by Matt Boyer
That’s one more point against capitalism. Or should we say another 777 points? In any case, somehow markets have failed to produce the worldwide prosperity and never ending consumption that they promised. It appears that everyone is shocked. Supposedly we were riding on an internet boom, followed by a housing market boom, an incredible surge in financial markets, and an unprecedented profitability in warfare and security. What could possibly go wrong?
For many people, things have been going wrong for quite some time. The “prosperity” that free markets are producing is generated for a particular class. Over the past decades, the liberalization of trade and finance has been a plague to the working people of both global North and South. In the United States, Reaganomics (better known as capitalism), has promised that decreased taxes for the wealthy will create incentives for business investment. And since these industrial barons are responsible for hiring the rest of us, wealth for them will surely translate to wealth for us.
By now, if you aren’t aware that this system is counterintuitive and exploitive, you are either a business person or well indoctrinated. Nevertheless, the current financial meltdown is providing an excellent opportunity for us to pull back the curtain on capitalism, and see it for what it truly is.
Here’s the quick rundown on what got us here:
The housing market was incredible. With prices constantly on the rise, mortgage companies gave loans to people that did not have credit or other requirements such as employment. This was a high risk loan, but the returns were potentially monstrous due to high interest rates. These mortgages were then sold off to banks, which were then sold on the stock market. Along the way, they were put into large bundles of these loans and called securities. With all these derivatives, the companies that rated them would give them AAA ratings – the highest possible. AAA ratings are the same as US bonds. Hence, they seemed very safe and reliable. These were passed off to other investors. Everyone was making profits and everyone was happy.
Turns out that giving out money to people who cannot pay it back is called ‘risky’ for a reason. Poor homeowners were hit hard when the housing market collapsed. Their homes were worth less then their mortgages, so they did what any common sense person would do, and bailed on the mortgage. This ‘default’ has begun eating its way through the capitalist chain. Everyone who tried to profit is now feeling the crunch. From mortgage companies, to investment, to Wall Street, and now the banks like Wachovia and Washington Mutual, we are watching as the capitalist system adjusts after its losses and figures out where it went wrong.
One clear catalyst is the government removal of the Glass Steagall Act from the 1930’s. During the Great Depression, the government realized that rampant financial groups, consolidating commercial banking and securities, had to be controlled. The act kept financial corporations from dealing in more than one type of financial sector. This regulation sought to reduce speculation and risk that allowed the 1929 stock market crash. Fast forward to an apparently blackout prone America in the 1990s. Having forgotten the dangers of freeing finance from regulation, the Glass Steagall Act was revoked and the Gramm-Leach-Bliley Act of 1999 was instated. This new bill allowed commercial and investment banks to consolidate, deregulating markets. Less than a decade later, we have seen the result of capitalism left to its own devices.
Just like with the Iraq war, we’re being told that this collapse is the result of mismanagement and corruption. We must recognize, as we have with the military-industrial complex and wars for resources, that this crisis is not an anomaly. The crises of war and finance are systemic and interrelated. Free market capitalism is destructive. The current stock market crash isn’t the result of recent increases in greedy brokers; greed is inherent to the system.
The media would like us to believe that this collapse is color and class blind. However, who is really hurting now? We are warned that if the US government does not respond with a massive bailout package from anywhere between $700 billion to even $1.2 trillion, then everything will come toppling down and the ‘common citizen’ will be suffering. Well, it’s a little late for that argument. With unemployment on the rise, and an unprecedented amount of people left homeless, the suffering has already begun. Detroit for instance, with a much higher African American population that the rest of the United States, has reached a 32% poverty level. Where is the $700 billion package for Detroit or New Orleans? The bailout is clearly an attempt to save the millions of dollars lost for CEO’s, corporations, and their politician counterparts.
And lets recognize this capitalist hybrid for what it is. Free market gurus oppose bailout because they view it as socialist?! Well, there is a hint of government planning in this response, but it is far more akin to fascist economic policy than socialist. The fascist economic systems of the past focused on private enterprise with government as the ultimate property owner. As Gaetano Salvemini explained the fascist state’s economy, “the State pays for the blunders of private enterprise… Profit is private and individual. Loss is public and social.” Isn’t this what we’re learning today? When corporations win, it is because the free market is the only answer to economic concerns. But when markets fail and the wealthy take losses, it is all of our duty to save them from the poverty of the majority.
The president has even come before the American people to ask for their support of this bill. His speech was nightmarishly reminiscent to his sales pitch for war. Essentially, our safety is being held ransom. Either we choose to support vast dictatorial power to the government-corporatist machine, or we are left for dead. In this time of crisis, just like after September 11, 2001, the president is attempting to take advantage of the national shock, and push through extreme measures. Not only are we expected to pay off CEOs and leave our neighbors impoverished, but we’re also supposed to see this as the result of too much regulation. The ruling class wants us to believe that freer markets, following this fascist bailout plan, would lead to more productive and responsive markets. That’s like telling a lead poison victim to drink a can of paint as an antidote.
Rather than rescue capitalism from its own self mutilating and violent nature, now is an opportunity to challenge the authoritarian economic structure enforced upon us. Now is the time to demand a democratic economy. With homelessness on the rise and mass amounts of houses left vacant, we can reclaim the ‘assets’ that the banks sell, and make their ‘capital’ into our homes. Rather than allow the threat of recession to create submission in unions and the workplace, it is time to demand that workers be restored to their proper collective potential. Instead of bailing out the ruling class so that they can pass the leftovers back down to us, lets recognize the power that we hold in this moment, as capitalism falters. We can make the economy more democratic through asserting ourselves and creating truly free markets that revolve around community potlucks and sharing what we have (both tangible good and knowledge) with our neighbors.
Take Alan Greenspan’s words as a warning, “Very large losses will, no doubt, be taken as a consequence of the crisis. But after a period of protracted adjustment, the U.S. economy, and the world economy more generally, will be able to get back to business.” We must ensure that this doesn’t happen. No more business as usual.
