This post was contributed by a community member. The views expressed here are the author's own.

Health & Fitness

The capitalist system will not, change so we must change the system

by Richard Mellor
Afscme Local 444, retired

Debt allows the capitalist system to reach beyond its limits; but only temporarily as the economy has to be brought back to reality at some point.  Home prices and debt drove the huge increase in spending prior to the crash of the sub prime housing market, an event that one commentator said would be the greatest loss of African American wealth in US history. Since 1980, the aggregate stock of US debt rose from 163% of GDP to 346% by 2007.   Household debt rose from 50% of GDP to 100% during the same period while the indebtedness of the US financial sector climbed from 21% to 116% (Financial Times 9-24-08).  

People thought their houses were banks, and safe banks at that. According to Freddie Mac, cash taken out of home equity went from $21 billion in 2000 to $321 billion in 2006. The figures are staggering.  In total, the debt boom of 2001-07 pumped $3 trillion in to the economy.  It was the most pronounced credit cycle in history during which the personal sector took in as much debt as the last 40 years combined.  That's an incredible injection of cash in to the economy in such a short period. It was inevitable that this bubble would burst.

The severity of the crash stunned the capitalist class.  The headlines and comments in the serious journals of capitalism at the time give some idea of the dour mood among them about the future of their system.  “Capitalism in Convulsion” wrote the Financial Times on Sept. 20,  2008.  “A week that shook the system to its core”, reads another headline in the same issue. The main story in the September 28, 2008, issue of Business Week read, “Wall Street Staggers” and was accompanied by the picture of a bull, head down with blood dripping from its mouth and body from the numerous swords that are protruding from in between it shoulder blades; the defeated animal’s blood is all over the page.

Something drastic had to be done, “heavy costs will be inflicted on the American taxpayer, who is now subsidizing Wall Street.”, wrote John Plender in the Financial Times. How true that statement was as the politicians in the two Wall Street parties dipped their dirty little hands in to the public trough and allocated as much as $16 trillion dollars to bail out the bankers and rescue capitalism from total collapse. The housing industry and auto was basically nationalized although the US capitalist class preferred the term “conservatorship” so as not to implant in any way the idea that public ownership, considered socialism in the US, was rescuing capitalism from itself.

The young up and coming coupon clippers with their tee shirts and jeans had never experienced such a crisis; they thought it would never end.  Their confidence in the system was severely shaken and the theoreticians of capital and the old guard had to ensure them that all would be well, they’d been through this before.  It was time for a history lesson. The pages of the serious journals of capitalism were filled with articles explaining the nature of the system and the history of such crashes dating back to the great Tulip bubble of the 1600's.  Readers flocked to bookstores to get a copy of Marx’s Das Kapital, the most thorough analysis of the capitalists system of production.  The Financial Times, the journal of British finance capital urged its readers to study Marx.

“The beginning of wisdom is to recognize that financial booms and busts have been a feature of capitalism from the very start,”
wrote Samuel Brittan in the Financial Times. Gillian Tett, also of the Times wrote: “…many bankers have believed—at least until recently---that this decades burst of market innovation had re-written the rules of finance.” . Ms Tett pointed out that Lehman Brothers, (the bank that was allowed to collapse) estimated that there had been 60 market crashes since 1622, “This summers turmoil will not be the last” she warns her class brethren. “This neo-modern credit market is not very dissimilar after all from its classical predecessors” she quoted a Leheman Brothers analyst as saying. We will get through this, was the message.

The mood was so tense and anger so pronounced in the aftermath of the crash that Obama was forced to chide his banker friends as they continued to receive huge bonuses as workers lives were shattered.  The bonuses were  “..the height of irresponsibility” he said at the time, “It is shameful” he added and appealed to his class to show, “some restraint and show some discipline and show some sense of responsibility.”  He assured them that profit taking will return but now is not the time.  The situation was too volatile; the anger too great.

Not one of these bankers served any time for their crimes though “at least 21 of the top 25 subprime originators…..were either owned or financed by the biggest recipients of the troubled asset relief funds.”  Included in these were Bank of America, Wells Fargo and JP Morgan according to the Center for Public Integrity (FT 5-6-09).

These episodes “…. occur with striking regularity—typically at least once a decade.”, Ms. Tett had assured the young coupon clippers. Considering they claim to know so much you’d think they’d have figured a way to avoid them.  Plus, knowing that, one would wonder how come respected journals of capital would even entertain the idea that the business cycle was dead; it shows how confused they are about these issues.  The answer to that is simple---profits---the gold at the end of the rainbow; the goose that lays the golden egg; money without working.  This is what blinds them to the reality of their system.  Only the regularity of such capitalist crisis will likely not be limited to once a decade or appear in quite the same way each time as this historically bankrupt system of production blunders along towards the abyss wreaking havoc along the way.

Such great social shocks leave their mark as once venerable institutions (Leheman, Kodak) enter the history books and new movements arise. The Occupy Movement that arose at the time appears to have ebbed somewhat due to its own mistakes and violent and brutal repression on the part of a beefed up state apparatus. But the Great Recession has left a bad taste in the mouths of millions. Polls have shown that as much as 36% of us favor some form of socialism.  In the aftermath of the crash Business Week launched a campaign to counter the unfavorable view about the market that existed in society but found through its focus groups that the term “Capitalism” could not be used as respondents considered it to represent the powerful crushing the weak.  This reflects a poweful tendency for fairness and equality in society despite the massive propaganda of the 1% promoting selfish individualism and a winner take all mentality.

It’s not likely what the capitalist commentators refer to as our “profligate” spending habits will return any time soon, no matter how hard they try to convince us otherwise, certainly not before the next crisis. Consumer spending has grown at a 2.1% annual rate since the end of the Great Recession compared to 3.2% for the twenty years prior to the crash as money is not so readily available.  Moneylenders are wary about lending and corporations are sitting on trillions in cash. Homeowners who thought that housing prices would rise forever and saw their homes as a bank and a secure one at that, have been badly burned.  Thousands of layoffs, massive cuts in social services and education and lost homes have taken their toll on the American psyche.

As hedge funds pour millions of dollars in to buying up foreclosed homes, sometimes renting them back to those from whom they were stolen and jacking up home prices in the process, those seeking home as a shelter are rethinking things. Instead of the house being a source of disposable income the feeling now is that a home is “more a nest egg to be secured” writes Rich Miller in Business Week adding,  “Cash-in refinancings, in which borrowers invest more of their own money in the house, outnumbered cash outs by more than 2 to 1.”

The consequences of this sea change in attitude is that every dollar increase in the housing sector may only yield 1 cent compared to 3 to 5 cents prior to the crash by Business Week’s estimations. It will not be the driver it was.

My point in all of this, other than writing being somewhat of a catharsis, allowing me to vent my frustrations about the destructive nature of the capitalism mode of production, is to keep history in perspective and the fact that their behavior that brought us the Great Recession is still there despite their glowing although somewhat guarded reports about growth.  Growth for them is stock market numbers.  It is the laws of the system that drives the big capitalists to do what they do, the same laws that drive them to war.

The old habits are returning, the financial swindling, speculation, lack of regulation or finding ways around it, the accumulation of capital in to fewer and fewer hands; more for those at the top, less for the rest of us including in the form of social services and of course the destruction of the environment. Coupled with this we see increased repression and curtailing of civil rights as those on whose backs their wealth is made are driven to resist being driven to starvation in some parts of the world and pauperism in others.  The US will have its “Arab Spring” there is no avoiding it.

I am optimistic because I am confident the US working class will fight back. Our history is one of rich and militant struggle against the most callous and ruthless ruling class in history.  We didn’t get this far by sending e mails to Congress.  It is to this history and great tradition that we must return.

As the ecosocialists like to say: System change not climate change. For a democratic socialist world.

We’ve removed the ability to reply as we work to make improvements. Learn more here

The views expressed in this post are the author's own. Want to post on Patch?