Why Wall Street had its worst week in 10 years
By Gary
Wilson
The headline blared: "Wall Street's Worst Week in 10
Years."
The New York Stock Exchange plunged 630 points in 5 days,
making it the worst week ever in absolute numbers. In terms of
percentage, the drop was 5.9 percent, the biggest drop since a
fall of 7.8 percent in the second week of October in 1989.
For the first time since April, the Dow Jones industrial
average fell below 10,000.
The business press was quick to put the blame on two events.
The first was a speech by Federal Reserve Board Chairperson
Alan Greenspan on Oct. 14 to a banking conference. There he
said that a sudden drop in the market is likely to set off a
panic that could precipitate a wider financial crisis.
The second event blamed is a report on Oct. 15 by the
Commerce Department that producer prices had risen 1.1 percent
in September. The producer price index is seen as a barometer
of inflation, and the rise was the largest monthly climb in
nine years.
Newsweek magazine headlined its report on the events:
"Halloween Arrives Early."
The Newsweek report begins: "October can be a scary time on
Wall Street for individual investors and hardened pros
alike."
Time magazine had a similar report: "More Tricks Than Treats
in October's Dow?"
The report begins similarly: "Halloween came early to Wall
Street last week, and it looks to be staying past
Christmas."
Nothing natural about crises
The flashy headlines and scary reporting are all supposed to
convey one message. There could be worse times ahead, even an
economic crash leading to a recession, and there's nothing you
can do about it. It is simply brought about by forces beyond
your control, like a hurricane or an earthquake.
That's one of the enduring myths of capitalism, a myth that
is believed by many even though Karl Marx exposed it as a myth
about 150 years ago.
Marx showed that the forces behind capitalism, its booms and
busts, are not the creation of a natural force of nature. The
economic forces are created by people and can ultimately be
controlled by people.
There is a famous section of Marx's book on capitalism,
"Capital," on the "fetishism of commodities." Elsewhere he also
wrote on the fetish-like character of capital.
The language used in the translation from the original
German sounds old fashioned today, making it harder to
understand its meaning.
In modern times, Marx's terms "commodity fetishism" and
"capital fetishism" are often thought to mean that he was
writing about an obsession with material goods and money. Of
course, it is the capitalists' obsession with profits that is
the source of capitalist crises of overproduction.
The capitalists produce goods and services only for profit
and not for need. Once a commodity can no longer be sold at the
desired rate of profit, production is cut back or even
terminated.
But that is not what Marx was talking about when he wrote
about fetishism. The term fetish here has a different
definition.
Here's the alternative definition from the Merriam-Webster
Dictionary: An object (such as a small stone carving of an
animal) believed to have magical power to protect or aid its
owner.
What Marx was talking about is the mysterious "magical
powers" that seem to come out of a capitalist economy. Although
the economy is the product of specific economic forces, it
appears to be independent of them.
Gold or diamonds, for example, appear to be valuable
independently of the tremendous labor necessary to bring them
out of the earth and then refine them.
The economy appears to have a life of its own. Business
cycles of boom and bust and the instantaneous creation or
disappearance of wealth on the stock market all seem to happen
independently from everyday life. Inflation and unemployment
seem rise or fall on their own accord, as do interest
rates.
The source, however, does not lie in the hidden powers of
Alan Greenspan or in money, economic crises, Wall Street,
inflation, interest rates, or any of the rest.
The magic comes from the way that capitalist production is
organized. The source of value--workers' labor power--is
hidden. Because the source of value has been mystified, it is
difficult to see that it is the secret to understanding the
economy's rises and falls.
Products seem to have a value on their own--oil is another
example--when in fact it is the labor power put into production
of the commodities that gives them their value. The magic of
money is that it represents labor power and labor power is the
source of wealth.
People today generally know that value comes from labor and
not some mysterious power inherent in a commodity. But the
fetishism persists in the belief that the economic laws of
capitalism are a given fact that cannot be changed.
There is no way to predict what will happen on Wall Street,
whether there will be a sudden fall or rise of the economy. But
the fact is that capitalism is an inherently unstable system
and there will be crises and unemployment and increasing
poverty as well as booms and soaring profits for a small
few.
The important thing to know is that it doesn't have to be
that way. The source of the problem is capitalism and not some
force of nature. And capitalism can be replaced.
By understanding the economic forces behind capitalism, it
is possible to overturn them through struggle and replace them
with economic laws that put people's needs before profits and
eliminate the source of economic crises.
This article is copyright under a Creative Commons License.
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