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May 3, 2010
Boon and bust is the normal dynamic of capitalism. The view that markets are self-equilibrating and stable is fantasy since Capitalism is inherently crisis-ridden. Its crises mutate rapidly. Eighteen months ago we had a debt crisis of the financial sector, the a global economic crisis and now we have a public sector debt crisis spreading across Europe. That has prompted a political crisis across the eurozone, and particularly in Germany and Greece; voters in the former are incandescent about lending their money, while in the latter it is rapidly becoming a crisis of the state itself.
Once the bubbles are burst, expectations about asset values are dashed, optimism gives way to despair, and wealth is ruthlessly redistributed. Capitalism survives by purging itself of debt and loading the costs of adjustment on the weak and the poor. Capitalism survives by socialising losses and distributing gains to private hands. With this crisis the global epicenter of capitalism accelerates its shift primarily towards East Asia.
That is what happened with the global financial crisis and Wall Street. Creative destruction. Today it is back to business as usual for finance capital, which translates into support for the capitalist class. David Harvey says:
Can capitalism survive the present trauma? Yes. But at what cost? This question masks another. Can the capitalist class reproduce its power in the face of the raft of economic, social, political and geopolitical and environmental difficulties? Again, the answer is a resounding “yes.” But the mass of the people will have to surrender the fruits of their labour to those in power, to surrender many of their rights and their hard-won asset values (in everything from housing to pension rights), and to suffer environmental degradations galore to say nothing of serial reductions in their living standards which means starvation for many of those already struggling to survive at rock bottom. Class inequalities will increase (as we already see happening). All of that may require more than a little political repression, police violence and militarized state control to stifle unrest.
He asks so what will happen this time around? If we are to get back to three percent growth, then this means finding new and profitable global investment opportunities for $1.6 trillion in 2010 rising to closer to $3 trillion by 2030.
Harvey says:
This contrasts with the $0.15 trillion new investment needed in 1950 and the $0.42 trillion needed in 1973 (the dollar figures are inflation adjusted). Real problems of finding adequate outlets for surplus capital began to emerge after 1980, even with the opening up of China and the collapse of the Soviet Bloc. The difficulties were in part resolved by creation of fictitious markets where speculation in asset values could take off unhindered. Where will all this investment go now?
He answers thus:
Leaving aside the undisputable constraints in the relation to nature (with global warming of paramount importance), the other potential barriers of effective demand in the market place, of technologies and of geographical/ geopolitical distributions are likely to be profound, even supposing, which is unlikely, that no serious active oppositions to continuous capital accumulation and further consolidation of class power materialize. What spaces are left in the global economy for new spatial fixes for capital surplus absorption? China and the ex-Soviet bloc have already been integrated. South and South East Asia is filling up fast. Africa is not yet fully integrated but there is nowhere else with the capacity to absorb all this surplus capital. What new lines of production can be opened up to absorb growth?
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Capitalism is a system built on private property, freedom of contracts and financial credit.
There is nothing in this triad that necessitates putting the weight of adjustments on weak and poor, in fact weak became stronger and poor reacher precisely under capitalism and because of it.
Socializing losses is not the idea on which capitalism is based, too.
On the contrary, socialising losses is the idea that comes from progressives and the anti-capitalist crowd wishing to protect themselves from change.