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October 13, 2008 at 12:39:46
Promoted to Headline (H2) on 10/13/08: by David Schultz Page 1 of 1 page(s) |
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The western banking crisis is an historic event on two counts. First it demonstrates that Karl Marx is again relevant and that his analysis of capitalist society is not quite ready for the dustbin of history. Second, state intervention to save the banks and the free market from itself undermine whatever remaining legitimacy there is in the intellectual foundations of neo-liberalism, setting the stage for a new vision of the world in ways that have not been seen since the 1930s. Nearly a generation ago after the collapse of Soviet Marxism writers such as Francis Fukuyma proclaimed in The End of History that western capitalism had won. More specifically, writers such as him and later Thomas Friedman in The World is Flat heralded that free markets had emerged as the winner in the Cold War and that the future was one of less government intervention in the economy in an increasingly globalized capitalist economy. The winners would be those with flat economies fully integrated into the market, the losers those outside. The triumph of capitalism and the fall of the Berlin Wall had proven Marx wrong. However much in the same way that Mark Twain once stated that news of his death was greatly exaggerated, so too is the demise of Marx and his analysis of capitalism. The core of Marx's writings, including his most famous Communist Manifesto, may yet prove to be accurate on many counts. In his writings Marx asserted that capitalism would ultimately be undone by capitalists themselves. In a famous passage in the Manifesto often referred to as the "gravedigger's thesis," Marx contends that the forces within capitalism itself would push individuals to seek profits in such a way that it would eventually lead to more severe economic booms and busts, the increased consolidation of industry and business, and the eventual destruction of the very foundations of capitalism itself. 
While Marx was mostly writing about what capitalism would do to itself within one country, his followers, such as Rosa Luxemburg and Lenin took the analysis international. They and others described a world of advanced capitalism where the crisis would go global, wrecking national economies that were globally interconnected.
Essentially what Fukuyma and Friedman wanted is what is called neo-liberalism. This is the world of Milton Friedman, Alan Greenspan, and Ronald Reagan. It is a world of free market economics, little if any government regulation and intervention, and a full integration of all economies of the world into one global marketplace. Daniel Yergin's Commanding Heights describes this world accurately as one where it would no longer be the government as the central place of power in the world. The marketplace would displace the nation state as the new institution to govern the world.
For a time from the 1990s neo-liberalism appeared to reign supreme but now the world economic crash and the rush for state intervention has proven Marx is not so wrong and Fukuyma, Friedman, and company not so right. The events of the last few weeks show that Marx might still be prescient in his analysis. Consistent with his arguments and those who followed him, capitalism is heading for a major global crash as a result of the zealous pursuit of profit. It is this behavior that supposedly demonstrates the inherent instability of capitalism and the production of a new economic system to replace it.
Solutions by the G-7 finance ministers to address the current worldwide banking crisis by taking them over or investing in them take a page out of the Communist Manifesto. "Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly" is one of the central planks of the program for the communist party in Marx's Communist Manifesto.
While one may doubt that the actions of the west to save the banks are a sign of the communist revolution, what is clear are three points. First, both Milton and Thomas Friedman are wrong. Government intervention to save the world economies demonstrates the poverty of neo-liberalism. Even if it survives in some mutated form, it is intellectually dead--the market as a stable self-regulating entity is fiction. Second, if any economies emerge as winners it is those whose markets were not flat, to use Thomas Friedman's term. The events of the last few weeks should lead to a demand to rethink globalization as governments around the world look to protect themselves from the next crisis.
Finally, we are at a defining point in history much in the same way it was after the stock market crash of 1929 and the United States presidential elections of 1932. The elections this year, along with the actions of the other major western economies, have the potential to reshape the world for generations to come.
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Thank you for a good article
It's clear. It speaks to current topics. It is information people are seeking to understand these days. by Margaret Bassett (45 articles, 2911 quicklinks, 43 diaries, 1859 comments [100 recommended, 0 rejected]) on Monday, Oct 13, 2008 at 12:42:26 PM  (0+)
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Thanks for that article
"Privatize the profits and socialize the losses" I don't know who to attribute this quote to, so I will give it to the USA! I was thinking today, what does it mean if my country owns stock? Do I get dividend checks? Do I get to be on the voting board of the institutions we are buying stock in? Are the banks now being socialized? I wondered if it would give our country a greater say in what happens within the market place, because now they have/earn interest. I wonder why it all seems like a bunch of crap anyways. We have a stock market that was soaking us dry and now is tanking, because we have nothing left to give it at the moment. How then, does our government have money to give the market? I am so very confused. Every time I wrap my brain around any one section of this economic issue (ah ha moments), I end up with Pandora's Box of questions. Why is the government doing this with our money? Does this mean banks pay no tax now, because they get it back from the government? You know, if I bounced my bank account, I would get charged. Why are the American people being charged when the banks bounce their own accounts? I am perturbed that the CEOs of various companies in trouble right now have gotten their money again and again, and I haven’t had a spa treatment in 3 freaking years. by Yvonne (5 articles, 0 quicklinks, 3 diaries, 38 comments) on Monday, Oct 13, 2008 at 7:24:20 PM (0+)
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Reply: Synchronicity abounds.
Those of us who relentlessly study spirituality, and the current collision of physicists and spiritualists, who both arrived at the same place from completely different perspectives, are thrilled to be here, so that we can get started on what it is that we came here to create - systems that actually meet the needs of all of the participants in the system. This is a great article, and spells out exactly what us lefties have known all along - that this disaster is exactly what was headed our way with the "neo-lib" philosophers in power. It is time that us lefties came out of the closet and started pushing the issue that our ideas are not the sinister, "Godless," evil ideas that the righties have made them out to be for so many years. by daveys (9 articles, 0 quicklinks, 22 diaries, 272 comments [20 recommended, 2 rejected]) on Monday, Oct 13, 2008 at 7:33:03 PM (0+)
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There Are
still remote Tribes living in Jungles that do not have Banks, or Money. Therefore neither money or Karl Marx (outside being a human being) are relevant to them. Hopefully your cash register money money money world will never to them. I pledge alligence to the cash register & for all it stands. by shadow dancer (0 articles, 0 quicklinks, 0 diaries, 1119 comments [121 recommended, 2 rejected]) on Monday, Oct 13, 2008 at 8:29:45 PM (0+)
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Good article
The basic tenet of neo-liberal economic theory is neo-colonialism which is itself based on greed and the disregard of humanity. Expecting Greed to self-regulate greed is preposterous for Greed neither recognizes nor accepts limits. by DC Rapier (28 articles, 73 quicklinks, 56 diaries, 114 comments [1 recommended, 0 rejected]) on Monday, Oct 13, 2008 at 11:22:38 PM (0+)
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Ugh is all I can say
The first problem with this article is that it uses a phrase that has no meaning to most people, neo-liberalism. I always prefer not to use labels for people that they do not choose themselves anyway. Marxists call themselves Marxists. Capitalists and Laissez Fairsts call themselves those things. I have never yet heard anyone call themselves a "neo-Liberal". TThis label is never described in this article. I have only seen it used by people who feel the need to use a trumped up pejorative instead of fully explaining what they mean. The second problem is it uses one failed philosophy, Marxism as the supposed savior for another failed philosophy, Laissez faire Capitalism (or at least the closest thing to it). Rather than reaching for radical -isms, people should be looking for what works the best and what most of the worlds people/economies/governments are heading toward from all sides. At some point, once all the ideologues are through, in my opinion we will all end up with something like the French or Danish or Swedish systems. Whatever it is, when there is a name for it, it is something we will call it and ourselves. by Steven Leser (255 articles, 58 quicklinks, 38 diaries, 2148 comments [63 recommended, 2 rejected]) on Monday, Oct 13, 2008 at 11:58:37 PM (0+)
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Reply: WHERE'S YOUR PROOF THAT MARXISM HAS FAILED
The point of the article was that recent events in which governments bail out the banks by buying stock in them and thereby moving towards government ownership of the banks are a confirmation of Marxism. It is no argument to repeat that Marxism has failed without proof. The instability inherent in capitalism means, paradoxically, the capitalism needs to adopt bits of socialism to survive, Our task is not to resort to bits of socialism to prop up a failed system but to be done with it by abolishing capitalism and adopting socialism in its stead. Robert Halfhill by rhalfhill (3 articles, 0 quicklinks, 0 diaries, 327 comments [1 recommended, 0 rejected]) on Tuesday, Oct 14, 2008 at 2:11:41 AM (0+)
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Reply: It's self evident...
... you are in as much denial as those Libertarians around OEN nowadays who say the failure of the markets had nothing to do with Laissez Fairism and lack of regulations. Feel free to respond with that I didnt offer proof. I would be as unlikely to spend the time to provide real scientific proof of the fact that geocentrism is wrong. I'll simply do the message board equivalent of looking you up and down, shaking my head, and marveling at the denial. by Steven Leser (255 articles, 58 quicklinks, 38 diaries, 2148 comments [63 recommended, 2 rejected]) on Tuesday, Oct 14, 2008 at 6:10:17 AM (0+)
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INEVITABLE ECONOMIC MELTDOWN UNDER CAPITALISM
Now that even Bush, Paulson, et al are saying the economic system is on the verge of collapse, we have a decisive refutation of the claim that capitalism had found a way to avoid depressions and keep itself in power permanently with Keynesian economic policies. The crisis is here to refute all their predictions. Since those who have the money, i.e. the ruling class, always have the means for influencing the government, it was only to be expected that the capitalists would repeal the restrictions put on them by the New Deal as the Great Depression of the 1930's became a distant memory. The exotic financial instruments that enabled the present crisis were made legal by the repeal of the Glass-Steagall Act in 1999. Before, when banks loaned money, the people who received the money paid it back to the bank. The bank thus had a strong motivation to assure that the people they loaned money to could pay it back. Even if the original maker of the loan sold it to another institution, that other institution had the same motivation to assure that the loan was good before they bought it. The repeal of Glass- Steagall made it possible to combine many loans into one instrument. The original loan maker could combine both good and bad loans into one instrument and sell it to another financial institution. They would get their quick cash payback when they sold the financial instrument and would not have to worry about whether the borrower could pay it back. It became possible to issue loans with variable and escalating interest rates that the borrower had no prospect of repaying and lump these bad loans in with other good loans and sell the whole amalgam to another financial institution who in turn could sell it to a third institution, etc. Someone could argue that capitalism could have avoided this crisis if only we had not repealed Glass-Steagall. But the point is that the ruling class will always lobby for the repeal of the legal restrictions on their financial manipulation when the crisis that led to their adoption has become a distant enough memory. And they will do this even if the repeal is not in the interest of the capitalist system as a whole. In an analogue to The Tragedy of the Commons, individual financial high rollers will benefit from the repeal of any restrictions on their behavior although it may threaten the welfare of the capitalist class as a whole. And if anyone doubts that the possessors of great wealth or the ruling class can always obtain what they want from the government, they need only remind themselves that it takes hundreds of millions of dollars to run for President with any prospect of winning. The only way to get large sums of money is to go to those who have large sums of money. And they are not just contributing to political campaigns for their health; they are unlikely to give money to any candidate who will legislate against their interests. Another example is the savings and loan crisis. A single financial institution could not by law be both a bank and a savings and loan. This was one of the New Deal reforms during the Depression to enable more people to own homes. These legal restrictions were repealed and the savings and loan crisis followed a few years later. A second argument about why capitalism has to eventually fail comes from examining the series of crises that resulted from exorbitant loans to third world countries. When a series of Asian countries defaulted on their loans, there was concern that the capitalist system might not be able to contain the crisis. Earlier, there were similar concerns when a series of Latin American countries defaulted. This series of crises demonstrates that capitalism is like a high wire walker threatening continually to loose their balance. They may regain their balance this time and the next time and the next, etc. But is is a statistical certainty that eventually there will be a fatal plunge to earth. Writing in the September 22, 2008 STAR TRIBUNE, Isaac Cheifetz, author of the monthly column, "Commerce Chain" in BUSINESS INSIDER, stated that there had been only four significant financial crises in the U.S. from 1873 to 1983; the Long Depression of 1873 to 1893. the Panic of 1907, the Great Depression of 1929 to 1939, and the crash after the economic boom of the 1960's in 1970. Yet in the past 25 years, we have had five major financial crises; 1987's Black Monday when the Dow Jones average fell 23% after computerized trading spiraled out of control, the savings and loan crisis of the late 1980's which cost taxpayers an estimated $125 billion, 1998's Long Term Capital Management collapse which nearly sank the global financial system, the dot-com bubble burst of 2000-2001, and the current subprime mortgage/derivatives crisis. And Mr. Cheifetz forgot to mention the banking system's threatened collapse when a number of Latin American countries defaulted on their loan payments and again when Asian countries defaulted. Both times thare were concerns expressed in the press that the global capitalist system might not be able to contain the repercussions from the defaults. You may as well admit it. You can not avoid an eventual economic meltdown if you retain capitalism and it is past time to replace an uncoordinated system of production for individual profit with a socialist system of production for human needs. Robert Halfhill http://halfhillviews.greatnow.com (SITE NOW BANNED ON AOL) by rhalfhill (3 articles, 0 quicklinks, 0 diaries, 327 comments [1 recommended, 0 rejected]) on Tuesday, Oct 14, 2008 at 2:25:05 AM (0+)
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The Death of Neo-Liberalism?
First of all "neo-liberalism" is a term that is widely understood as referring to the Friedman school of economics meaning a radically free market approach to business. Second of all, don't count these people out. They represent, on a global basis, the ultra weathy elite who feel entitled to the rewards of natural resources and labor available everywhere in every country. Because of their advantageous position they often wield great control over the flow of information through commercial media and publishing houses and take special pains to manipulate ignorant populations. They love to aggravate emotional issues that they don't really care about but that they know serve to divide and conquer less sophisticated voters. Abortion, gun rights, racial animosity, gay rights issues, prayer in schools are all hot button issues that the wealthy elite couldn't care less about except that they cause lower income voters to vote against their own interests. The CIA and other shadow organizations that have perpetrated evil interference in other countries, initiating and promoting the overthrow of democratically elected governments largely for the sake of business interests all work for the benefit of this global elite. From the Spanish-American War this has been the American pattern. General Smedley Butler tried to blow the whistle on this behavior in the early 1930's but no one listened. The neo-liberals are firmly entrenched around the world and in domestic politics here in the U.S. Even though a move toward an American brand of socialism (The Marxist/Leninist stuff is crap) would be the healthiest and most successful way to make life better for most people, this pack of greed mongers will not relinquish their thrones easily. Facing defeat, you could expect them to resort to just about anything including division, violence and disruption. These are not American patriots. They only have allegiance to their own bank accounts even though they may be centered in Dubai. by Bryan Emmel (0 articles, 0 quicklinks, 0 diaries, 418 comments [32 recommended, 0 rejected]) on Tuesday, Oct 14, 2008 at 4:07:49 AM (0+)
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Reply: It's not widely understood.
A very quick poll of ten college educated people at work yielded that none had never heard the term. I then asked a few folks with MBAs and THEY never heard the term that is supposed to be so classic. That being said, I agree with your other point (rephrased another way) that I think we are headed toward some variation of the French or Swedish systems. 200 years from now, I think the whole world will be there. by Steven Leser (255 articles, 58 quicklinks, 38 diaries, 2148 comments [63 recommended, 2 rejected]) on Tuesday, Oct 14, 2008 at 6:13:24 AM (0+)
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The teaching of Marx is omnipotent
because it is correct. Those are the words of Lenin from his article ' Karl Marx'. Unlike most of the commenters I have actually studied and passed exams on scientific Marxism so I at least consider myself qualified enough to say the following: 1. Marxism is an analytical materialistic approach to the human activity. Neo-liberalism is not. 2,. Capitalism is a term invented by Marx for convenience. It is not a real thing like water or sun etc. 3. Communist manifesto is a guideline for action from a leader. It rallies the supporters for the political movement. ALL writings of Friedman, Fukuyama etc, are just the writings of the servants and their sole purpose is to fortify the good life of the writers and their masters. 4. A person should use Marxism as an analytical tool although Marx does not give a panacea. He explains the disease but his cure is wrong. 5. The simple issue of the wrong cure is that even until now about 2/3 of the people on Earth are not only passive survivors but they have never heard of anything we here discuss. That makes all the theories and philosophies obsolete. 6. I would advise not to make statements about 'collapse of Soviet Marxism' not only because they are ridiculous ( Soviet Union was not a Marxist state; in fact there are no Marxist states) but also because there were much bigger forces at hand than the 'clash of philosophies' Having said all that I want to add that History judges people by only one criteria(which has nothing to do with right or wrong) . That criteria is a level of honest effort exerted by that individual to achieve a certain goal NOT directly connnected to his/her immediate well- being. By that criteria Marx, Lenin, Rose Luxemburg ( killed viciously by the German officers in Munich), even Stalin are giants compared to Friedman, Bush and all those other vultures and that might be the key for the understanding of some human events- shallow malice and stupid envy rule the world. by Mark Sashine (72 articles, 19 quicklinks, 269 diaries, 4103 comments [131 recommended, 0 rejected]) on Tuesday, Oct 14, 2008 at 8:01:24 AM (0+)
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Karl Marx, of attributed, rarely read or understood.
Like the Bible, more people know of it than know it. We are living in the second Age of Capital or the New Gilded Age. It can't survive without help from the state to keep its excesses balanced. True fascism with the melding of state and corporation. The next level is where the corporate-state comes into existence. Where they have the same status as nation-states. It was called "neo-liberalism" because it was a mutation of the classic liberalism like what Ron Paul promotes only with the aid of the state to defend it and support it when it fails. Used as a colonialist tool to gain control of other countries resources. I wouldn't expect MBA's to be taught it under that rubrik unless it is in the area of geo-politics. Even then they would have to go outside the school system to find such data. Read Chomsky, et cetera for that. by nightgaunt (0 articles, 0 quicklinks, 0 diaries, 449 comments [27 recommended, 0 rejected]) on Tuesday, Oct 14, 2008 at 12:36:12 PM (0+)
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Brokers and traders whimpering
A few days after the unpopular bailout was announced, a talking head quoted in the WSJ said that capitalism was not to blame - the problem was greed. I had to laugh - any ideology of governance from Marxism to feudalism would be a utopia if there was no greed. This was a crybaby excusing the implosion of his preferred system due to it's own malfeasance. He was right about one thing - the greed - outside of that, it hardly matters which system you adopt. The question we need to ask today is which system best insulates our society from the poisonous greed we've seen corrupting the public and private sector? Capitalism as it has been practiced is a failed experiment for the U.S., but it has worked out wonderfully for Japan, Saudi Arabia and China who hold ten trillion of our grandchildren's dollars, with interest piling on and on. Anyone defending U.S. capitalism without answering the question "what about the deficit??" is ignoring basic accounting. I'd argue for Scandinavian style socialist capitalism, but the rich bray "Marxism" out of all proportion when you mention this. by Gustav Wynn (77 articles, 65 quicklinks, 5 diaries, 421 comments [34 recommended, 0 rejected]) on Tuesday, Oct 14, 2008 at 5:39:10 PM (0+)
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