopholes and cash in. Like kids within reach of the cooky jar they never fail to dissapoint.

ge'ez said...

The problem is all about poor guys who live in shacks getting loans?

And the gubmint will bail out the failing financial institutions. Just as the _uckers failed to regulate them.

Keep government out of the economy and all that rot!

The rich ain't going to suffer.

ge'ez said...

57 wrote: This problem is a made in America mess as a result of deregulation taking place in the financial sector

-->> So much for the invisible hand.

jannowak57 said...

beatroot said:"ok, so would you like to present some facts to back up the claim that “this is the most serious crisis…etc”?

The chairman of the Senate Banking Committee, Chris Dodd, D-Conn., warned the United States could be "days away from a complete meltdown of our financial system" and said Congress is working quickly to prevent that.

It's no longer a debate on "if there is a financial melt down" but rather how to stop it. Some forms of trading activity on Wall Street have been ordered to cease. Everything now depends on quick and effective government action and a public perception of the same.

Do you own a butcher knife? During the last depression some farmers in Poland who could neither sell their cattle or afford to feed them, they would take the animal and leave it in a poor area of town for the locals.

jannowak57 said...

ge'ez said..."So much for the invisible hand."

Don't understand??

roman said...

ge'ez,

The problem is all about poor guys who live in shacks getting loans?

Did you make this comment because you have difficulty with illustrative examples or do you have some logical point to make?
I second.. Don't understand?

ge'ez said...

My point is that the problem is so much more rooted in loans to rich pucks not poor or even middle class folks. We've been living under a system in the US of socialism for the rich and capitalism for the poor.

My other point is that I find it ironic that folks who have been adamantly against any kind of government involvement in the economy for so many years are now yelling for it to happen, ie.: McCain.

I am also being critical of so many folks' faith in laissez faire economics. Often, the same folks are critical of folks who believe in an invisible (not so, I'd counter) God, dimissing such a belief as fanciful. Yet, they believe in this "Invisible Hand."

roman said...

ge'ez,

We agree there should be more government oversight but I strongly dissagree with your contention that it's loans to RICH guys that got us to this point. The rich are able to re-pay their loans and as such your reazoning here is a bit faulty. It is loans to folks that were not properly screened for their ability to repay should there be an economic downturn that is the main cause and effect in play.
Not all rich people are bad, you know. :-)

ge'ez said...

Consider all the gubmint loans and other incentives to corporations, not just individuals. How many times do these corporations fail to create the promised number of jobs? Indeed, how many of these businesses fail and don't pay back the gubmint, ie. you and me, the taxpayers?

And let's not forget those folks who are financially advantaged who act like they are even more advantaged than they are. These are the guys, flaunting the high life, who for the most part who are defaulting on their mortgages and loans. Guys who have ins with this guy or that guy at the bank. Good ol' boys networking and all that. Not working families for the most part. The latter buy within their means.

I agree that not all rich folks are evil bastards. But its harder for them to be good.

beatroot said...

So at the end of trading today on most bourses shares closed HIGHER than one week ago before they pummited. Some return of the GREAT DEPRESSION.

What is going on today is nothing like as bad as even the economic crisis of the 1970s. I remember the 1970s. Inflation in UK at 20-25 percent. 1.5 million out of work.Interest rates at nearly as high a level as inflation. We had a three day week in Britain...we had to go down the electricity board to check when they were going to cut off people's electric. I remember sitting in the dark with candals on playing chess with my dad because we could not put the TV on.

Now that was an economic crisis. What is happening now is a crisis in the finance system in the UK and some other countries. But a wholesale economic crisis it is most certainly not.

roman said...

beatroot,

a wholesale economic crisis it is most certainly not.,

I agree. I am also quite surprised and delighted to hear that some of the G8 countries and others have infused approx $180B into their respective financial institutions. For the world economy to cooperate in concord this way to resolve this crisis should panic anyone whose dreams consist of the demise of the capitalist system.

So don’t just blame Marx.

Marx was a smart and intuitive philosopher/economist. His theory on "class struggle" was well-thought out and way ahead of its time. His prediction that the capitalist system will extinguish itself was only wrong in one respect. He expected it to happen much too early. Human nature being what it is and as long as there is more demand than supply, it can only happen when those two are balanced. Science and technology will probably make this possible in a couple of centuries.

Anonymous said...

The stock market is not the economy. Shares may be worth more now than they were a week ago but that's no consolation if you don't have any and they're kicking you out of your house .

beatroot said...

Exactly, anon. People get confused as to the difference between a 'financial crisis' and an 'economic crisis..'. Very different things. One impacts the other of coyrse, but they are not the same.