Introduction to explanations of the crisis/meltdown

This is the handout I gave out during a talk on the financial crisis at Wellington occupy on Labour day, Oct 24. It is just a very introductory introduction to explaining that crisis from a Marxist perspective. As I said during the talk, I am not an economic expert in any way, and the talk was more aimed at the general trend in the ‘Occupy Wall St movement’ that banks and greed etc were to blame for the crash. These notes, from which I spoke in much more detail, were very much a preliminaryand tentative investigation in to the complex causes of the crash – it is all still a bit above my head really, and I would like to further read about underconsumptionist and ‘tendency of the rate of profit’ to fall theories, because even through I presented a more underconsumptionist theory at the workshop I am really not sure if it is the best. This was because I only spent a couple of hours preparing the talk, so it really was pretty basic. All in all the talk went well and lots of people shared ideas and experiences.


Explanations of the economic crisis/meltdown

Basics – lifting the veil behind economics – in the end, economics is about satisfying collective/individual human needs with the least amount of energy. It shouldn’t be about things like money, the market, prices, supply and demand, etc. Need to explain inequality not just the price of things.

Round: As you’ve experienced it, how has the crisis affected you and your whanau/family and friends?

Discussion of major explanations: The five major explanations I’ve come across are:

  1. GREEDY BANKERS AND CEOS (Chief Executives of Big Corporations): Politicians and regulators took the leash off greedy bankers, corporations, and brokers. Many variations on this including – greed, false belief in efficiency of markets (which are by their very nature unstable). (Keynesian explanation)
  2. CULTURE: – US blames China, China blames US for creating a housing bubble (as do many others), Germans blame Greek cultural habits, and so on.
  3. TOO MUCH REGULATION: And not enough unfettered competition within the market eg. claim that China’s interference in their market has created world-wide problems. (neo-liberal, Fox news interpretation.
  4. CREDIT CARD CRAZINESS: Blaming the ‘99%’: too many people went crazy with credit cards and loans and thus caused the crash. (another neo-liberal interpretation)
  1. THE CAPITALIST SYSTEM. The capitalist system of exploitation is at fault: Excessive power of capital, who after having crushed workers’ resistance, have repressed our income. Thus created a credit bubble/credit pyramid to create demand. To create this bubble, it has to be based on physical looting: looting our wages, cutting social services, looting infrastructure, nature (thus ecological crisis) and on ultra-exploitation of cheap migrant labour. Yet this crazed financial speculation is still founded on thin air and is very volatile and hence likely to crash. When the crash happens, it forces capitalists to further drive down wages, deepen cuts, limit credit, and so on. (socialist/Marxist explanations – many varieties)

Some discussion questions:

  • Should we blame individuals or the system for the crisis? Should we blame the players or the game as a whole?
  • Is greed a major factor?
  • Why has the crisis not affected NZ as badly as Greece, Ireland, Spain, Portugal?
  • Should regulation be enough? Or is systemic change needed?
  • Who ought to control profits? Are profits created by the hard work and risk taking innovators of the 1% or are they created by us? Should there even be profits and banks? Or is the enemy a system (including banks) that profits from us?
  • Who ought to pay for the crisis?
  • How do we fight it?

For a great easy to understand explanation, see RSA animate youtube cartoon of David Harvey, The Crises of Capitalism.

There are many other useful resources on the web, for many good articles see

My non-expert and fragmentary views, for what they are worth. The explanations all have some truth to them, but also limited.

1.      Personal greed? Yes a large degree of truth to that, as practices on Wall St and City of London etc have been revealed. But if you remove nasty corporations, bankers, stockbrokers and the like, the system remains, and new people and corporations take their place. Keynesian explanation claims capitalism can be fair, but by its very nature, it is exploitative. Capital is a social relationship of class exploitation. Blame the game, not the players. The game needs to be overturned. The target is not banks, but a system that requires banks. Greed is just a symptom of capitalism, not a human failing to be attacked.

2.      Yet reforms of the financial system, greater regulation, tobin tax etc would be helpful to the lives of most working class people (which sort of corresponds with the 99% but actually much less than that). Nothing wrong with those reforms. But revolution and reform both needed, not one or the other.

3.      Cultural theories: maybe some truth to credit being used to finance private home ownership in Anglo-Saxon countries, but the crisis is global, as capitalism is global.

4.      Neoliberal theories: blame working class people. Yet people are forced to go into debt because our incomes are so low. More neoliberal deregulation will lead to more volatility, inequality, wealth going to the 1% and others in the capitalist class.

5.      Marxist theories: A. Underconsumption. Fictitious, financial capital – capital investment resulting in rent, profit etc but no real investment in the real, physical economy. Is unstable – physical production becomes dominated by this fiction. Not the complete explanation though. B. Tendency of rate of profit to fall. Orthodox Marxist view. Overlooks working class agency, focus on internal contradictions of capital accumulation.

6.      Is a global crisis: need to examine link between offshoring and ‘first world’ and ‘third world’, not just internal problems of the ‘first world’.

7.      Depressions are good for capital – fire sale auction, can buy up big.

8.      Resistance: I think it needs to be based on self-organisation, fighting against people’s conditions in community and workplace, and go beyond occupying public squares and direct democracy therein. Resistance overseas has been most successful when interlinked with struggles in the workplace and communities eg. Egyptian strike wave and workers movement, Greek general strikes and workers’ refusal to comply/ carry out austerity measures.

9.      Crisis is a fundamental part of capitalism. The form of this current crisis is dictated by the form of the last crisis in the 1970s. Then unions and workers had a lot of collective power, and so therefore neoliberalism comes in, free market, offshoring, smashes unions, gains access to global market and labour supply, frees up market, deregulates, privatises, etc.


~ by vomitingdiamonds on 01/11/2011.

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