John Kay: public support for markets caused crisis

[Qwerty Dvorak]

This is something which I have long believed myself, and I would expect to here it from you commies, but it's interesting to hear it coming from Financial Times economist John Kay.

The public support of markets provided on each occasion the fuel needed to stoke the next crisis. Each boom and bust is larger than the last. Since the alleviating action is also larger, the pattern is one of cycles of increasing amplitude.

The rest of his very interesting piece can be found here (http://www.ft.com/cms/s/0/1959f72c-fa2f-11de-beed-00144feab49a.html).

[IcarusAngel]

thanks for the post (Can't give normal thanks cuz you're restricted).

Yep, it's accurate. I've been saying the same thing on Revleft although one Revleft member called it "the most retarded analysis he's ever heard of" (no evidence for or against of course).

It's really basic common sense and political analysis, one Marx himself probably would have agreed with.

[ckaihatsu]

Each boom and bust is larger than the last. Since the alleviating action is also larger, the pattern is one of cycles of increasing amplitude.


*This* part is true -- but, despite the article's overall tone of desperate contrition and hand-wringing it is *laced* with *anti-populist*, or *elitist* jabs at the general public.





The public support of markets provided on each occasion the fuel needed to stoke the next crisis.


Holy shit, have we suddenly *forgotten* what it means to live in an imperialist, neo-colonial system of political and economic repression? Did the public just somehow forget to go to the polls and check the box that says "No to markets" -- ?





The resulting herd enthusiasm led to mispricing – particularly in asset markets, which yielded large, and largely illusory, profits, of which a substantial fraction was paid to employees.


Here's *another* example of blaming the victim -- suddenly it's * the employees * (or, in political jargon, 'workers') who have gobbled up more than their fair share of the fictitious-capital profits -- ? Please.





While measures were implemented which, if they had been introduced five years earlier, might have prevented the most recent crisis from taking the particular form it did, these responses addressed the particular problem that had just occurred, rather than the underlying generic problems of skewed incentives and dysfunctional institutional structures.


This is a false-bottom analysis -- the author is ready to go as low as faulting "skewed incentives" and "dysfunctional institutional structures", but he's obviously not denouncing capitalism *itself*.

Despite giving a rather good recent history of capitalism's drunken swaggering he admits that nothing's likely to change systematically:





I do know that unless human nature changes or there is fundamental change in the structure of the financial services industry – equally improbable – there will be another manifestation once again based on naive extrapolation and collective magical thinking.


So this is a *description* of the motivations that drive the markets: "naive extrapolation" and "collective magical thinking". I couldn't do a better job of characterizing what investors do, myself -- as long as he lays off of the general public and workers he can go ahead and reveal as much as he wants to the rest of us.


Chris



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[IcarusAngel]

It's easy to blame the government and the corporations for all our problems, Chris. It's harder to look inside yourself and realize that part of the reason the government is the way it is is because of the public. Could the people have stopped the Nazis? There was actually a lot of info out there that the Nazis were engaging in political propaganda, repression, terror, and death camps. Sometimes evil is supported as an alternative to another evil.

Certianly, there was a ton of evidence that Eron was a faulty corporation, yet its own workers continued to invest in it. Certainly the anti-war movement provided a TON of evidence against the Iraq war, it was ignored.

History shows that the public is willing to submit to tyranny; today's tyranny is market tyranny.

[ckaihatsu]

It's easy to blame the government and the corporations for all our problems, Chris.


It's not just *easy* -- it's *valid*, too! I thought that's *why* we're anti-capitalists and revolutionaries, because of the elite control that those with wealth have compared to those of us who *don't*....

However, that said, I will concede the following point which I just happened to have posted to another thread:




Marxism *is not* -- and *should not* *try* to be -- "life-emancipatory", or some kind of a program for the living of life. One's relationship to one's own life (and life history) is a *philosophical*, *humanistic* matter, *not* a (mass) political one.





It's harder to look inside yourself and realize that part of the reason the government is the way it is is because of the public. Could the people have stopped the Nazis? There was actually a lot of info out there that the Nazis were engaging in political propaganda, repression, terror, and death camps. Sometimes evil is supported as an alternative to another evil.

Certianly, there was a ton of evidence that Eron was a faulty corporation, yet its own workers continued to invest in it. Certainly the anti-war movement provided a TON of evidence against the Iraq war, it was ignored.

History shows that the public is willing to submit to tyranny; today's tyranny is market tyranny.


Well I *do* agree that those who are *not* on the revolutionary left *are* tacitly accepting the continuance of the status quo.

[Qwerty Dvorak]

ckaihatsu



Here's *another* example of blaming the victim -- suddenly it's * the employees * (or, in political jargon, 'workers') who have gobbled up more than their fair share of the fictitious-capital profits -- ? Please.
Er, exactly what employees do you think he's talking about? Do you think he's talking about minimum wage workers in factories or shops?

Kay is referring to the multi-million dollar/euro/sterling bonuses paid out to top investment bankers. I hardly think they are the real victims of this crisis (considering that even today they continuue to be paid such bonuses). They are certainly not the kind of workers leftists shouldbe seeking to protect or defend.

[ckaihatsu]

Er, exactly what employees do you think he's talking about? Do you think he's talking about minimum wage workers in factories or shops?

Kay is referring to the multi-million dollar/euro/sterling bonuses paid out to top investment bankers. I hardly think they are the real victims of this crisis (considering that even today they continuue to be paid such bonuses). They are certainly not the kind of workers leftists shouldbe seeking to protect or defend.


Oh -- yeah, you're right....

[Skooma Addict]

The author of the article at least got something right.

"Eventually, at the end of each phase, reality impinged. The activities that once seemed so profitable – funding the financial systems of emerging economies, promoting start-up internet businesses, trading in structured debt products – turned out, in fact, to have been a source of losses."

Those are bad examples, but whatever. Now if only the Author realized that the reason why these malinvestemnts were made was due the tampering of the interest rate.

[ckaihatsu]

Those are bad examples, but whatever. Now if only the Author realized that the reason why these malinvestemnts were made was due the tampering of the interest rate.


This is one of those things where it's all a matter of how wide a focus one wishes to have -- sure everyone can see the damage up-close, but not everyone wants to acknowledge the overall big picture itself -- capitalism.

Do we want to *restrict* ourselves to an explanation that *only* includes "the tampering of the interest rate", or will we accept that the interest rate was lowered in order to provide free-money liquidity to cover the widening spreads on the only investment opportunities left: shitty, high-risk long-shots.

And if we take a step back in this farcical game of slack-chained cause-and-effect linkages we'll find that the right-wing's politics collapsed in an inescapable conundrum of do-we-let-the-system-fail-as-free-markets or do-we-jack-the-public-treasury-to-keep-the-roulette-wheel-spinning.

The long-shot, publicly backed "malinvestments" were the only way to keep the storyline going -- when there's no *real growth* in the economy then practically *all* of your past investment decisions turn into bad ones when the shitstorm cometh.

A *rational*, working class person would look at all of this and say, "Time to pack it in -- the merchant class had 500 good years, let's call it a wrap."

But the establishment will spin, spin, spin, in a vain attempt to keep the air moving -- *whatever*...!

[Skooma Addict]

This is one of those things where it's all a matter of how wide a focus one wishes to have -- sure everyone can see the damage up-close, but not everyone wants to acknowledge the overall big picture itself -- capitalism.

How is our economic crises due to capitalism? What is it specifically about capitalism that causes massive and sudden malinvestemnts in higher order capital goods?


Do we want to *restrict* ourselves to an explanation that *only* includes "the tampering of the interest rate", or will we accept that the interest rate was lowered in order to provide free-money liquidity to cover the widening spreads on the only investment opportunities left: shitty, high-risk long-shots.


It doesn't matter why the interest rate was artificially lowered below the markets rate of interest. All that mattered it that such a lowering did occur.


A *rational*, working class person would look at all of this and say, "Time to pack it in -- the merchant class had 500 good years, let's call it a wrap."

That would be a misguided working class person.

[ckaihatsu]

How is our economic crises due to capitalism? What is it specifically about capitalism that causes massive and sudden malinvestemnts in higher order capital goods?


Funny you should ask on such a discussion board as this.... You'll have the *easiest* time doing research to answer that...!





It doesn't matter why the interest rate was artificially lowered below the markets rate of interest. All that mattered it that such a lowering did occur.


First you *want* to know, and now you *don't* want to know...!

[Die Neue Zeit]

A *rational*, working class person would look at all of this and say, "Time to pack it in -- the merchant class had 500 good years, let's call it a wrap."

But the establishment will spin, spin, spin, in a vain attempt to keep the air moving -- *whatever*...!

"Merchant class"? I'll have to think about this alternative to "bourgeoisie" and "petit-bourgeoisie."

[ZeroNowhere]

No doubt the S&L crisis a few decades ago was also caused by public support for markets. Anyways, I prefer research (http://akliman.squarespace.com/persistent-fall/).

[ckaihatsu]

"Merchant class"? I'll have to think about this alternative to "bourgeoisie" and "petit-bourgeoisie."


Yeah, it's got a certain ring and pithiness to it, right?

Suddenly the entire commercial culture around us looks like people in those fancy felt multicolored Medieval outfits with the baggy hats, running around from table to table at the Renaissance Fair to secure a few passers-by as customers...!


x D

[Dean]

It's easy to blame the government and the corporations for all our problems, Chris. It's harder to look inside yourself and realize that part of the reason the government is the way it is is because of the public.

Are you serious? Are you even a leftist?

[Qwerty Dvorak]

Are you serious? Are you even a leftist?
Well it's true that the market has a corrupting effect on individuals and the public, and I don't think it's necessarily un-leftist to think so (in fact I'd say it's a fairly left-wing analysis). Firstly, certain causative factors in the crisis, such as the property bubble or over-reliance on credit, were stoked by the actions of many individuals with no direct affiliation to the "fatcats" at the top. Secondly, the deregulationist laissez-faire policies of governments in the developed world which were another major factor in the crisis were consistently endorsed by the electorates in those countries.

That;s not to say that the people themselves caused the crisis--far from it--but that people can be, and were, duped into screwing themselves over in the long run. Capitalism teaches that the markets are God and the public bought this.

[IcarusAngel]

Are you serious? Are you even a leftist?

It's funny my "leftist" credentials are challenged by Stalinists and Leninists, while not providing any sort of a counter-argument whatsoever.

My analysis is based off reading books like "Backing Hitler" and "Necessary Illusions" and so on to see how the public often supports the oppressive conditions in society - every part of my argument is well documented, then.

The public support for free-markets is very much in contrast to the slaves and serfs who often revolted openly AGAINST their oppressive conditions, or the jews who stood up to the Nazis, or the anarchists who stood up to Stalin. There is no coherent opposition to markets, and the left versions are riddled with Stalinism and cultish thinking. So I blame the left as well (and I include myself in that category).

Marcuse noted the same tradition. And Chomsky has also discussed collective guilt etc.

Instead of attacking other leftists and trolling you could purpose a theory of your own.


Well it's true that the market has a corrupting effect on individuals and the public, and I don't think it's necessarily un-leftist to think so (in fact I'd say it's a fairly left-wing analysis). Firstly, certain causative factors in the crisis, such as the property bubble or over-reliance on credit, were stoked by the actions of many individuals with no direct affiliation to the "fatcats" at the top. Secondly, the deregulationist laissez-faire policies of governments in the developed world which were another major factor in the crisis were consistently endorsed by the electorates in those countries.

That;s not to say that the people themselves caused the crisis--far from it--but that people can be, and were, duped into screwing themselves over in the long run. Capitalism teaches that the markets are God and the public bought this.


Good post.

[Die Neue Zeit]

Yeah, it's got a certain ring and pithiness to it, right?

Suddenly the entire commercial culture around us looks like people in those fancy felt multicolored Medieval outfits with the baggy hats, running around from table to table at the Renaissance Fair to secure a few passers-by as customers...!


x D

Comrade, the reason why I responded above was because of how I actually included big-time fund manager personalities, whether or not they themselves are investors, as outright bourgeoisie (from CSR work). The typical Marxist classification is still "petit-bourgeoisie," but since I looked closer ("functioning capitalists" in Volume III), this is akin to the pre-Medieval intercontinental merchants who, with aristocratic state blessing, bought goods in China at dirt cheap prices and sold them half-way 'round the world at a markup.

"Oh, but I was entrepreneurial! I added value! I created wealth!" :rolleyes:

[ckaihatsu]

big-time fund manager personalities [...] akin to the pre-Medieval intercontinental merchants who, with aristocratic state blessing, bought goods in China at dirt cheap prices and sold them half-way 'round the world at a markup.

"Oh, but I was entrepreneurial! I added value! I created wealth!" :rolleyes:


So we could call the pre-Medieval merchants "shippers" or "haulers" at best, but I dunno about the big-time fund managers.... What is it they do again, exactly???

(Maybe the human manifestation of a spreadsheet algorithm?)


x )

[Die Neue Zeit]

They take care of things like mutual funds, pension funds, other group-based investment funds, etc. They analyze which stocks, bonds, and derivatives are good for their management portfolios and which aren't, and buy and sell accordingly. They share the spotlight with some corporate execs as guests on business news.

At least the on-the-exchange-floor trader is petit-bourgeois, since he only trades without analysis.

[ckaihatsu]

(Yeah, I meant the question *rhetoricallly* -- that's why I answered my own "question"....)