The Periodic Crises of Market Economies

north america / mexico | economy | opinion / analysis Sunday October 12, 2008 04:13 by Randy (personal capacity) - supporter of the Captal Terminus Collective, NEFAC

The US economy is in crisis. Construction has halted and credit is scarce. Companies remaining in business slash their workforces. The stock market is turbulent, even as Congress bails out the bankers. (Meanwhile, working homeowners and renters are left to fend for ourselves, indeed to finance the bailout of the banks.)

How serious is the damage? Will this turmoil prove temporary, or do hard times stretch before us to the horizon? Opinions vary, but the careful reader more attuned to human psychology than economics* might get a clue from the pages of mainstream news reports...

Depression era billboard

Corporate news outlets are careful to avoid alarmist tones when reporting on economics, lest they cause panic in the marketplace. Yet, for the first time in memory, parallels are being drawn between current events and those that preceded the Great Depression of the 1930's.

What caused this most recent crisis? At the risk of oversimplification, we may say there are three broad schools of thought. The most common view, what we will call the liberal view, is that the "free market" is mostly a good thing, but government intervention is necessary to dampen the extremes of the inevitable ups and downs of the business cycle, to offset the more brutal consequences thereof, and pacify the necessary layer of the unemployed.

Conversely, laissez-faire economists claim that markets are infallible, and government intervention the enemy. This view is most common among the wealthy, who employ the ideology to justify such policies as cutting social services. (However, such types are quick to jettison "free market" ideology when convenient. See the previously mentioned bailout of the banks, which, after some posturing, is being supported by the very politicians who delight in bashing Big Government.)

And finally, there is the view that while the worst extremes of the business cycle may in fact be damped out or even delayed by various policies, the nature of the market is such that periodic collapses will occur, regardless.

Which of these views does history lend credence to? Laissez-faire theory is easiest to debunk. Again, its own proponents don't consistently accept its tenets! Witness President Bush, who preaches free market religion to China and the world, even as he scrambles to secure government assistance for his cronies in the banking and energy businesses. Aside from such blatant hypocrisy, US history prior to the regulated market is a tale of boom and bust, of one period of unbridled expansion followed by yet another recession or depression, ad infinitum.

Until recently, the liberal position appeared more tenable. A reasonable person might be forgiven for believing that society had indeed arrived at the end of history, that practitioners of the dismal science, economics, had succeeded in taming the business cycle. After all, there had been no calamity to rival the Great Depression since the 1930's. The late 70's saw a severe recession, and many folks lost their savings when the tech bubble of the 90's burst, but these circumstances paled against the soup lines of yesteryear. Extremists of both left and right were thought discredited, irrelevant within the new social order, throwbacks to an era dead and gone.

But as the mortgage crisis becomes the market crash, and as the current recession threatens to deepen into a depression, one can only conclude that the savage nature of market economics has not changed significantly. Market economies, local and global, with or without government intervention, have proven as great a failure as the so-called Communism of the former Soviet Union. So long as we live in a society that worships at the altar of exchange, that allows one class to purchase the hours of the lives of another, that values profit above the well-being of humans and humanity, for just so long will these crises periodically recur. In the best of times, the rule of the wealthy is cruel and degrading. In times such as these, it is intolerable.

In the coming months and years, we may expect an increase in the scapegoating of immigrants, religious fundamentalism, perhaps even a resurgent fascist movement in new clothing, financed by the right wing of our rulers. Meanwhile, people of conscience will turn to the left, in search of a sane, humane structure for a new society. Which side will you take?

For several years now, the Capital Terminus Collective has argued for an end to government and market economies, and in their place a global federation of self-managed communities, with fields and industries belonging to all. We are not pleased to see the current chaos and impending misery. But we think it inevitable under capitalism. The need for a new social order has never been greater.

*- An excellent economic analysis examining derivatives in the post-Keynesian world is Paul Bowman's *Financial Weapons of Mass Destruction* on Anarkismo.net at http://www.anarkismo.net/article/9850