An Uncertain Time for Capitalism
Don't take it from me. The august Financial Times said it last Saturday: 'It is not just the credit crisis. Popular fears of globalization, discontent with high oil and food prices, rising income inequality within nations - all have contributed to an uncertain time for capitalism. The capitalists have certainly not helped.'
The paper's editors generally place the blame for the economic meltdown currently underway on the bankers, the decisions the captains of high finance have made in their management of their money and ours. They are not about to allow that there is anything about the system itself that has created what The Economist magazine last week headlined as 'The Great American Slowdown' and its awesome negative impact on the world economy. 'This week the world's leading banks - represented by the Institute of International Finance - concurred with a conclusion long ago reached by the rest of the world: they screwed up, the credit crisis is largely their fault, and everybody else is suffering for their errors.,' the editors said, adding, 'The admission may not be enough to prevent a dangerous backlash.'
The editors correctly note that while there is some fraud involved in the current credit crisis that's not the real reason it is happening. However, they said there is a 'caricature' afoot in the public mind of 'an industry populated by clever crooks who manufactured toxic derivatives of subprime loans, repackaged them to look succulent, and sold them to greedy fools.' After all, the banks are losing money now. 'But most people are looking not at the banks' losses but at the bankers' gains,' the editors observed. 'They have noticed that when the music stopped ... some of the dance partners left the floor with their pockets stuffed with cash, while others went home to lock up the houses they no longer owned and post the keys back to the bankers. Ordinary citizens, far from any subprime loan, have found themselves asking whether their savings are safe, why it is suddenly so hard to get a mortgage, and why the stock market numbers keep flashing red.'
By accepting much of the blame and proposing various measures to get its house in order, the banking industry hopes to avoid further regulation,' read the April 12 editorial. 'The political atmosphere has become too febrile for that: the mob is at the gates baying for justice.'
At this point in my reading, I chow down another piece of pita and check to make sure I was reading the salmon-colored Financial Times and not one of the socialist publications that arrive in my mailbox. But they wouldn't stop. The bankers' owning up to the havoc they have engendered 'may blunt a few pitchforks and snuff out a blazing torch or two.'
A dangerous backlash, a mob outside Wall Street baying for justice, pitchforks and blazing torches? Of course, the esteemed editors were only speaking metaphorically. But they were talking about something real; there is a political backlash under way in the country and abroad. The representatives of capitalism discussed the probability of something like this when they huddle in
But they are feeling the disgruntled-ness. They may have been tuned in to the 72 year old woman on Social Security who told the San Francisco Chronicle last week that she's now paying $5 for a small bottle of peanut oil that used to sell for two or three dollars and, 'I think we're almost in a depression. Like the man in the movie said, â€˜I'm mad as hell and I'm not taking it anymore."
Whether it's just the normal working of capitalism, which does produce economic downturns every so often, or - in today's common rendering - the new capitalism, turbo capitalism, super capitalism, casino capitalism, caravansary capitalism, or the like, the system now operating is failing people. And it's not the subprime mortgage crisis. That's a result of the dysfunction, not the cause. Soaring oil and food prices and rising income inequality weren't caused by the hardworking African American woman who was told that housing prices would continue to rise and therefore she had nothing to worry about even if her credit score wasn't first-rate. She's a victim.
It's not unexpected that those at the pinnacle of the system's financial power become apprehensive about the consequences of brewing crisis when the workers start buying tar and sharpening their pitchforks - so to speak. The growing mortgage crisis has been apparent for almost two years. That the economy was slowing and would soon affect employment rates has been obvious for equally as long. For months we have been told it's just a credit crunch and financial advisors have been counseling holders of retirement accounts that everything that goes down must come up as if it were
It is now estimated that this year 2.2 million mortgage holders will lose their homes and housing prices will continue to fall 10 to 20 percent more, wiping out, after a lifetime of labor, the assets of many, many people.
The employment figures are out for March and guess who took one of the biggest hits? According to Dean Baker, co-director of the Center for Economic and Policy Research, young African American 'were among the hardest hit groups' with their employment population ratio falling to 19.7 percent, 'the lowest level since it hit the same number in June of 2003, which in turn was the lowest level since March of 1984.'
The new jobless report 'removes any doubt that the economy is in a recession, with the private sector now shedding jobs at a rate that may exceed 100,000 per month,' wrote Baker. 'With real wages declining, and the plunge in house prices destroying home equity at more than a $2.5 trillion annual rate, it is likely that the rate of job loss will accelerate in the months ahead.'
'The nation's infrastructure is aging and in many places decrepit. Rebuilding it would be an important source of job creation, but nothing on the scale that is needed is in sight.'
Certainly not from the current Congress. The Democratic Party leadership there can't even come up with the courage to force through improvement in unemployment benefits which Nobel Prize winner economist Joseph Stiglitz says should be emphasized in any economic stimulus measures.
And the Presidential candidates? There have been some specific proposals but most have to do with supposedly avoiding another crisis like this one in the future after this one has supposedly ended. For the Democrats the rhetoric is still too much I-feel-your-pain and too little urgent resolve. 'Hold on, I'm coming' is fine but January 2009 is a long way off.
'We now are looking at one of the greatest real estate busts of all time,' Allen Sinai, chief global economist for the consulting group Decision Economics Inc., told the New York Times writer Peter Goodman 'The free market is not geared to take care of the casualties, because there's no profit motive. There's no market incentive to deal with the unemployed or those who have lost their homes.'
'The bright new financial system - for all its talented participants, for all its rich rewards - has failed the test of the marketplace,' former Federal Reserve Chair Paul Volker said recently. Addressing the Economic Club of New York last week, he said the new form of capitalism has created 'a demonstrably fragile financial system that has produced unimaginable wealth for some, while repeatedly risking a cascading breakdown of the system as a whole.'
Meanwhile, the political backlash is coming from the people facing economic precariousness, if not dire conditions. Any politician that denies that there is bitterness and anger out there is indeed out of touch.
BlackCommentator.com Editorial Board member Carl Bloice is a writer in San Francisco, a member of the National Coordinating Committee of the Committees of Correspondence for Democracy and Socialism and formerly worked for a healthcare union. Click here to contact Mr. Bloice.