Economic crisis: It isn’t just greed
By
Stephen Millies
Published Oct 8, 2008 8:24 PM
Everybody is blaming greed for the economic crisis. Even John McCain, who
doesn’t know how many houses he owns.
With their yachts, private jets and multiple mansions, the billionaire
parasites deserve to be hated. Greed, however, has been around for thousands of
years, ever since most human societies were divided into rich and poor.
Greed alone doesn’t explain where all the cash came from to fuel the
housing boom and overall expansion of credit. Millions became ensnared by
predatory lending, while billions of credit cards were mailed out.
Crunch time came during a period of capitalist overproduction, when cars,
houses and other commodities couldn’t be sold at a profit.
Credit is capital. Whether it takes the form of money or commodities like goods
and services, capital is a social relation between paid and unpaid labor.
The origin of capital is the new value—called surplus
value—produced by workers which is stolen by their exploiters and called
profits.
The continuous reinvestment of these unpaid wages to get more surplus value is
called capitalist accumulation.
But first the capitalists have to sell their stuff in the capitalist market.
The annual $15-trillion United States market remains the biggest of them
all.
It was U.S. imperialism’s foreign trade deficits, reaching $800 billion
annually, which helped create this credit expansion. Capitalists in other
countries had to do something with the mountains of dollars they accumulated
through trade surpluses.
They bought trillions of dollars worth of Treasury bills and bonds which helped
finance the Pentagon. Corporations like Bell Labs were bought up.
This wasn’t enough to consume the torrent of dollars. So they poured
capital into mortgages and other financial instruments.
The United States was consistently running a foreign trade deficit of 5 to 6
percent of its economy. Part of it came from U.S. corporations importing goods
from their plants abroad.
How did the U.S. get away with it for so long? Any other country would have
been brought to its knees, like when the British pound collapsed in the
1960s.
Ultimately the law of value asserted itself.
Origin of the crisis
Capitalism starts with the exchange of commodities. Despite monopoly prices,
colonial robbery and other boons, these exchanges demand that equal amounts of
socially necessary labor change hands.
Exchanging trillions of IOUs, that is, tokens of value for the real values
represented in imported goods, couldn’t last forever. The dollar fell
dramatically, particularly against the euro, the currency used in most of
Western Europe.
The origin of the present crisis began with the monopoly position of the United
States at the end of World War II. Virtually every capitalist rival of Wall
Street was in ruins. At least 25 million people in the Soviet Union died saving
the world from Hitler.
The United States then accounted for half of world capitalist production. Ten
years later in 1955, 40 percent of the world’s steel was produced in the
United States.
U.S. imperialism had nuclear weapons and an economy that dwarfed all others.
But the Soviet Union survived and was growing dramatically.
Millions of French and Italian workers voted for communist parties. The Chinese
Revolution shook the world. People in Asia and Africa were revolting and
demanding independence. Yankee imperialism was hated throughout Latin
America.
A global class war compelled Wall Street to open its market—previously
surrounded by tariff walls—to other countries, despite the opposition of
industrial capital centered in the Midwest. “Politics was in
command,” as Mao Zedong would have said.
Germany and Japan were turned into military vassals in exchange for the chance
to sell their commodities in the United States.
The U.S. could afford to do this because of its monopoly position at the time.
But monopoly breeds lethargy. Foreign capitalist rivals had to be more
nimble.
Big U.S. corporations depended on cost-plus Pentagon contracts for much of
their profits. Half of U.S. research and development was done for the
military.
By the late 1960s the U.S. still had a trade surplus with the rest of the
world. But it was running a financial deficit because of the vast cost of
occupying other countries. President Lyndon B. Johnson fueled inflation by
printing dead presidents to help pay for the Vietnam War.
Other countries demanded gold for their dollars. Suddenly in 1971, Nixon
stopped this exchange of gold—that is, real value—for dollars and
devalued the dollar itself by 10 percent.
A surcharge was placed on imports. These acts destroyed the exchange rate
system the United States engineered at Bretton Woods in 1944.
Nixon also imposed phony price controls and a real freeze on workers’
wages.
U.S. imperialism enjoyed for decades a reactionary holiday away from the law of
value. This vacation was extended by the collapse of the Soviet Union.
Countries continued to ship vast quantities of commodities to the United States
and hoped to get rid of their dollars. What else could they do?
But all holidays must end. Today the United States is in a weaker position
vis-à-vis its capitalist rivals than in Nixon’s era.
Trillions of dollars on bank ledgers represent nothing. That’s
what’s “clogging the arteries” of world finance, resulting in
the credit freeze.
Articles copyright 1995-2012 Workers World.
Verbatim copying and distribution of this entire article is permitted in any medium without royalty provided this notice is preserved.
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