The illusion of stabilization
There has been a distinct deficit of good news lately. News influences financial markets, and that is why leaders try to organize, distribute and manipulate the news in such a way as to convert today's headlines into tomorrow's quick profits.
The trillions that governments around the world have spent since the crisis broke out have been spent more on producing positive headlines than in instituting measures to halt the crisis. Investors react positively to each government bailout, creating yet another financial bubble.
The current "stabilization measures" reveal the perversity of the economic system even more than the crisis itself. The moment that the economic situation improves even slightly, financial speculators jump in to get a piece of the profit-taking when the stock markets rise. Speculators do not know how to do anything else. They are essentially parasites that feed off society. That is why it is critically important to fundamentally redesign the current system of financial markets if we hope to emerge from the crisis. Minor modifications and "additional regulatory measures" won't be enough. Financial speculation has gotten so out of hand that we need to consider ways of eliminating it.
The fact that stock market quotes and raw materials prices are rising does not indicate a systemic improvement in the economy because consumption and industrial output remain in severe decline. But speculators use any "good news" -- an announcement that bankruptcy proceedings will be delayed in the latest bank failure, a speech by the U.S. president, positive comments by a economist designed to restore confidence -- as a justification for raising prices. Government funds allocated for anti-crisis programs end up on the stock market and never enter the real economy. In the end, those most responsible for causing the crisis find a way to turn a profit from it.
The paradox is that the rapid growth of the financial sector during the epoch of delayed capitalism is what first demonstrated the need for radical changes. The state has already been forced to nationalize banks and insurance companies and support the stability of financial markets. But instead of taking measures to end speculation, the governments of the world spend trillions of dollars to prop up an unsound system that would have collapsed long ago had they not manipulated it.
It was obvious from the beginning that we are in for another wave of the crisis, and now it appears that the shock involved will be even more destructive than the first.
Politicians who make flowery speeches about their struggle against the economic crisis might produce a few good sound bites, but this has little impact on the crisis. They are prepared to fight the crisis, but they lack the strength to overcome it.
It appears that the inability of the political and business elite to learn anything from their own mistakes is a chronic and incurable condition. In this respect, Russia's leaders are no better or worse than the rest. The question now is whether the next big shock will make society more able to learn the lessons from the crisis.
Boris Kagarlitsky, a fellow of the Transnational Institute, is a Director of the Institute of Globalization and Social Movements, Moscow. His latest book is Empire of the Periphery: Russia and the World System (2008).
The Moscow Times, 28 May 2009