Whats Next ?

According to the news media covering the seemingly endless Presidential campaign the economy far outstrips the Iraq war for the "people's" major worry. And the economic news is even more endless than politics. Of course, the economy is politics as much as the war. Bush didn't invade for the date palms. I read something recently that summed it up and I couldn't have written it more pithily myself. So below I reproduce an article from People's Tribune:

The economic crisis that is steadily engulfing our country is getting broader and deeper. This is not just another recession. The market economy system is running out of steam. The temporary “fixes” that have been used over the past 30 years to patch up the capitalist economy and keep it going no longer work. Now, only fundamental change that addresses the underlying problem will get us out of this mess. What is the underlying problem? While the corporate press talks of the bursting housing bubble and the subprime mortgage mess “spreading to the broader economy,” this is only a symptom of the problem. At the root of the crisis is the way a market or capitalist economy really works. It works through workers selling their ability to work – their labor power – to a capitalist in return for wages. That labor power creates more economic value than it consumes – this is the source of profit. The capitalist owns what the worker produces and sells it to get his profit. The “market” that the capitalist sells to consists of businesses and workers that have money to spend. The basic problem is, the market is being destroyed because advancing technology is replacing workers and wiping out jobs and whole industries. As more workers compete for fewer jobs, wages fall for those who still have jobs. Technology, combined with globalization, also means millions of jobs can be shipped overseas, so workers in one country are competing for jobs with workers all over the world. The result? A new class of dispossessed workers – permanently unemployed, or with only temporary, low-paying jobs – is being created and is moving steadily toward becoming the majority. Workers with little or no money cannot consume. This destroys the market for what is produced, and the market economy begins to fail. This is the foundation of the crisis we see developing now. Until now, the crisis has been averted. For about the past 30 years, the US economy has been propped up with borrowed money. Workers and homeowners have borrowed on their credit cards and against their homes. Banks, investors, industrial firms and the US government have borrowed from foreign investors and governments. The US today relies on $2 billion a day from abroad to finance investment. The periodic recessions and other economic crises that have developed have been temporarily solved with more borrowed money. But sooner or later the loans have to be repaid. And now everyone involved is out of options. Unemployed and impoverished workers can’t pay. Without buyers, businesses can’t sell what they make, and now they can’t pay. Seeing this, bankers and other lenders are pulling back. Credit is drying up. The US “Rust Belt” – the former industrial heartland – tells the story. Look at Michigan, for example, where auto layoffs and buyouts continue, and 400,000 jobs have been lost since 2000. The jobs aren’t coming back, and new “New Deal”- style government programs won’t solve the problem. It does no good to put money in the hands of workers who will never again have jobs. Once the money is spent, we’re right back where we started. During the Great Depression, it wasn’t Roosevelt’s New Deal programs that ended the Depression, but World War II, which put everybody back to work. But today, the military industries and modern warfare are so automated, even another world war won’t put many people to work, and it would probably destroy the world. History shows that depression, war and fascism go hand in hand. If we continue to follow capitalist leadership world war is where we’re headed. And we’ll have fascism in the bargain, as the corporations seek to turn us against each other so we don’t turn on them. There is only one way out of this – we, the people, must organize ourselves to fight for a new society where we use the marvelous technology at our disposal to produce everything we need and guarantee that everyone has the necessities of life. It is a world worth fighting for.

There is a liquidity crisis because there is too much liquidity, all based on debt, or as Marx called it, fictitious capital. Fundamentally there is an accumulation crisis; there are few places to invest profitably in production so capitalists thought up making money from money and so extended credit that Bear Stearns had only $1 in capital reserves for each $30 in debt. Thus the liquidity crisis manifests itself as a solvency crisis. Both the government through the Treasury and the privately owned Federal Reserve have moved debt from insolvent corporate debtors to the taxpayer. This can only buy time as insolvency and devaluation works its way through the economy. And it can't solve the basic contradiction that workers can't pay bills or buy products because they don't have the income. Major shrinking of economic activity is in the offing with the Feds trying to fight it off through hyperinflation which can only add to the problem.

For more than a century many leftists thought that capitalism would collapse on its own, as though an accumulation crisis were a typhoon or tsunami that would wipe the slate clean and a new order might be writ. That idea is probably a fantasy, an implausible fiction. Crisis occurs, assets are devalued, those with wealth pick up the bargains, lay off workers, lower wages and destroy pensions (which are merely deferred compensation). There will be a continued push for privatizing the public sphere as one of the very few productive areas that have a necessary, captive market that will be enforced through a manipulated government. Wait for the day when your neighbor knocks on your door not to borrow a cup of sugar but a gallon of water! As after WW II, and as 'they' hoped after seizing Iraq, a devastated country needs to be rebuilt and by putting people to work, creating wealth for investors the game begins anew. Capitalism doesn't collapse and die, it destroys and rebuilds at a higher level of exploitation. More bullets bombs and deaths await us. If people want a more humane and cooperative world, society and economy, they will have to fight for it and create it. Goldman Sachs and its wholly-owned subsidiaries, the US Treasury and Federal Reserve, will not do it for us.