Out of control
Some people you meet have a touching faith in global capitalism, although they would never put it like that. They believe that the authorities are more or less always in control of affairs and they will always be able to “manage the crisis” to avoid disaster. The assumptions behind this are that a) capitalism is a rational system that follows a predictable logic b) they have all the answers up their sleeves. Of course, if you add a) and b) together, there is no chance of challenging, let alone defeating, the economic system.
This viewpoint is found not just in universities but among militant trade unionists too. They prefer not to talk about the current economic crisis because they believe it is a passing phase, which the authorities are getting a grip on. So in the end, both the academic and the trade unionist can carry on with their present activities. One can continue to write impenetrable texts which neverthless advance careers, while the other can still focus on industrial issues or speak demogogically at meetings, ignoring the economic crisis altogether but still sounding miitant.
In reality, the financial authorities only wish they had as much control and power as they are ascribed! They know better than their opponents that capitalism is far from a rational, organised system. Production is carried out by private corporations operating purely to maximise profit. Commodities are turned out without firms knowing for certain whether goods will actually be sold because this is subject to the whims of the market. Reliance on credit, especially in the sphere of consumption, adds to this uncertainty and leads to overproduction in a world of scarcity. Subjective factors like confidence and trust are essential aspects of capitalist economic activity which no one “manages”.
Taken together, these diverse aspects of the capitalist system come together to constitute an objective process, a level of reality that has always been beyond conscious control and is more so in the present period of globalised economy where borders and national government policies are disgregarded by powerful economic and financial forces. None of this is hot news. In 1848, Marx and Engels in the Communist Manifesto compared modern bourgeois society to “the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells”. They wrote of crises of productive forces that become too powerful for private ownership to handle and as a result “bring disorder into the whole of bourgeois society” leading to “enforced destruction of a mass of productive forces”. Sounds familiar?
But let’s not take Marx and Engels as the sole authority. Fast forwarding to April 2008, those in the know say something quite similar. Take George Magnus, senior economics advisor to investment bank UBS. He has warned that “there is a quite serious risk that the de-leveraging downturn could run amok: credit contraction causes economic contraction, which causes further write-downs and capital destruction, which leads to more credit contraction and so on”.
Magnus has also said that what the central banks are doing is just “firefighting” and that if the banks don't want to lend, no amount of extra liquidity is ultimately going to help. He should know about the crisis. UBS this week announced a $19 billion writedown in assets, to go with $18 billion losses revealed earlier this year. UBS is now top of the global mortgage writedown chart.
Yesterday, First Direct became the first UK major mortgage lender to close its doors to new customers. The bank – one of the country's top 20 home loan providers – gave only five hours' notice. The move came as figures showed that more than 90 mortgage products a day have been scrapped over the past week as lenders put the shutters down. Oh yes, they are really “managing the crisis”!
AWTW communications editor
2 April 2008