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Economic crisis: It isn’t just greed

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.