Like a lot of folks I have spent the last couple of weeks reading all kinds of stuff. Pulling Mandel and Marx off the shelf. Looking at old Sweezy and reading everything I can from current Marxists. As to the crisis caused by the pyramid scheme of selling bad debt that the big banks have gotten themselves into. Let ’em fall. The more the institutions of finance capital collapse the better off the world will be, if not in the short run.
What is credit to a worker anyway? Starting in the mid-70’s and the neo-liberal offensive real wages started to drop. Credit became an increasingly important “income” of workers as they sold their future labor power to make up for the gap with the hope that a rise in wages would make up for the debt. Unfortunately the labor market has also been unkind to US workers as the capitalist’s offensive opened up new labor pools, especially in manufacturing, that have helped to continue the downward pressure on wages.
The purchasing power of workers declined. The general capitalist contradiction of the working class not being able to afford all of the useless commodities produced by an unplanned, anarchic system, causing a crisis of “under consumption”. The huge surpluses liberated from society by neo-libralism were trying to find profitable places to go. In the 90’s these surpluses went into the new technologies markets. That bubble burst at the end of Clinton’s term.
The twin crises of “under consumption” and an “outlet” for the surplus was “solved” by the housing boom brought on by the funneling of the surplus into the credit markets. But the loans can’t be paid back; so you bundle the loans and sell them to another financial institution to, you guessed it, leverage for more credit. Bad debt piles on bad debt and that bad debt is sold and resold to keep it capitalized. The bubbles burst with both the housing and credit industries collapsing.
If you sold your future labor with the hope that it would pay off with a rise in wages, the opposite happened. Your future labor that you “banked” on is worth even less than it was ten or fifteen years ago. The debt can’t be paid off, not with a whole lifetime, because wages aren’t rising. Workers are always behind and wage slavery means not just a slave to this week’s pay check, but to the next 30 years of paychecks.
The market in debt took off with the rise in credit. Banks were at pains to loan out more and more, selling the debt to recapitalize and…sell more debt. This is, well, a pyramid scheme. How much is debt worth that can’t be paid back. Not much. So the banks find themselves screwed, Banks won’t lend to other banks because the credit in which this was leveraged with has no value anymore. To get out of the mess the banks are demanding $700 billion from the government to recapitalize and, yep, sell more debt.
Why in the world would any worker favor getting the banks out of this crisis, even if it allowed workers to gain a new credit line? The problem, for workers, is declining wages brought about in part by the globalization of increasing parts of the labor market. To solve that crisis workers have to organize across national boundaries in a struggle to increase wages.
As for the banks. Fuck ’em. The values they claim to hold are all so much smoke and mirrors. Expropriate all of them. All debt for workers is toxic. Cancel all of the debt that can’t be paid back and put the speculators in jail, create a single national bank co-operative. Begin to make “despotic inroads on the rights of property” is what I say. Think of the lives they have ruined after workers lose their homes, the chance of retirement and the future education of their children. What price on that?
What about the inflationary pressures of this huge influx of capital into the financial markets? On what basis will workers have access to new lines of credit? To pay off old ones? Or will most workers be denied new credit at all as the new regulations deny credit to those without the income potential to pay it back? To say nothing of the other unsaid of this whole process; the massive concentration of capital in fewer and fewer institutions.
I know that the crisis is a lot more complicated than the one I laid out here. The operations of the financial institutions are so Byzantine as to make my head spin. It is impossible to get the real story from them. I hope to come up with a reading list and post it here. The crisis has been a learning experience for me- I reread Marx’s Capital with the help of David Harvey over the summer and that has helped to contextualize this crisis within the process of capitalist accumulation, but I am no economist Marxist or otherwise.
Politically, we do have lessons to draw out from all this of course. The Democrats are united with the White House in facing down the only institutional opposition to the bailout; the “free market” Republicans. How whack is that? The Keynesian (sans social democracy) winds are blowing . The left, long accustomed to battling on the terrain of neo-liberalism will need to prepare itself for a confrontation with the “managed” capitalism that may come out of this crisis. The capitalists are learning too. FDR once claimed that the New Deal’s purpose, and this is no New Deal, was to “save capitalism from itself”. Why in the world would we ever want to be a party to that?