Home / Rejoice: The Impending Collapse of Global Capitalism?

Rejoice: The Impending Collapse of Global Capitalism?

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The answer to the question posed in the headline above is “probably not”, but the avatars and born again prophets of the miraculous curative powers of the Church of Free Market Capitalism are trembling around the world today. As a system it probably hasn’t yet run out of answers to its periodic crises.

Nevertheless, global capitalism is staggering and the system shows signs of breaking down, if only temporarily. Capitalism has shown throughout its history to have amazing powers of recovery and capacity for rejuvenation and I suspect it will pull off yet another recovery, but this will be followed, as inevitably as night follows day, by yet another crisis.

This past week two more megabanks in the United States – Washington Mutual and Wachovia – went belly up. The former was seized by the US government and is being sold off piecemeal with the government, presumably, picking up most of the worthless paper that had been passing for assets.

The latter, bad loans and all, has been bought by an even larger bank, the Citi Group. I predict that in a few years, unless they can unload their bad loans at taxpayers' expense, the buyer banks will themselves be subject to crisis. The folly of a two decade-plus orgy of speculative profit taking will be back to haunt those banks that seem today to be the winners.

In Europe, in the meantime, the three Benelux governments have taken over one bank, Fortis, while another bank, Dexia, has been rescued (they hope) by an infusion of government capital. The British mortgage bank, Bradford and Bingley, passed into state ownership in the last several days. Even in staid, stolid, and prudent Iceland, the government has been forced to intervene to prop up a bank.

In the meantime shares are falling globally, on all the world’s primary stock exchanges. Economic problems cause price fluctuations and capital flight. This in turn causes panic which fuels an even more frenzied movement of capital.

The underlying cause of the latest crisis of capitalism (other than capitalism itself) is the frenzy of speculative credit instruments that have emerged, particularly in the United States, over the last three decades. This orgy of chasing quick and enormous profits at the expense of prudence is the logical outcome of Reaganomics and Thatcherism. Three decades ago Ronald Reagan campaigned on the slogan of “getting government off our backs.” The result was deregulation of the finance sector. Unregulated and left to their own devices, the bankers and financiers ran amok. That is the nature of capitalism.

The proximate cause of the latest crisis is the collapse of the housing mortgage system and, as a consequence, many of the banks that leaped into this speculative cesspool with dollar signs in their eyes and little good sense. Greed – and this was serious greed – led to short term, bottom line fanaticism. Quick profits, high share prices, extraordinarily excessive executive compensation and no brains. They built a house of cards and, over the last few months, the chickens have come home to roost. More and more American homeowners could no longer pay their high interest mortgages. The cards at the bottom were pulled out. Prices fell. Trying to protect their declining assets, the banks foreclosed, the housing market collapsed, and the banks were left with huge losses, a credit crunch, and a liquidity crisis.

Last week, President Bush, the current Pope of the Church of Free Market Capitalism, decided that bankrupt financial institutions and their billionaire owners needed to have their assets protected by working people — the American taxpayer. So, along came the so-called bipartisan bailout plan that would have the government spend up to $700 billion buying bad debt and defaulting loans from banks that should never have loaned out the money in the first place.

In a stunning defeat for the leadership class of both American political parties, the US House of Representatives rejected the massive taxpayer subsidy to capitalist excess and irresponsibility. The conservative Republicans who opposed the bailout did so on the grounds that this was a step on the road to socialism. These people are the ultra-fundamentalists in the Church of Free Market Capitalism. Actually, it’s just another step in the road to state-subsidized capitalism. This is a system in which the state guarantees profits to the rich that are paid for by working people.

The Democrats who voted against the bill did so because they were feeling heat from their constituents who were complaining about having to save profligate capitalists. The opposition has been mainly posturing. I predict that new legislation will be written with purely cosmetic changes and that both the recalcitrant Republicans and Democrats will get on board in support.

I am reminded that I write this week’s column on the last day of September, 2008. In October 1929 the stock market in New York collapsed, ushering in the Great Depression. Hang on to your hats, boys and girls, we might be in for one helluva ride.

Nearly two decades ago, in the aftermath of the much deserved implosion of Leninist communism in the then Soviet Bloc, there was nearly universal celebration in the West. We had won the Cold War: ideologically, economically, and militarily. Hurrah!

The American philosopher, Francis Fukuyama, penned a triumphalist essay in the neo-con journal, The National Interest. He entitled it “The End of History”. The essay was later turned into a book and Fukuyama was hailed as the post-communist philosopher of the future for his encomium to liberal democracy and free market capitalism. The essence of Fukuyama’s argument was that the end of the Soviet Union marked the end of any plausible challenges or alternatives to the hegemony and moral superiority of free market capitalism and liberal democracy. There were no conceivable historical alternatives. We had arrived at the end of history.

History’s aftermath hasn’t lasted all that long. Long before Fukuyama, a far more prescient observer of the history of political economy asked the question: “What is the modern state, but the executive committee of the bourgeoisie?” As one watches modern capitalism cooperate with the modern state in extricating capitalism from its own excesses, one is reminded as to how extraordinarily correct Karl Marx was… and remains.

The epitaph on Marx’s tomb at the Highgate Cemetery in London is from his Theses on Feuerbach, written when he was only 27 years old. In the 11th Thesis Marx asserts, “The Philosophers have only interpreted the world in various ways; the point, however, is to change it.”

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About Bill Hansen

  • Sorry folks for not replying for a couple of weeks. For long periods of time our server has been down here in northeastern Nigeria, and I’ve been busy as well.

    I just write the essays for a Nigerian newspaper. My son posts them on my blog, which he created, and this one as well. My only comment would be to “David from Sydney”. If one were actually to read Marx one would note that he wrote very little about “communism” or “socialism”, i.e., the future, post-capitalist world that he thought would emerge. His work concentrated virtually completely on his critique of capital. The building of socialism was left to those who claimed to be working in his tradition.

    To blame Marx for the crimes of Leninism, Stalinism and Maoism is to blame Jesus for Torquemada or Socrates for Mugabe (Socrates supported the notion of the philosopher king and Mugabe thinks he is one.) This is not to say that I think the history of “real socialism” from the October Revolution through Maoism was one massive, undifferentiated crime. Au contraire mon ami.

    In terms of blood actually shed, I’m certain a dispassionate review of history would find at least as many dead bodies writhing in the wake of capitalism.

    Below is a comment by Marx in a letter to Arnold Ruge written in 1844. The thought contained in this quote differs markedly from that espoused by Lenin… or George Bush.

    “But if the designing of the future and the proclamation of ready-made solutions for all time is not our affair, then we realize all the more clearly what we have to accomplish in the present – I am speaking of a ruthless criticism of everything existing, ruthless in two senses: The criticism must not be afraid of its own conclusions, nor of conflict with the powers that be.” (from the Deutsch-Franzoesiche Jahrbuecher, 1844) Karl Marx, 1818-1883

    Bill Hansen, Yola, Nigeria

  • troll

    bliffle – since all of those guys engaged in similar projects – describing and explaining the machinations of the ‘prevailing systems’ active in their times and proposing political ‘corrections’ – I’m not sure what your point is about Keynesianism being less ‘complete’ than the others

    you set an unreasonably high bar when you call theories ‘simple-minded’ for failing to come up with “The Ultimate Question”…and in any case all of those theories are a bit less simple-minded than the one you consistently fall back on – that being that we’re all buggered because of ‘human nature’

    everything changes

  • bliffle

    I thought of Keynes but discarded it because Keynesianism isn’t a complete system: all it does is propose taxes during flush times and gov spending in sparse times. It’s just a correction to the prevailing system, much as Supply Side econ is a patch on Demand Side econ.

  • troll

    and thanks for your ‘no answer’ bliffle

  • bliffle

    Thanks for naming your favorite, troll. Glad to see you took up my offer.

  • bliffle

    See, Mark. A simple-minded idea that you think will make everything work.

    There you go again.

  • troll

    bliffle re your platitudinous #11 – two questions:

    just what are you accusing those ‘simpleminded theories’ of failing at – ?

    your omission of Keynes’ work is telling…did you omit it from your list of simpleminded theories for a reason – ?

    your appeal to an ahistoric ‘human nature’ explains nothing

  • Mark

    “Humans are no more capable of designing a perfect society than they are of designing an unsinkable ship.”

    That’s the great thing about capitalism: you don’t NEED to “design” a society. It designs and regulates itself.

  • I have many I won’t reveal because they are just too scary–like no food in the stores.

    I’s love to have a handful revealed, Heloise. I’ve been doing a lot of reading this week especially when it comes to prophecy. I’ve been fascinated with the site that Ruvy suggested concerning Judaic prophecy. I’ve also revisited Jeanne Dixon, Nostradamus and even went so far as to have my Armenian coffee grounds read. And all I have learned from this little foray into the superstitious is that we have the power to change things. It doesn’t take a rocket scientist. If we are that passionate for change we need to make our voices heard BEFORE the food is off the shelves and a loaf of bread is $10.

  • bliffle

    ALL of the simplemended economics theories fail: Marx, Smith, Ricardo, Friedman, Straus. Name your favorite.

    Economics is a complex business because the desires of so many people are involved. That’s why Econ so often becomes Morals and Ethics, i.e., what people SHOULD want. Or, the other way around: what econ theory will justify a given outcome (either like this present society or some dreamed of utopia).

    Every one of the hortatory economists I’ve ever read suffers from two ills: (1) some kind of moral mania, and (2) such a narrowness of focus that their theories have limited application.

    Then, when some nuts take control of a society somewhere and implement about 95% of some econ theory, and that society fails, as anything designed by Mere Humans must, the onlookers divide into two groups. One says “see, I told you that Xism was no good and would fail!”, and the other group says “but it wasn’t PURE Xism!”.

    It has always been so. And it is less a remark on X or any other system than on the gullibility of humans in accepting that some simple narrow idea could encompass all of human desires and capabilities.

    Humans are no more capable of designing a perfect society than they are of designing an unsinkable ship. Remember the Titanic! The bigger they come, the harder they fall, just like communism and capitalism.

    Too bad that so many people get hurt and killed in the process, which is often less due to the failures of the theory than the iron bound unwillingness of disciples to recognize incipient failure and willingness to take everything down with them.

    One would hope that education and easy access to learning and history through things like the internet would improve our understanding of what people of thought have to say, and what history has to tell us, but, alas, it seems not to be true, witness our proclivity for scorning educated Eggheads and electing uneducated rubes who seem to only act from viscera (I will name no names, out of regard for the sensibilities of some BC auditors).

  • Doug Hunter

    Well said David from Sydney. It amazes me that people still worship Marx after the failed implementations of his ideologies have cost tens of millions of lives in less than a century.

    The problems with capitalism usually revolve around excesses, having too much of a good thing. Socialism/Communism problems usually involve shortages. I know which one I prefer.

  • Heloise, in a lot of ways you’re really no more rational or dare I even say ‘sane’ than a conspiracy theorist like Pablo. Bush didn’t have a plan to destroy the US economy. The suggestion is paranoid and ridiculous.

    But if your most extreme scenarios are true, I hope you’ve got some good guns on hand.


  • Heloise

    A funny thing happened on the way to WaMu. I along with millions of others pulled their funds out of WM on damn near the same day! How’s that for a herd mentality. That was to the tune of billions of dollars, then the next week they went belly up. Is it a horse before the cart issue? Not sure. I was mad at something they did and wrote a check and emptied my savings and checking account with them. I also had it tied to my trading account.

    I got burned on stocks so I decided not to buy anymore. I sold my JPM stocks when they went up to 46/share just before black Monday. I have only a few dollars left in Wall Street. I pulled my money out of there a year ago and put it in a CD with Wachovia. Now, they’ve been sold.

    But lo and behold I recalled today saying that Bush had plans to destroy the US economy with the Iraq war and what better way to take over the world economy by first destroying it? So, I hate to make predictions because it’s not pretty when they come true. I have many I won’t reveal because they are just too scary–like no food in the stores.


  • David from Sydney

    Capitalism is the only economic system that has actually helped the poor/working class. On a massive scale and explosively fast. This article demonstrates the sheer ingratitude and lack of perspective found in socialist thinkers. Communism/socialism is just a disease of capitalism, hubris resulting from the astounding success of capitalism in building wealth, the idea, “Let’s go one step further, let’s have equality of outcome”.

    I mean think about this: we live in a society where poor people are fat. This has never happened before. A bad thing it is thought, but is it such a bad problem to have? Compared with what has been the case throughout history and in the alternative communist countries (73 million died in peacetime in communist China mostly due to government created famines).

    And you still have a soft spot for Karl Marx. I’m sorry, but I find it lazy, ignorant and unforgivable.

  • Stu

    Greed? No. Contrary to popular opinion, granting defaulting sub-prime loans which need to be written off the balance sheet isn’t exactly sound long-term business practice.

    Good intentions? Getting warmer.

    Global capitalism… let’s give it a try for once.

  • Greed, facilitated by the notion of uninhibited exploitation.

    Greed – with no regard for the environment, the poor or for country. Greed is universal. It finances the terrorists with pennies from every gallon of gas we purchase. It finances the pharmaceutical lobbyists, with every over priced pill we purchase. It finances the oppression of children and women in third world nations with every article of clothing we purchase from Wal Mart. Greed – it governs all of us who live sin a “civilized” society.

  • Steve

    Government-backed mortgage entities, inflationary Federal Reserve monetary policy and arbitrary mark-to-market accounting regulations represent “global capitalism” to you? Interesting definition.

  • bliffle

    Greed, facilitated by the notion of uninhibited exploitation.

  • Yup. Once again, you hit the nail on the head, Joanne….

    Have a happy 5769.

  • Greed. Meh… That’s what caused all of this.