What does the recent events at Wall St. actually mean for capitalism?

[rednordman]

The events of the ‘credit crunch’ and recent events of Wall Street stock exchange has been all over the media recently and has been labelled by some papers (mainly the Guardian) as the end of capitalism. Even I think that this is a bit far fetched a thing to say, but what does it really mean for the global free-market? Is just a blip in the system or are the media right to make a big deal of this? Were the governments correct to bail the companies that went bust out, and what would have happened if they had not? Some people are now calling for more government regulation of markets, where as others are even going as far as to blame this on government restrictions!? Are they correct or has capitalism and liberalization of practically everything simply gone too far?
I’ve decided to post this on the OI forum (though it is more of a learner post) because I would like to hear all sides to the argument (Marxist/anarchist/capitalist) if possible.

[Bud Struggle]

It means nothing.

Business as usual Monday morning.


The events of the ‘credit crunch’ and recent events of Wall Street stock exchange has been all over the media recently and has been labelled by some papers (mainly the Guardian) as the end of capitalism. Nonsense. Capitalism has been declaired dead all through the birth life and demise of socialism. Just more of the same.


Even I think that this is a bit far fetched a thing to say, but what does it really mean for the global free-market? No, it's the beginning of the global market--but government oversight isn't a bad thing.


Is just a blip in the system or are the media right to make a big deal of this? There were five similar blips in the stock market in the last ten years. Big deal.


Were the governments correct to bail the companies that went bust out, and what would have happened if they had not? The governments GOT the mortage companies into this mess--(though the companies were their own worst enemies.)


Some people are now calling for more government regulation of markets, Fine.


where as others are even going as far as to blame this on government restrictions!? Nope--not enough restrictions.

[the questionist]

The events of the ‘credit crunch’ and recent events of Wall Street stock exchange has been all over the media recently and has been labelled by some papers (mainly the Guardian) as the end of capitalism. Even I think that this is a bit far fetched a thing to say, but what does it really mean for the global free-market? Is just a blip in the system or are the media right to make a big deal of this? Were the governments correct to bail the companies that went bust out, and what would have happened if they had not? Some people are now calling for more government regulation of markets, where as others are even going as far as to blame this on government restrictions!? Are they correct or has capitalism and liberalization of practically everything simply gone too far?
I’ve decided to post this on the OI forum (though it is more of a learner post) because I would like to hear all sides to the argument (Marxist/anarchist/capitalist) if possible.

I think global 'free market' is the incorrect terminology since almost all trade is regulated and spelled out by governments. Black market and to some extent gray market trade could be more accurately described as closer to free market. Otherwise the global trade is a mercantilist institution.

I think government bailouts,at the expense of the tax payer,was the wrong action and will perpetuate the overall bigger problem of an unstable economy with inflating currency and rising unemployment. Its easy to blame the 'free market' when it is substituted as a definition for mercantilist practices. On the surface it seems that these companies were forcing people to do business with them with the intention of ripping them off and all this was due to a relaxed government that stood idly by and did nothing to 'save' the people. Such myths are perpetuated in popular culture and to those with limited understanding of the hidden costs that a rational economic analysis yields.

In all markets the common denominator is the currency and whoever controls and monopolizes the currency would be the rational choice to investigate first. In this case it is the institution that enforces monopolization and manipulated interest rates which distort market signals and cripple investors , speculators , and consumers/customers. Unfortunately one cannot find this enforced monopolization in the private sector but it is the government the enforces the U.S. Central Bank's (Federal Reserve's) grip on the currency. It is also the government that incorporates these companies and shields them from losses by socializing them to the sap taxpayer.

Surely we have thieves in the woodworks with some of these companies but they don't wield the guns, you have to look at who has the guns and that is the government.

[RGacky3]

TomK is right, a lot of people lost money, a lot of people will make money, this sort of thing happens all the time, its the cycle of Capitalism, some make it to the top, some loose their position at the top, most are always at the bottom.

Most of us who make most of our living from wages, won't be too bothered by this "unless our companies are affected enough to lay us off." Its those with huge amounts of money invested (i.e. Capitalists), that will suffer the most, but many will also gain by making new investments.

Its the cycle of Capitalism, Capitalists make money, more money, want deregulation to make even more, Capitalism starts to crumble, the government comes in and saves them, so they can keep making money, obviously if it crumbles the poor are going to suffer too (because the top hats are in charge, and will drop their bottom guys before they take a hit).

[the questionist]

I think you're half right when it comes to describing the mercantilist capitalism in the States. But government is hardly a savior in all of this and I think thats where the myth is strong.

Loss of investment and savings will affect jobs because the long term interest of capital is several diminished. The jobs that couldn't of been created will never be able to be seen unfortunately.

Certain corporations actually bid for heavier regulation in the form of tariffs and entry barriers. The logic is simple to follow, this prevents competition and ensures a mutually advantageous arrangement with the State authorities. The fact that the state will coerce the taxpayer into bailing out companies gives these companies the disincentive for efficiency, gains are gains , but loses are subsidized, not a bad deal.

Nor is proper forecasting of futures really possible with manipulated interest rates that is a govt enforced monopoly and you'll get your large bit of bad investment.

I do agree in general with you though. Mercantilist capitalism would collapse without state intervention. The two are inextricably link. Wipe out the market and keep the state and you have socialism, wipe out the state and keep the market , you have free markets.

[Psy]

Those that think this is busniess as usual are not paying attention. The cycle of capital is violently grinding to halt, as value is starting to get stuck in the different stages as the whole system goes through crisis and the capitalist class panics.

The idea that the ruling class is profiting from this is short sighted, the large bailouts is as effective as flapping ones arms while falling to the ground as there is not enough value in the entire capitalist to cover the losses of the fictional capital evaporating into nothing.

That is not to say the capitalist system is doomed, but the capitalist system is blowing up in the capitalists' faces right now.

[Die Neue Zeit]

What this recent crap means is that we are about to enter into an era of protectionism (there were earlier indicators, such as resistance to Russia's entry into the WTO, the failure of signing onto some world trade pact, the decline of the IMF, and so on).

[Elliot_R]

We know capitalism will not collapse. Dont worry, it ill get right back up if it ever falls because that is what it has been in the past.

[Psy]

We know capitalism will not collapse. Dont worry, it ill get right back up if it ever falls because that is what it has been in the past.
You do know feudalism didn't get back up?

[Elliot_R]

Feudalism isn't capitalism. Feudalism does nothing good to the people -either. So it is good it's gone.

[RGacky3]

That is not to say the capitalist system is doomed, but the capitalist system is blowing up in the capitalists' faces right now.

Not all of them, I guarantee you a lot of Capitalists will profit from this. As a whole the Capitalist class is pretty safe I think.


Certain corporations actually bid for heavier regulation in the form of tariffs and entry barriers. The logic is simple to follow, this prevents competition and ensures a mutually advantageous arrangement with the State authorities. The fact that the state will coerce the taxpayer into bailing out companies gives these companies the disincentive for efficiency, gains are gains , but loses are subsidized, not a bad deal.

Thats true, that being said ultimately the government works for Capital, thats how its always been, thats how it always will be, and the fact is, the government, as well as the vast majority of mankind, have no option but to work for the Capitalist.

Thats why when people talk about getting money out of government, its rediculous, becuase thats impossible as long as you have a capitalist system.

[Non-Sectarian Bastard!]

Actually this whole recent recession has been blown out of proportion. A recession is a normal part of the market economy, the prices and values can't be going consistently up. From time to time corrections are needed to avoid an unhealthy economy.

There have been dozens of recessions far worse then this one, just a few on the top of my head; the recession caused by 11-9, 1980's recession and ofcourse the big one of the 1930's.

I mean if capitalism survived the one from the 1930's and made an even stronger recovery, then you can't expect it to collapse from this tiny one. For the sake of survivability of capitalism they even benefit from occasional recessions. It's keeps the economy sharp and healthy.

[Qwerty Dvorak]

A lot of people here playing down the recession, including some leftists strangely enough. I'm generally not an alarmist person and I don't think this is the end of capitalism or anything like it, but this recession is pretty serious compared to anything in the last ten years. Banks are dropping like never before, it really hit home for me when Lehman went under. Lehman's bankruptcy was the largest in US history, and the firm had been around since 1850 an survived all previous recessions and depressions.

The fact of the matter is that never before have there been so many sub-prime mortgages lent out, and the oil crisis is more severe than ever which leads to general economic woe. On top of this, we are currently experiencing an international property bubble (or rather, a number of bubbles) which compounds the problem and in many ways has worked in tandem with the credit crunch leading to serious consequences for the economy.

[rednordman]

Thanks for your responses people, its been interesting hearing what both sides of the spectrum have had to say:).

[Sendo]

the system is obviously increasingly unstable. We have an overproduction crisis, but the product doesn't fill consumer need nor is it a capital. The product is debt. Couple this with the building environmental* crisis (agriculture hurt by freak weather, depletion of oil, messy American infrastructure, health problems, healthcare problems, food for fuel campaigns) and we have a very bleak future.

FM and FM, Bear Stearns, and Lehman Brothers....this isn't your run-of-the-mill recession. Capitalism's crises get worse and worse each time. The depression of the late 19th century was nothing compared to the Great Depression (how arrogant, as if the 20s/30s would be the worst crisis ever for all time to come). I imagine the current crisis will dwarf the "Great Depression" in its own turn.

It will be drawn out, however, and won't be as "bad" for the most Americans in absolute terms. But in relative terms (pre-depression to depression loss of quality of life and financial security) it will be. Maybe even worse. We have black American unemployment in the double digits. US Fed agencies are notoriously sugar-coated. If the govt says unemployment is 10% it's really more like 15%. The US unemployment status is VERY VERY VERY narrowly defined, and ignores underemployment to a great deal. Isn't there a clause that being unemployed for over 6 moths in a row makes you not counted for unemployment?

*Environmental being the tangible (non-market) conditions of life and production. Not simply pretty animals and biodiversity, but fuels, infrastructure, health, too.)

[Nusocialist]

Personally I think we are seeing an end to the right of centre consensus we've seen since the early 80s. More people will feel ready to take a look at more left of centre and social democratic alternatives. Hopefully Nulab will die and we'll get something closer to old labour back.