27 August 2009 **** Front Page

Stagnation is the name of the game

By Tapani Lausti

John Bellamy Foster and Fred Magdoff, The Great Financial Crisis: Causes and Consequences. Monthly Review Press 2009.

Highly educated Finnish analysts have been saying that the world economy is in a state of fundamental change. In spite of the dramatic tone, their language does not touch on any questions of class and power. The analyses are couched in mainly economic terms, politics mostly disregarded. They want people to seek "new paths of growth".

Sitra, the Finnish Innovation Fund, will be organising high-profile seminars and workshops this autumn. The aim is to chart new sources of vitality for Finland in the context of a changing world economy. One of the keynote speakers will be the Nobel prize winner, US economist Paul Krugman.

It is already clear that the agenda will not include any radical ideas for another kind of social and economic system. Sitra's intellectuals do say that difficult times can open up new possibilities, but they would not agree that the capitalist system is ultimately unsustainable. They expect economic recovery and renewed robust growth, and want Finland to find its place in this new brave world.

Among Krugman's critics have been the two American radical economists John Bellamy Foster and Fred Magdoff whose new book, The Great Financial Crisis, offers observations of the capitalist economy which Sitra's intellectuals don't even have the vocabulary to analyse. Yet, Foster and Magdoff's analyses of how we got to the current financial mess are much more credible than those you mostly see in the media.

In the explanations of the current financial crisis, Foster and Magdoff consider it insufficient to concentrate on the phenomena of the housing bubble and financial deregulation. The problems go deeper. They emphasise "that the normal path of the mature capitalist economies, such as those of the United States, the major Western European countries, and Japan, is one of stagnation rather than rapid growth. In this perspective, today's periodic crises, rather than merely constituting temporary interruptions in a process of accelerated advance, point to serious and growing long-term constraints on capital accumulation." (p. 101)

Class struggle is one concept obviously missing in Sitra's dictionary. Yet, whilst the majority of even left-wing parties has abandoned class analyses, the capitalist class never stopped waging the old struggle. Inequalities have grown everywhere as labour costs have been aggressively cut. This, however, in no way solves the conflicts built into the capitalist system, on the contrary. Consumers are supposed to consume to keep the system going, and yet their consumption power is being curtailed.

Thus the growing productivity of the economy ultimately makes it difficult to find sufficient demand for products. New profitable investment outlets are not easy to find. After the real economy had started experiencing slower growth, financial explosion took place as capital sought to "leverage" its way out of the problem by expanding debt and gaining speculative profits. (p. 121)

As the whole system totters, citizens are watching with disbelief how trillions are thrown to banks and other financial institutions. They have been told for decades that there are not enough resources to solve major social problems. In Britain it used to be fashionable to assure people that problems are not solved by throwing money at them.

Now citizens are treated to the old spectacle of privatisation of profits and socialising losses. Again masses of people are asked to tighten their belts to save the system which ultimately serves the material interests of a small part of the population.

Foster and Magdoff put it like this: "The capacity of the larger public to see through this deception in the months and years ahead will of course depend on an enormous amount of education by trade union and social movement activists, and the degree to which the empire of capital is stripped naked by the crisis." (p. 137)

Sitra's representatives say that they have noticed a readiness for change in people's minds. However, the change the world really needs is probably beyond their grasp. The necessary change will only come with the help of mass movements rather than elite seminars. But let's wait and see what the seminarists will come up with. Even flawed efforts to understand the world are interesting in times of deepening crisis.


Read also:

Visit the archive: World economy, US policies, Michael Albert, Noam Chomsky, Naomi Klein, István Mészáros


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