By Op Rana
And the world thought nothing could possibly go wrong with the US economy, not even when the subprime market tumbled last year. Economic brains on Wall Street then insisted not much was wrong, and we suspended disbelief, till September 7, that is.
That was when the financial world's "humpty dumpties" began their great fall. And all the empire's bourses and brains couldn't put them together again. But try they did. The US Treasury was generous enough to take on the $5.3 trillion exposure of mortgage giants Fannie Mae and Freddie Mac. Just over a week later, Lehman Brothers went belly up. Merrill Lynch had already fallen in Bank of America's kitty. Lest we forget, Bear Stearns had gone bust a few months ago. And Morgan Stanley and Goldman Sachs changed their investment bank garb to cushion their fall. Despite all this, how could the Federal Reserve not try bailing out AIG with a $85-billion parachute?
But more was still to come. In what many experts believe is a turning point in US history, the Bush administration took over the reins of the "savior chariot", proposing a $700-billion package to Congress to bail out banks and financial firms. How? By buying their non-performing housing loans and other worthless assets. And where would the money come from? Taxpayers, of course.
If you still have doubts this would be the biggest largesse the hard-working American people pay to the rich and powerful, just consider this. The Fannie and Freddie mortgages alone amount to more that the entire US national debt – actually the combined deficit run up by the government since the American War of Independence. Or consider what former Wall Street economist Michael Hudson says: the bailout package would be the largest and most inequitable transfer of wealth since the land giveaways to the railroad barons during the Civil War era.
But Bush, Bernanke, Paulson and Co still want the package. They are seeking the rest of the world's help, too. The Bush administration that preferred to go it alone – in Afghanistan, in Iraq, and everywhere else – now needs the rest of the world. And the Congress and the world have to help the modern-day Robin Hoods go on robbing the poor to pay the rich.
Laissez-faire capitalism cannot operate on its own. But that's not news. Nor is the fact that it needs state intervention to survive. Keynes said that a good few decades ago. The Bush administration has applied almost all his advice to avoid recession: promoting aggregate demand, fighting high unemployment and deflation and increasing government borrowing (but not cutting spending) to avoid recession. Wages may not have been controlled nationally, but workers have been retrenched, not only in the US, but across the globe.
And still the administration needs $700 billion to save the world economy (sic) – when it's not ready to spend even $1 billion to save the world (from the wrath of global warming). What do we call this? "Financial socialism", "economic fascism" or "one more weapon of mass deception".
Finance capitalism is the pursuit of profit through the purchase and sale of, or investment in, currencies and financial products such as bonds, stocks, futures and other derivatives, and through lending of capital for interest. In short, it's a dialectical outgrowth of industrial capitalism, and part of the process through which the entire capitalist phase of history would come to an end.
This may not be the end of the entire capitalist phase because as a system, capitalism has for centuries found ways to not only survive, but also thrive. But for sure the spin doctors of finance capitalism have created a Frankenstein's monster that they cannot control. They have, to quote Marx, "conjured up gigantic means of production and of exchange like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells".
The tragedy is that the big brains that called up the powers of the nether world of finance will, as always, get off scot-free after making millions, or even billions, and the innocent and helpless workers will pay the price with their jobs and livelihoods.
But that is justice, capitalism-style.
(China Daily September 26,2008)