Monday, December 13, 2010

The Crisis of Capitalism and the New Great Depression

Sneak Peak on Professor James Petras' book on "The Global Economic Crisis"

December 9, 2010

Michel Chossudovsky, Andrew G. Marshall (editors)

The following text is a preview from Global Research Publishers' recent book on the Global Economic Crisis.

by  Prof.James Petra

(`chapter )Depression: The Crisis of Capitalism

All the idols of capitalism over the past three decades crashed. The assumptions and presumptions, paradigm and prognosis of indefinite progress under liberal free market capitalism have been tested and have failed. We are living the end of an entire epoch: experts everywhere witness the collapse of the U.S. and world financial system, the absence of credit for trade and the lack of financing for investment. A world depression, in which upward of a quarter of the world’s labor force will be unemployed, is looming.

Crash of the U.S. Financial System

The biggest decline in trade in recent world history defines the future. The imminent bankruptcies of the biggest manufacturing companies in the capitalist world haunt Western political leaders.

The "market" as a mechanism for allocating resources and the government of the U.S. as the "leader" of the global economy have been discredited.[1]

All the assumptions about "self-stabilizing markets" are demonstrably false and outmoded. The rejection of public intervention in the market and the advocacy of supply-side economics have been discredited even in the eyes of their practitioners. Even official circles recognize that "inequality of income" contributed to the onset of the economic crash and should be corrected. Planning, public ownership and nationalization are on the agenda while socialist alternatives have become almost respectable.

With the onset of the depression, all the shibboleths of the past decade are discarded: as export-oriented growth strategies fail, import substitution policies emerge. As the world economy "de-globalizes" and capital is "repatriated" to save near bankrupt head offices – national ownership is proposed. As trillions of dollars/Euros/yen in assets are destroyed and devalued, massive layoffs extend unemployment everywhere. Fear, anxiety and uncertainty stalk the offices of state, financial directorships, the office suites, the factories and the streets...

We enter a time of upheaval, when the foundations of the world political and economic order are deeply fractured, to the point that no one can imagine any restoration of the political-economic order of the recent past. The future promises economic chaos, political upheavals and mass impoverishment. Once again, the specter of socialism hovers over the ruins of the former giants of finance. As free market capital collapses, its ideological advocates jump ship, abandon their line and verse of the virtues of the market and sing a new chorus: the State as Savior of the System – a dubious proposition, whose only outcome will be to prolong the pillage of the public treasury and postpone the death agony of capitalism as we have known it.

The crash of the U.S. financial system is symptomatic of a deeper and more profound collapse of the economic and financial system which has its roots in the dynamic development of capitalism in the previous three decades.

Contrary to the theorists who argue that finance and post-industrial capitalism have destroyed or de-industrialized the world economy and put in its place a kind of "casino" or speculative capital, in fact, we have witnessed the most spectacular long-term growth of industrial capital employing more industrial and salaried workers than ever in history. Driven by rising rates of profit, large scale and long-term investments have been the motor force for the penetration by industrial and related capital of the most remote underdeveloped regions of the world. New and old capitalist countries spawned enormous economic empires, breaking down political and cultural barriers to incorporating and exploiting billions of new and old workers in a relentless process. As competition from the newly industrialized countries intensified, and as the rising mass of profits exceeded the capacity to reinvest them most profitably in the older capitalist centers, masses of capital migrated to Asia, Latin America, Eastern Europe, and to a lesser degree, into the Middle East and Southern Africa.

Huge surplus profits spilled over into services, including finance, real estate, insurance, large-scale real estate and urban lands.

The dynamic growth of capitalism’s technological innovations found expression in greater social and political power – dwarfing the organization of labor, limiting its bargaining power and multiplying its profits. With the growth of world markets, workers were seen merely as "costs of production", not as final consumers. Wages stagnated; social benefits were limited, curtailed or shifted onto workers. Under conditions of dynamic capitalist growth, the state and state policy became their absolute instrument: restrictions, controls, regulation were weakened. What was dubbed "neo-liberalism" opened new areas for investment of surplus profits; public enterprises, land, resources and banks were privatized.

As competition intensified, as new industrial powers emerged in Asia, U.S. capital increasingly invested in financial activity. Within the financial circuits it elaborated a whole series of financial instruments, which drew on the growing wealth and profits from the productive sectors.

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