Description
When the American financial system began to unravel in late 2007, sending trillions of dollars up in smoke, not only politicians but most experts, from the halls of academe to newspaper financial pages, agreed that though things might be serious, comparisons to the Great Depression were uncalled for. A few months later, however, that comparison was everywhere, if only as background for insistence that this time the downward spiral could be controlled – provided that governments did the right thing, and fast. (Otherwise, as the then leader of the free world put it, ‘This sucker’s going down.’) Three years later, the worst seems to have been avoided, and what has been dubbed the Great Recession is generally supposed to be giving way to recovery. This recovery, however, seems to be of the jobless variety, with banks still reluctant to extend much credit and successive fiscal crises in Europe and elsewhere doing nothing to counter unease in the world’s financial markets.
Only a few years ago, economists who explained the rational, efficient, self-correcting nature of the market system were winning Nobel prizes; those who disagreed with them were sure that proper government policies would make up for whatever limits to growth capitalism might bump up against. Both of these versions of economic orthodoxy have been more difficult to believe since the economic gains of yesteryear melted away like glaciers under the impact of global warming, as fortunes vanished from stock markets around the world and the nine largest us banks lost more money in three weeks of early 2008 than they made in profit during the three years after 2004, while governments struggled to contain the damage. And yet, despite the surprising readiness of publications like The Economist (which, on 18 October 2008, featured a story on ‘Capitalism at Bay’) to consider the economic system as truly imperilled by its current disorder, it is still difficult for people to understand that the current crisis is the result of more than greed, corporate irresponsibility and the deregulation of financial markets. Greed and corporate irresponsibility are hardly novel features of capitalist society. And if the dismantling of the regulations put in place in the United States during and after the Great Depression to limit financial hijinks eased the way both to fraud and to the extension of speculation beyond sustainable limits, it is also what made possible the exuberant expansion of credit on which the level of well-being achieved over the last two decades depended. Understanding the Great Recession requires looking beyond the contributions made to the debacle by governmental connivance and the instability inherent in newfangled financial contrivances like the now infamous collateralized debt obligations and credit default swaps, to the long-term dynamic of capitalism itself.
Contents
Preface 7
1 What Happened? 11
2 Ups and Downs 26
3 Money, Profit and Cycles 40
4 After the Golden Age 5 2
5 Appropriate Policies 67
6 The Future o f Capitalism 83
References i n
Acknowledgements 126