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Like many other people, when I listen to the economists interviewed on CNN, MSNBC and the like, I frequently come away thinking that either they don't know why our economy is in crisis or, if they know, are deliberately lying about it.   Some Republican-prone babblers would have us believe that the poor, largely the poor of color, bought houses they couldn't  afford and thus did in our whole economy.  Nobel winning economist, Paul Krugman, is the welcome exception to mindless talking heads; he unabashedly tells it like it is. Krugman effectively smashed "the poor caused the crisis" meme.

I was dissatisfied, not only with the TV's talking heads, but also with President Obama's appointments of those who contributed to the financial crisis by pushing for deregulation,to "fix" the economic problems they helped to create.  So, I began googling for explanations of our economic woes.

What popped up was beautiful in its simplicity: audio book recording of a pamphlet entitled "Wage-Labour and Capital" by Karl Marx and Frederick Engels. In 8 short segments I learned why this crisis is not "a bug" in our economic system, "but a feature" as the techies would say.

The information simply and compelling explained in "Wage-Labour and Capital", clarified my understanding of the factors that have caused our crisis.  I highly recommend it to other searchers for explanations.  

My understanding of the current crisis, as discussed below, is based on these audio tapes. My analysis may contain many simplifications, even distortions, for which I would appreciate your comments:

The current economic crisis, as with previous ones since the industrial revolution, is part and parcel of the life-cycle of our capitalist economic system, based as it is on the ever-increasing need for greater and greater profits.  These profits are derived from the labor of the workers who produce.  The workers who produce the profits are kept barely alive, but well crushed, by the economic forces that control their lives.

To survive, capitalist businesses constantly strive to keep their costs low while keeping their prices low enough to undercut their competition. Their competitors, on the other hand, are constantly striving to lower their production costs similarly so as to gain more of market share than anyone else. To do this, they invest in more sophisticated machines and thus strive to decrease their labor costs.

But it is from living labor that the capitalist can extract a surplus value, not from the machines, which have a fixed cost and a fixed life of production. A widget machine will produce X number of widgets and no more before being worn out or supplanted by a ever more efficient machine. Living labor is critical to capitalism.

The capitalist needs a sufficient supply of workers to run his machines, so he must pay workers enough to survive and reproduce.  When there are more than enough workers from the army of the unemployed to compete with other workers for the available jobs, then the capitalist can pay them the lowest wages, so long as he keeps them alive. Given an over-supply of potential workers, the workers are in competition with those who will accept the lower wages, they are the ones who will get the jobs.

The successful capitalist can extract value from his laborer's work far above that which is sufficient to pay the worker's wages and the cost of the materials needed for production. It is from that "surplus value" that the owner realizes his profit and the ability to re-invest in more capital.  The sum total of the "dead" labor now embodied in the owner's machines and assets is the accumulated capital needed to keep the owner in the competitive game with other owners in the same industry.

Unless a given company has a virtual monopoly in an industry (read Microsoft), it must keep both its costs and its prices competitively low or it will be bested by a more successful competitor.

In a competitive industry, to keep its business alive, the owner must constantly work to lower his costs and increase his market share or he will lose sales to his competitors.  If, however, a company is able to establish a virtual monopoly, it is comparatively free of the need to reduce costs and increase profits (again, read Microsoft) in order to have the capital to stay ahead in the field.  

The obvious answer is to strive to monopolize the industry by either buying or bankrupting the competition. Thus, Lehman Brothers was bankrupted while Merrill Lynch was bought out by Bank of America.

This absorption of relatively smaller companies by larger companies is patiently obvious in the computer and banking business, indeed, one of the first thing the banks who received bail-out money from taxpayers did was attempt to use it to buy out other banks.

The danger of leaving competitors on the playing field is that they might, in the future, devise some new means of lowering costs and increasing efficiency as to put the larger owner out of business. Thus the need to constantly absorb the competition is an operant fact of life
in the capitalist system.

Why has the U.S. lost its manufacturing jobs to other countries

Clearly, it is because it cost much less to keep a worker alive in China, Korea or India than it does in the United States. Thanks to the union movement, the standard of living -- and expectations for a standard of living -- for workers in the U.S. is much, much higher than in southeast Asia. Workers, desperate for food and shelter,will work for pennies a day for 12 to 15 hour days, even while locked inside factories.

Companies who export their production to areas where there are plenty of unemployed workers who will work for next to nothing are thus have a competitive advantage, they can lower their costs and compete in their industry -- until such time as all other companies move their factories to places where similar low cost conditions obtain and the playing field is once again leveled.

The problem for American workers is that they are now competing for jobs internationally with workers who don't have unions or enforced health and safety conditions.  American workers have been losing that fight and are being increasingly absorbed into the large army of the unemployed or the under-employed in the service industries. In effect, the pay of the lowest paid worker in the world is determining not only the pay of every other worker in the world, but whether a worker has a job at all.

Naturally, the low pay rate differs from industry to industry, but the principle holds: in the global economy, the lowest paid worker sets the global standard for pay and conditions of labor for all workers.  

The drive to improve technology to make each human worker produce more surplus value in any given day also serves to lower the skill levels needed for the labor force, adding to the ease of off-shoring. Skilled, experienced workers are no longer needed; skill and experience having been eliminated by the machines, thus making the world work force even more globally fungible: an unschooled worker in Taiwan can push a button just as efficiently as a worker with a community college degree in Detroit, at much cheaper wages.  

The result of increasing automation is that the actual production of goods becomes increasingly mindless and alienating. Deprived of the need to exercise skill, judgment and creativity, the worker is reduced to a cog in a wheel.

Thus, the worker is not only selling his labor hours for a relative pittance, but selling off the opportunity to use his waking hours for creative, productive activity.  After 8 to 15 hours of repetitive, mindless labor, who has the energy left for creative thinking, let alone writing poetry,painting a picture or even being actively involved in raising one's children?

A key struggle between workers and company owners in the past century has been the fight for the 8 hour day. It is cheaper for a company to force one worker to work 12 or 14 hours rather than hiring two workers to each work 6 or 7 hours. Thus, even at relatively high auto industry wages, forced over-time was a horrendous burden on the health and well being of the work force and was, for years, a key bargaining issue.

[Indeed, this is one of the revolutionary improvements that Venezuela's president, Hugo Chavez, is making in the lives of Venezuelan workers. Chavez is passing laws to require a 6 hour work day for 8 hours pay.  Chavez is doing so expressly to provide workers with the time for self-education, creative projects, community events and interaction with the family. This generates problems for Venezuelan capitalists who must compete globally with companies whose workers are forced to work 15 hour days. Little wonder that U.S. and Venezuelan capitalists with companies in Venezuela are so aggressively opposing Chavez and his labor policies.]

But the efficiency gained by producing goods with cheap Third World labor and ever-improved technology has its own limits; with increasing automation, companies are put in the position of inevitably producing more goods than the markets wants or can absorb.

The criss of over-production, can now be seen in China. With the down- of the U.S. economy, all the goods which Asia can manufacture are no longer needed.  The Asian workers are then kicked off into the army of the unemployed until such time as demand increases.

With the off-shoring of production, the capitalist owners and even nation states have realized huge, huge profits that they must re-invest to keep increasing their profits. Thus China's investments in the U.S., long the bastion of investment security.

Our U.S. and international financial companies have taken advantage of the need to invest these surplus funds, to the extent of creating phony investments to attract them:  sub-prime mortgages bundled into investment
securities, duly approved by the credit rating agencies that got premium pay for their imprimaturs, along with credit default swaps, a new investment creation  designed to avoid the government regulations, however minimal, of the insurance industry.

Other creative bankers simply went with low tech Ponzi schemes, such as that of Bernie Madoff. The financial industry became parasites on the off-shore production industry, blood-sucking equally from the rich and poor, but subject to the same laws of financial competition: the big fish had to swallow the little fish in order to survive, thus Bank of America buys Merrill-Lynch.

When the global economy crashed into the inevitable wall of over-pro- production, the cyclical internal contradiction within capitalism -- the push to ever more efficient and profitable production hits the wall of over-supply; the confluence of too many goods chasing too few consumers as unemployed U.S. workers cannot buy cars, even with the zero interest loans some car companies have been hawking; unemployed workers cannot make their mortgage payments, especially if they were sold as ARMS whose interest rates readjust up, not down, after the initial low interest rate bait.  

The economy took an additional hit when investors discovered that their investments in bundled mortgages were not based on accurately rated risk and collateral, but were difficult to value at all. The rating companies
were in competition with other rating companies. To retain business, they gave all the dubious security paper AAA ratings.

As many mortgage applicants were not properly vetted for the ability to repay their mortgages, and given the rapidly falling value of real estate due to foreclosures, financial institutions have no accurate data on which to value the paper investments; investors have no accurate data on which to calculate the actual value of their investments:  who knows how many mortgages will foreclose? Who knows, in a rapidly falling real estate market, even what the value of the houses underlying the loans as collateral really is?  That is why the government is not even in a position to guess at how many "bad assets" are out there. With so many unknowns, it is little wonder that the banks are paralyzed and are sitting on their bail-out funds, fearful of making any loans at all.

How ironic that a political economist and a journalist, writing in 1891, could so accurately describe and predict the inherent, integral crisis in the capitalist economic system which is so devastatingly wrecking the lives of millions of Americans in 2009. It is, indeed, time, as Marx and Engels suggested in the late 1800's, to consign the capitalist economic system to the dustbin of history, and begin creating a system which actually serves the needs of human beings, rather than destroying them.

Originally posted to Justina on Mon Feb 16, 2009 at 12:45 PM PST.

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Comment Preferences

  •  yay. another conservative. (1+ / 0-)
    Recommended by:

    russian communism was inherently conservative.
    please, this is a progressive website.

    Jesus ain't comin', go ahead and put the Nukes back now.

    by RisingTide on Mon Feb 16, 2009 at 12:54:23 PM PST

    •  Not actually conservative... (9+ / 0-)

      "Russian communism" actually is irrelevant here. Neither Marx nor Engels had anything to do with what happened in Russia; that was the work of Lenin, Trotsky, Stalin, and others, following in a tradition of Russian revolutionary thinkers of the 19th century, people who didn't subscribe to the ideas of Marx. Lenin was the source of the official interpretation of Marx, and Lenin wrote almost nothing along the lines of Marx's arguments cited in this diary.

      The question is whether the diarist's presentation of Marx has merit. You should argue that question, rather than trash the diarist's ideas by associating them with "Russian communism."

      Note that the diarist presents an economic explanation of the current crisis. Is it valid? Is it accurate? If not, what points refute it? Let's try to evaluate arguments rationally, without using Republican fallacies, pseudo-logic, and straw men.

      If that's too much work, then just ignore the point.

      •  valid? probably. but I like Mises' explanation. (0+ / 0-)

        of course, now I've made you go google the guy.

        kos is not the place I want to have the econ discussions. too many... illiterates.

        of course, that Is why i post here. I'm not bill gates, after all.

        Jesus ain't comin', go ahead and put the Nukes back now.

        by RisingTide on Mon Feb 16, 2009 at 01:38:24 PM PST

        [ Parent ]

        •  Googling Mises I Find That... (1+ / 0-)
          Recommended by:

          Mises, according to Wikipedia, was a libertarian economist who specialized in analyzing monetary systems.  

          He reportedly believed that:

          ...without a market economy there would be no functional price system, which he held essential for achieving rational allocation of capital goods to their most productive uses. Socialism would fail as demand cannot be known without prices.

          Undoubtedly, this is a gross simplification of Mises thinking, but if it correctly represents it, then it should be compared to Marx's formulation.

          According to Marx's "Capital" (Chapter 1) price is based on the exchange value placed on the human labor time when a desired commodity is exchanged.

          If one accepts that definition, Mises analysis of the defect in socialism seems to fail, as the human labor time which adheres in any commodity is easily quantifiable, and can be the basis for exchange in a socialist society.  The market demand for a given item is also easily quantifiable; our market research industry provides such information routinely.

          Money is simply the medium employed for the exchange of human labor time, and thus is merely a reflection of that exchange, not a causative factor in the system of capitalist production as it strives to extract more and more surplus value from its workers.

          While the games that the Fed plays with our money supply have an impact on the capitalist system, it does not determine its fundamental health or illness. That is dependent first upon the relative success or failure in extracting surplus value and second upon the availability of a market for a given commodity.

          In a socialist economy, it would still be necessary for workers to produce more value than that required to pay their wages, as a certain amount would be needed above that to replace the worn-out means of production, for new capital investment and community needs, but the profit driven need for ever greater extraction of surplus value would be absent, as would the drive to create new, artificial needs for the sake of selling more commodities.

          Commodities would be produced because there was a social need for them -- for their use value -- not merely to generate profits.

          Genital Slicing IS Torture: Convict Bush and His War criminals.

          by Justina on Mon Feb 16, 2009 at 11:11:11 PM PST

          [ Parent ]

          •  that's not particularly the part of his work that (0+ / 0-)

            I'm interested in.
            His explanation for the Great Depression seems to fit our current global depression.

            Also, I do not think Marx's economics were his strong point. Centrally planned economies are inferior to market driven ones. This is not to say that the government does not have a compelling national security interest in the economy...

            Jesus ain't comin', go ahead and put the Nukes back now.

            by RisingTide on Tue Feb 17, 2009 at 06:30:15 AM PST

            [ Parent ]

  •  What does Karl Marx put on his pasta? (6+ / 0-)

    Communist Manipesto!!!!!!!

    "I gotta rec that sh*t, even though it is completely tasteless and rude." ... "luntz and his cretinous kabal are paid bloggers from AIPAC."

    by DemocraticLuntz on Mon Feb 16, 2009 at 01:07:48 PM PST

  •  There has to be another way (7+ / 0-)

    to ensure world prosperity besides making, buying, and discarding more and more products. We need a culture based on sustainability not some race to destroy all the worlds resources and turn them into expensive toys, which will turn into total disaster when we've finally used our world up.

    •  "Sufficiency Capitalism" (1+ / 0-)
      Recommended by:
      FundaMental Transformation

      Search and read.

      There is a window open for cooperative capitalism built on a strong foundation of well-provided for team players.

      Taxes are used to provide for the elderly and truly handicapped.

      The TOP HEAVY paid corps of today will become corpses soon.  They are unsustainable.  It is corrupt to keep bailing out the corrupt.

      Poverty does not mean powerless. Unite!

      by War on Error on Mon Feb 16, 2009 at 03:29:54 PM PST

      [ Parent ]

      •  Have you seen this: (0+ / 0-)

        MIT Prof: Businesses of the Future Will Survive Without Growing

        Turns out the Prof is a pretty smart guy, Jay Forrester, the father of system dynamics and inventor of RAM.  Here's the link to the interview.

        •  Forrester Interview Lacks Specifics. (1+ / 0-)
          Recommended by:
          FundaMental Transformation

          The interview with Professor Forrester raises interesting questions which, unfortunately, are left unasked and unanswered.

          Forrester suggests that it is possible for businesses to resist the mantra of "grow or die", but doesn't say how that can be done successfully, aside from a reference to using good management practices and using up less of the world's resources.

          Our current capitalist business model depends on lowering costs by automating and extracting more and more surplus value (profits)from its workers while increasing market share. The unanswered question is how can a business cease doing -- when its competitors are doing that -- without displeasing investors, who will therefore move their investments to other, more profitable companies?

          Genital Slicing IS Torture: Convict Bush and His War criminals.

          by Justina on Mon Feb 16, 2009 at 09:58:10 PM PST

          [ Parent ]

  •  Karl Marx wrote: (4+ / 0-)
    Recommended by:
    Justina, EthrDemon, joeshwingding, DBunn

    "Owners of capital will stimulate the working class to buy more and more expensive goods, houses and technology, pushing them to take on more and more expensive debt, until their debt becomes unbearable. The unpaid debt will lead to the bankruptcy of all banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism."

  •  Overproduction has not developed overnight (6+ / 0-)

    I would argue that we've been in a period of chronic overproduction for more than a decade. This has been mitigated by an excessive expansion of credit, basically a credit bubble, which has now burst and exposed the essential problem.

    The people who were unable to buy homes without subprime and other bad mortgage instruments are in the same position as people who are unable to pay for the things they consume without carrying an enormous debt on credit cards. All essentially consume products that would not otherwise be sold--that is, if people had to pay for these products from their actual income. (Or if home buyers could buy homes only by qualifying for traditional mortgages, analogously.)

    The mountain of debt and the tremendous expansion of credit allowed an expansion of the economy that would not otherwise be possible, but the economy expanded to the point that it was unsustainable, and the housing market was the weakest link. Prices spiraled beyond the point that enough buyers could be found; the peak hit more or less in 2005-2006, and prices began to fall. This triggered increasing foreclosures and the subprime crisis, and the credit house of cards collapsed.

    This is an interesting diary. I haven't previously seen anyone tie the credit crisis to overproduction, but it's an obvious connection, since banks and the financial sector are intimately tied in with the rest of the economy.

    •  Diary is very comprehensive (6+ / 0-)

      It is unusual to see an attempt to present such a broad vision of the causes and effects of our economic problems. Pretty well done, I would say.

      Capitalism does have its internal contradictions, one of which is the "race to the bottom" that happens whenever there is real market competition. Owners cut prices in order to make sales, then have to cut wages and/or workforce to remain profitable, in a continuing cycle. Lower prices stimulate demand, but lower wages depress it. Eventually, we wind up where we are today, with mountains of production capacity and too few people with the money to buy anything.

      Note that a key part of this destructive dynamic is real market competition. In other words, capitalism (or at least capitalists) does best under monopoly or near-monopoly conditions. For all the RW worship of free markets, it turns out that what they actually want is captive markets.

      •  The Key Problem is the Initial Unfair Exchange. (4+ / 0-)
        Recommended by:
        EthrDemon, justCal, Cassiodorus, DBunn

        I found it interesting that Marx seems to be saying that the problem with capitalism is in the nature of the relationship between the worker and the business owner.  

        Say, for example, that the worker "pays back" the business owner for his wages and the costs of materials in the first two hours of his productive working day, the additional 6 to 13 hours of labor produces the "surplus" value or the profits for the owner.  The owner doesn't care about what is produced as long as it will sell on the market. (Thus the advertising industry is required to "create" needs in the public.)

        It is the constant chasing of that surplus value or profits which is the engine which drives capitalist production, not the production of useful goods.

        If the worker only worked long enough to produce goods that were actually needed by consumers and no more; if he didn't need to produce the surplus to satisfy the race for profits, he (and his community) would have the benefit of 6 to 13 hours a day to be creatively productive.

        And, while some workers get paid relatively high wages, due to the scarcity of a required expertise, still that worker is impoverished relative to the vast amount of surplus value (profits) which the owner receives.  

        Marx emphasized that this impoverishment" must be viewed relative to the owners profits, not on as absolute scale.  And, in general, the wages of the lowest paid worker in an industry will set the standard for all workers in that industry.

        Thus we see the current gross inequality between the assets of the rich in the U.S. and those of the poor and middle class.  Indeed, the middle class is rapidly being driven into relative impoverishment.

        If we stopped producing to generate profit and started producing in order to meet real human needs, we would all have an abundance of time and sufficient money to meet those needs.  Then, society could really begin to flourish as individuals can use their minds,skills and free time to be humanly creative.

        President Chavez of Venezuela, with his steps to reduce the hours of the working day, sees this as the ultimate goal of human society. This is what he is trying to achieve in Venezuela, and why I think it is so important that we support his efforts.

        Genital Slicing IS Torture: Convict Bush and His War criminals.

        by Justina on Mon Feb 16, 2009 at 02:47:15 PM PST

        [ Parent ]

      •  Monopoly capitalism doesn't improve the situation (3+ / 0-)
        Recommended by:
        Justina, justCal, DBunn

        Because what we have is essentially monopoly capitalism, which, in reality, doesn't mean absolute monopoly over every market necessarily, but rather the tendency toward monopoly, resulting, effectively, in oligopoly (a term not in great use after the 70s, when it was the subject of significant discussion).

        The problem is not just that capitalists drive wages to the bottom when there is competition but that when there is monopoly (or near-monopoly), capitalists drive prices beyond people's ability to pay, which is functionally the same as driving wages low.

        •  Russia and China: The Ultimate Monopolists. (2+ / 0-)
          Recommended by:
          Cassiodorus, DBunn

          I agree, and Soviet Russia is a prime example of why monopolies are not the answer to the ills of capitalism.

          In Russia, the state was the owner of all the major industries, as was China up until well after the demise of Mao. Now China joins private and state capitalism together, with the state still in control.

          The state, in Russia and china, acted the same as the private capitalists:  demanding more and more surplus labor from its workers in order to meet its state-plans for world domination. All the thinking and decision-making was done, not by the workers, but by the party officials and the technocrats who designed the plans to meet the officials aspirations.

          When these plans went awry, as they did with great frequency, it was the workers and the middle class who paid the price in the absence of necessities for consumption.

          Genital Slicing IS Torture: Convict Bush and His War criminals.

          by Justina on Mon Feb 16, 2009 at 03:26:54 PM PST

          [ Parent ]

          •  Capitalism, monopoly, growth (1+ / 0-)
            Recommended by:

            Here's something interesting: The peak of American prosperity and power occurred during the 25 or 30 years following WW2. No coincidence, that was a time when the other indutrialized countries were in ruins from the war, and much of the rest of the world was in a primitive or traditional state of development. IOW, the American economy was in a near-monopoly position with respect to the world. During this time, our working and middle classes may have been exploited at home, but they were still essentially shareholders in America Inc., and prospered accordingly compared to their brethern in other lands.

            When Japan and Europe rebuilt, and other countries learned to read, write, and train their own engineers, the previous US dominance became less of a reality, and more of a habit and a memory.

            Here's another interesting thing: Capitalism is roughly 500 years old. It's origins in Europe coincide roughly with the beginning of the Age of Exploration. We could lump them together (along with a few other things, like literacy and science) and call it the European Awakening, an immensely successful project that has now washed completely around the globe. During this time, the general prosperity of nations "inside" the bubble of the European Awakening has greatly increased, while other groups, ranging from Stone Age tribes to great civilizations, have had to give way. Again, those nations inside the bubble enjoyed near-monopoly cultural, technical, and military advantages.

            Well, one of the meanings of globalization is that there are now many more nations inside the bubble. The monopoly is broken.

            One more interesting thing: Industrial capitalism began in a few spots in Europe and trans-Europe (aka the US and a few other colonies) and, in its initial phases, engaged a world that was largely given over to primitive and traditional societies plus vast areas of wilderness. The tendency of capitalism to ruthlessly exploit the natural environment could be tolerated under those conditions, and the requirement of perpetual growth could be accommodated for a time. That time is now past. Capitalism and Western culture (the new name for the European Awakening) is everywhere, and true wilderness is almost nowhere. The starting conditions no longer exist.

            The brilliant success of capitalism over the last 500 years should not be taken to mean that it can continue to be successful for the next 500, or even the next 20.

            •  Excellent Insights! (1+ / 0-)
              Recommended by:

              You raise important points about the America's "monopoly" vis a vis the rest of the world after so many other economies were crushed after World War II.

              Now that the economic competitors have more than caught up with our technology, the playing field has been leveled and our corporate chiefs need to rely on
              fraudulent practices to keep their bonuses coming!

              Genital Slicing IS Torture: Convict Bush and His War criminals.

              by Justina on Tue Feb 17, 2009 at 08:10:49 AM PST

              [ Parent ]

              •  Comparisons to FDR and Great Depression (1+ / 0-)
                Recommended by:

                In discussions of the current economic crash, the stimulus bill, and strategies for economic recovery, we hear a lot from progressives about how FDR used the Keynesian approach of deficit spending to lift us out of the Depression. The story has a happy ending when the super-spending of WW2 finally jolts the US into an era of unparalleled prosperity.

                But that comforting narrative leaves out some important plot points, like the way American prosperity was boosted by the destruction wrought in the war. Or the fact that then, we were on the growth side of the global oil production curve, whereas now we are approximately at the peak.

                I still think there are valuable lessons to learn from comparisons to how we got out of the last Depression, but we should not expect our story to end the same way, or even close.

  •  Some, some (0+ / 0-)

    the push to ever more efficient and profitable production hits the wall of over-supply; the confluence of too many goods chasing too few consumers as unemployed U.S. workers

    While profitability is the drive for capitalism ... I do not believe it was inherent in our economic demise.

    What you are describing is not the death of Capitalism but the death of Consumerism. Too much debt chasing too little income to pay for it.

    A business that makes nothing but money is a poor business. Henry Ford

    by joeshwingding on Mon Feb 16, 2009 at 02:00:43 PM PST

    •  Not Describing Death But Life Cycles. (0+ / 0-)

      I certainly hope for an end to the capitalist system, but I really didn't address that issue in this post.  What I was looking at are the factors that lead to its periodic crises, which Marx and Engel describe so succinctly in "Wage-Labour and Capital."

      I really hope DK members will take the time to read (or listen to) that work. (The short audio tapes can be downloaded for free from  It is quite short and very clearly written, unlike the confusion that emanates from our current Friedman-lite economists.

      What Franklin Roosevelt did, and what one hopes Obama will do,  is put in place laws to ameliorate some of the ruthless greed we have seen in operation since Reagan came to power.  Reagan and his progeny successfully dismantled many of the safety-nets that Roosevelt put in place. (Yeah, with some help from Clinton too).

      But, while crying "free market capitalism" is best to the hords, they proceeded to encourage the devouring of the little capitalists by the big, allowing those big CEOs to effectively control the government:  the state was owned by the big capitalists.

      I fear that President Obama, extremely well-educated in the law, is not so well-educated in non-Friedmanite economics, and is relying on the purported expertise of his old University of Chicago buddies, who were themselves schooled there by Friedman: the same guy who preached the gospel of de-regulation as savior.

      I pray that Obama will keep up his subscription to the New York Times and get a daily education from Paul Krugman's columns there.  I doubt Krugman is a Marxist, but he clearly understands the fundamentals of how the ruthless capitalist system works and what is needed to stave off some of its worst excesses.

      Genital Slicing IS Torture: Convict Bush and His War criminals.

      by Justina on Mon Feb 16, 2009 at 03:55:31 PM PST

      [ Parent ]

  •  The boom-bust cycle seems to be (1+ / 0-)
    Recommended by:

    a fundamental flaw in capitalism.  I'm not sure if it is a part of a free market or only exists because of government intervention, though.

    •  Exactly! (0+ / 0-)

      The inexorably drive for profits eventually generates either monopoly ownership or the excess production of goods for which there is no market.  Thus, the periodic crisis.  

      Once millions of workers are in the unemployment lines and hundreds of thousands of businesses are taken out of the competition through either bankruptcy or buy-out, the remaining owners have a clear field in which to re-start the cycle until, once again, the drive for profits produces the next, inevitable crash.

      Genital Slicing IS Torture: Convict Bush and His War criminals.

      by Justina on Mon Feb 16, 2009 at 02:51:41 PM PST

      [ Parent ]

    •  Gov't Intervention (2+ / 0-)
      Recommended by:
      Justina, rossl

      It is Gov't policy of loose credit and easy money that exacerbates the boom-bust cycles.
      We would probably still have them but to smaller degrees.

      A business that makes nothing but money is a poor business. Henry Ford

      by joeshwingding on Mon Feb 16, 2009 at 03:15:16 PM PST

      [ Parent ]

      •  Also, (1+ / 0-)
        Recommended by:

        the government encourages certain economic trends.  In the 1800s, it was moving West, for instance.  Now, the new trend seems to be green innovation (although I'm fine with that!).

      •  Government intervention? Not quite (1+ / 0-)
        Recommended by:

        You imagine that government intervention is responsible for easy credit? I suppose this is superficially correct. However, government is only responding to the demands of business for easy credit. You must realize this, if you've been following the developments of the last ten years.

        And we now know whose pocket government is in--which we didn't even need Tom DeLay to prove.

        •  Actually, not even superficially correct (1+ / 0-)
          Recommended by:

          Let me correct what I wrote by saying that, technically speaking, government intervention actually has nothing at all to do with easy credit, since the Fed isn't part of the government.

          •  Actually Half True (1+ / 0-)
            Recommended by:

            While the FED is not part of the Gov't. it does work with the Treasury to regulate the value of the dollar and by extension the interest rates charged for borrowing.

            I think we are on the same page.

            A business that makes nothing but money is a poor business. Henry Ford

            by joeshwingding on Mon Feb 16, 2009 at 04:55:44 PM PST

            [ Parent ]

  •  Cooperation not Greed (3+ / 0-)

    If the law permits greed fulfillment, capitalism will always fail.

    That is why we used to believe in Anti-Trust.  Now we allow, even use our tax dollars, to promote banks that are "Too Big to Fail".  WRONG POLICY.

    Criminals in DC allow this crap.  I hope Tim G. ends this soon.

    And destroy the monopolies like Monsanto, the Health Insurers, Private Prison Corps, utilities, Comcast, etc.

    It is time for Justice Dept to enforce Anti-Trust again!

    Poverty does not mean powerless. Unite!

    by War on Error on Mon Feb 16, 2009 at 03:33:26 PM PST

  •  The situation is worse -- (1+ / 0-)
    Recommended by:

    than that which Marx and Engels described.

    On top of the exploitation which they analyzed so well, capital as a whole has been lying about its assets for the past thirty-five years -- and it's only now with the collapse that everyone is finding out.

    "It all makes perfect sense/ Expressed in dollars and cents/ Pounds, shillings and pence" -- global anthem, from Roger Waters' song "Perfect Sense"

    by Cassiodorus on Mon Feb 16, 2009 at 09:41:08 PM PST

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