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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

economic crises: why? « Previous | |Next »
February 6, 2011

In How Much Is Too Much? in the London Review of Books Benjamin Kunkel says that Paul Krugman, discussing Roubini’s book in the New York Review of Books, agreed with him that what Ben Bernanke called the ‘global savings glut’ lay at the heart of the crisis, behind the proximate follies of deregulation, mortgage-securitisation, excessive leverage and so on.

Kunkel adds:

Originating in the current account surpluses of net-exporting countries such as Germany, Japan and China, this great tide of money flooded markets in the US and Western Europe, and floated property and asset values unsustainably. Why was so much capital so badly misallocated? In the LRB of 22 April 2010, Joseph Stiglitz observed that the savings glut ‘could equally well be described as an “investment dearth”’, reflecting a scarcity of attractive investment opportunities. Stiglitz suggests that global warming mitigation or poverty reduction offers new ‘opportunities for investments with high social returns’.

Kunkel adds that the neo-Keynesians’ ‘savings glut’ can readily be seen as a case of what a more radical tradition calls overaccumulated capital---it is the broader and more systematic Marxist perspective that ultimately and properly contains Keynesianism within it.

The Marxist account of crisis is that it is caused by the over accummulation capital which, means by definition, that it can’t easily find a profitable outlet in increased production. Capital overaccumulated in one place can flow to another which appears to boast better ultimate prospects of profit.

Overaccumulated capital, whether originating as income from production or as the bank overdrafts that unleash fictitious values, can postpone any immediate crisis of profitability by being drawn off into long-term infrastructural projects, in an operation David Harvey calls a ‘spatio-temporal fix’.Not only Americans and Britons but the Irish, Spanish and Emiratis live today among the ruins of a broken spatial fix. They are experiencing what David Harvey calls a switching crisis.

Harvey argues that the resulting temptation to the overaccumulation of capital, will be for capital to sidestep production altogether and attempt to increase itself through the multiplication of paper (or digital) assets alone. Kunkel says:

Both the new factories at home (China) turning out exports for the US, and the deliriously appreciating houses abroad rested on the premise of continuously rising American incomes. But among Americans, wage growth had ceased and household incomes could no longer be supplemented by the mass entry of women into the workforce, something already accomplished. The issuance and securitisation of debt alone could substitute for present income. But in the end so much fictitious capital could not be redeemed. Whatever the destination of future Chinese savings gluts, they can no longer sponsor American consumption in the same way.

| Posted by Gary Sauer-Thompson at 6:47 PM | | Comments (1)
Comments

Comments

Shows up the contradiction between labor value and commodity value as to the disposition of the masses to productivity, eg can your workforce be both productive and also fulfil their role as consumers dislocated from reality in late capitalist consumer capitalism?
Wasn't part of Buadrillard's thesis to do with the transformation from use value to exchange value involving abstract symbolisms beyond bread and butter ones?
WAs this process relative to Battailles idea of an "economy of excess"?
Yet the B.S aspect of life has many reflective of the more feral forms of change and seek hoard or in reaction, binge, as part of a turning defensive of the self.
A lot of people have noted imperialism at work in Egypt and Tunisia, but few have thought perhaps that Obama and co are actually reflective of an isolationist reflex mentality.
Haven't Quiggin and co pointed to a mentality that has forgotten the last set of lessons (1987?)and no longer understands "risk" even at the moment, in recoil of it after 2007.
What goes wrong when the cargo cult expectations fail and victimhood/entitlement consequently surfaces and etrenches, driven by forces that may take time to identify and decode as to meaning?