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[arjuna]

World Depression: Regional Wars and the Decline of the US Empire

James Petras

All the idols of capitalism over the past three decades crashed. The assumptions and presumptions, paradigm and prognosis of indefinite progress under liberal free market capitalism have been tested and have failed.

We are living the end of an entire epoch: Experts everywhere witness the collapse of the US and world financial system, the absence of credit for trade and the lack of financing for investment. A world depression, in which upward of a quarter of the world�s labor force will be unemployed, is looming. The biggest decline in trade in recent world history � down 40% year to year � defines the future. The immanent bankruptcies of the biggest manufacturing companies in the capitalist world haunt Western political leaders. The �market� as a mechanism for allocating resources and the government of the US as the �leader� of the global economy have been discredited. (Financial Times, March 9, 2009) All the assumptions about �self-stabilizing markets� are demonstrably false and outmoded. The rejection of public intervention in the market and the advocacy of supply-side economics have been discredited even in the eyes of their practitioners. Even official circles recognize that �inequality of income� contributed to the onset of the economic crash and should be corrected. Planning, public ownership, nationalization are on the agenda while socialist alternatives have become almost respectable.

With the onset of the depression, all the shibboleths of the past decade are discarded: As export-oriented growth strategies fail, import substitution policies emerge. As the world economy �de-globalizes� and capital is �repatriated� to save near bankrupt head offices � national ownership is proposed. As trillions of dollars/Euros/yen in assets are destroyed and devalued, massive layoffs extend unemployment everywhere. Fear, anxiety and uncertainty stalk the offices of state, financial directorships, the office suites the factories, and the streets�

We enter a time of upheaval, when the foundations of the world political and economic order are deeply fractured, to the point that no one can imagine any restoration of the political-economic order of the recent past. The future promises economic chaos, political upheavals and mass impoverishment. Once again, the specter of socialism hovers over the ruins of the former giants of finance. As free market capital collapses, its ideological advocates jump ship, abandon their line and verse of the virtues of the market and sing a new chorus: the State as Savior of the System - a dubious proposition, whose only outcome will be to prolong the pillage of the public treasury and postpone the death agony of capitalism as we have known it.

Theory of Capital Crisis: The Demise of the Economic Expert

The failed economic policies of political and economic leaders are rooted in the operation of markets � capitalism. To avoid a critique of the capitalist system, writers are blaming the leaders and financial experts for their incompetence, �greed� and individual defects.

Psychobabble has replaced reasoned analysis of structures, material forces and objective reality, which drive, motivate and provide incentives to investors, policy makers and bankers. When capitalist economies collapse, the gods drive the politicians and editorial columnists crazy, depriving them of any capacity to reason about objective processes and sending them into the wilderness of subjective speculation.

Instead of examining the opportunity structures created by enormous surplus capital and the real existing profit margins, which in drive capitalists into financial activity, we are told it was �the failure of leadership�. Instead of examining the power and influence of the capitalist class over the state, in particular the selection of economic policy-makers and regulators who would maximize their profits, we are told there was a �lack of understanding� or �willful ignorance of what markets need�. Instead of looking at the real social classes and class relations � specifically the historically existing capitalist classes operating in real existing markets - the psycho-babblers posit an abstract �market� populated by imaginary (�rational�) capitalists. Instead of examining how rising profits, expanding markets, cheap credit, docile labor, and control over state policies and budgets, create �investor confidence�, and, in their absence, destroy �confidence�, the psychobabblers claim that the �loss of confidence� is a cause for the economic debacle. The objective problem of loss of specific conditions, which produce profits, as leading to the crisis, is turned into a �perception� of this loss.

Confidence, faith, hope, trust in capitalist economies derive from economic relations and structures which produce profits. These psychological states are derivative from successful outcomes: Economic transactions, investments and market shares that raise value, multiply present and future gains. When investments go sour, firms lose money, enterprises go bankrupt, and those prejudiced �lose confidence� in the owners and brokers. When entire economic sectors severely prejudice the entire class of investors, depositors and borrowers, there is a loss of �systemic confidence.�

Psychobabble is the last resort of capitalist ideologues, academics, experts and financial page editorialists. Unwilling to face the breakdown of real existing capitalist markets, they write and resort to vague utopias such as �proper markets� distorted by �certain mindsets�. In other words, to save their failed ideology based on capitalist markets, they invent a moral ideal the �proper capitalist mind and market�, divorced from real behavior, economic imperatives and contradictions embedded in class warfare.
The inadequate and shoddy economic arguments, which pervade the writing of capitalist ideologues parallels the bankruptcy of the social system in which they are embedded. The intellectual and moral failures of the capitalist class and their political followers are not personal defects; they reflect the economic failure of the capitalist market.

The crash of the US financial system is symptomatic of a deeper and more profound collapse of the capitalist system that has its roots in the dynamic development of capitalism in the previous three decades. In its broadest terms, the current world depression results from the classic formulation outlined by Karl Marx over 150 years ago: the contradiction between the development of the forces and relations of production.

Contrary to the theorists who argue that �finance� and �post-industrial� capitalism have �destroyed� or de-industrialized the world economy and put in its place a kind of �casino� or speculative capital, in fact, we have witnessed the most spectacular long-term growth of industrial capital employing more industrial and salaried workers than ever in history. Driven by rising rates of profit, large scale and long-term investments have been the motor force for the penetration by industrial and related capital of the most remote underdeveloped regions of the world. New and old capitalist countries spawned enormous economic empires, breaking down political and cultural barriers to incorporating and exploiting billions of new and old workers in a relentless process. As competition from the newly industrialized countries intensified, and as the rising mass of profits exceeded the capacity to reinvest them most profitably in the older capitalist centers, masses of capital migrated to Asia, Latin America, Eastern Europe, and to a lesser degree, into the Middle East, Southern Africa.

Huge surplus profits spilled over into services, including finance, real estate, insurance, large-scale real estate and urban lands.

The dynamic growth of capitalism�s technological innovations found expression in greater social and political power � dwarfing the organization of labor, limiting its bargaining power and multiplying its profits. With the growth of world markets, workers were seen merely as �costs of production� not as final consumers. Wages stagnated; social benefits were limited, curtailed or shifted onto workers. Under conditions of dynamic capitalist growth, the state and state policy became their absolute instrument: restrictions, controls, regulation were weakened. What was dubbed �neo-liberalism� opened new areas for investment of surplus profits: public enterprises, land, resources and banks were privatized.

As competition intensified, as new industrial powers emerged in Asia, US capital increasingly invested in financial activity. Within the financial circuits it elaborated a whole series of financial instruments, which drew on the growing wealth and profits from the productive sectors.

US capital did not �de-industrialize� � it relocated to China, Korea and other centers of growth, not because of �falling profits� but because of surplus profits and greater profits overseas.

Capital�s opening in China provided hundreds of millions of workers with jobs subject to the most brutal exploitation at subsistence wages, no social benefits, little or no organized social power. A new class of Asian capitalist collaborators, nurtured and facilitated by Asian state capitalism, increased the enormous volume of profits. Rates of investments reached dizzying proportions, given the vast inequalities between income/property owning class and wageworkers. Huge surpluses accrued but internal demand was sharply constrained. Exports, export growth and overseas consumers became the driving force of the Asian economies. US and European manufacturers invested in Asia to export back to their home markets � shifting the structure of internal capital toward commerce and finance. Diminished wages paid to the workers led to a vast expansion in credit. Financial activity grew in proportion to the entrance of commodities from the dynamic, newly industrialized countries. Industrial profits were re-invested in financial services. Profits and liquidity grew in proportion to the relative decline in real value generated by the shift from industrial to financial/commercial capital.

Super profits from world production, trade, finances and the recycling of overseas earnings back to the US through both state and private financial circuits created enormous liquidity. It was far beyond the historical capacity of the US and European economies to absorb such profits in productive sectors.

The dynamic and voracious exploitation of the huge surplus labor forces in China, India, and elsewhere and the absolute pillage and transfer of hundreds of billions from ex-communist Russia and �neo-liberalized� Latin America filled the coffers of new and old financial institutions.

Over-exploitation of labor in Asia, and the over-accumulation of financial liquidity in the US led to the magnification of the paper economy and what liberal economist later called �global disequilibrium� between savers/industrial investors/ exporters (in Asia) and consumers/financiers/importers(in the US). Huge trade surpluses in the East were papered over by the purchase of US T-notes. The US economy was precariously backed by an increasingly inflated paper economy.

The expansion of the financial sector resulted from the high rates of return, taking advantage of the �liberalized� economy imposed by the power of diversified investment capital in previous decades. The internationalization of capital, its dynamic growth and the enormous growth of trade outran the stagnant wages, declining social payments, the huge surplus labor force. Temporarily, capital sought to bolster its profits via inflated real estate based on expanded credit, highly leveraged debt and outright massive fraudulent �financial instruments� (invisible assets without value). The collapse of the paper economy exposed the overdeveloped financial system and forced its demise. The loss of finance, credit and markets, reverberated to all the export-oriented industrial manufacturing powers. The lack of social consumption, the weakness of the internal market and the huge inequalities denied the industrial countries any compensatory markets to stabilize or limit their fall into recession and depression. The dynamic growth of the productive forces based on the over-exploitation of labor, led to the overdevelopment of the financial circuits, which set in motion the process of �feeding off� industry and subordinating and undermining the accumulation process to highly speculative capital.

Cheap labor, the source of profits, investment, trade and export growth on a world scale, could no longer sustain both the pillage by finance capital and provide a market for the dynamic industrial sector. What was erroneously dubbed a financial crisis or even more narrowly a �mortgage� or housing crisis, was merely the �trigger� for the collapse of the overdeveloped financial sector. The financial sector, which grew out of the dynamic expansion of �productive� capitalism, later �rebounded� against it. The historic links and global ties between industry and financial capital led inevitably to a systemic capitalist crisis, embedded in the contradiction between impoverished labor and concentrated capital. The current world depression is a product of the �over-accumulation� process of the capitalist system in which the crash of the financial system was the �detonator� but not the structural determinant. This is demonstrated by the fact that industrial Japan and Germany experienced a bigger fall in exports, investments and growth than �financial� US and England.

The capitalist system in crisis destroys capital in order to �purge itself� of the least efficient, least competitive and most indebted enterprises and sectors, in order to re-concentrate capital and reconstruct the powers of accumulation � political conditions permitting. The re-composition of capital grows out of the pillage of state resources � so-called bailouts and other massive transfers from the public treasury (read �taxpayers�), which results from the savage reduction of social transfers (read �public services�) and the cheapening of labor through firings, massive unemployment, wage, pension and health reductions and the general reduction of living standards in order to increase the rate of profit.

continued... [long]

http://lahaine.org/petras/articulo.php?p=1775&more=1&c=1
http://www.lahaine.org/petras/b2-img/petras_depr.pdf

[arjuna]

An Argentine opinion on the Global Financial Crisis, describing the whole Global Financial System as one vast Ponzi Scheme.

Like a pyramid, it has four sides and is a predictable model. The four sides are:

(1) Artificially control the supply of public State-issued Currency,

(2) Artificially impose Banking Money as the primary source of funding in the economy,

(3) Promote doing everything by Debt and

(4) Erect complex channels that allow privatizing profits when the Model is in expansion mode and socialize losses when the model goes into contraction mode.



Salbuchi - Global Financial Collapse - Part 1
http://www.youtube.com/watch?v=UlDNMB6wYmI

Salbuchi - Global Financial Collapse - Part 2
http://www.youtube.com/watch?v=78ddURofMWs

[arjuna]

Salbuchi - Global Meltdown: What We Can / Should Do... Part 1 & 2

Describes what needs to be done regarding the Financial Meltdown. Put the financial system in its proper place and bring Health to the Economy. All based on the Argentine experience of having suffered systemic collapses, hrperinflation and the gross corruption of wanton speculation.

http://www.youtube.com/watch?v=aj-_YU09NLc

http://www.youtube.com/watch?v=zqs5ljEOTvg

[arjuna]

Global systemic crisis: June 2009 - When the world steps out of a sixty-year old referential framework

http://www.europe2020.org/spip.php?article602&lang=en

The financial surrealism which has been at the heart of stock market trends, financial indicators and political commentaries in the past two months, is in fact the swan song of the referential framework within which the world has lived since 1945.

Just as in January 2007, the 11th edition of the GEAB described that the turn of the year 2006/07 was wrapped in a � statistical fog � typical of an entry into recession and designed to raise doubts among passengers that the Titanic was really sinking [1], our team today believes that the end of Spring 2009is characterized by the world�s final stepping out of the referential framework used for sixty years by global economic, financial and political players in making their decisions, in particular of its �simplified� version massively used since the fall of the communist bloc in 1989 (when the referential framework became exclusively US-centric). In practical terms, this means that the indicators that everyone is accustomed to use for investment decisions, profitability, location, partnership, etc ... have become obsolete and that it is now necessary to find new relevant indicators to avoid making disastrous decisions.

This process of obsolescence has increased dramatically over the past few months under pressure from two trends:

. first, the desperate attempts to rescue the global financial system, particularly the American and British systems, have de facto "broken navigational instruments" as a result of all the manipulation exerted by financial institutions themselves and by concerned governments and central banks. Among those panic-stricken and panic-striking indicators, stock markets are a perfect case as we shall see in further detail in this issue of the GEAB. Meanwhile, the two charts below brilliantly illustrate how these desperate efforts failed to prevent the world�s bank ranking from experiencing a major seism (it is mostly in 2007 that the end of the American-British domination in this ranking was triggered).

. secondly, astronomical amounts of liquidity injected in one year into the global financial system, particularly in the U.S. financial system, led all financial and political players to a total loss of touch with reality. Indeed, at this stage, they all seem to suffer from a syndrome of diver�s nitrogen narcosis � impairing those affected and leading them to dive deeper instead of surfacing. Financial nitrogen narcosis has the same effects than its aquatic counterpart.

Destroyed or perverted sensors, loss of orientation among political and financial leaders, these are the two key factors that accelerate the international system�s stepping out of the referential framework of the past few decades.

Of course, it is a feature of any systemic crisis and easy to establish that, in the international system we are used to, a growing number of events or trends have started popping out of this century-old framework, demonstrating how this crisis is of a kind unique in modern history. The only way to measure the magnitude of the changes under way is to step back several centuries. Examining statistical data gathered over the last few decades only enables one to see the details of this global systemic crisis; not the overall view.

Here are three examples showing that we live in a time of change that occurs only once every two or three centuries:

[...]

Thus, to conclude this historical perspective, we want to emphasize that the stepping out of the century-old reference system is graphically visible in the form of a curve simply popping out of the frame which allowed ongoing trends and values to be represented for centuries. This popping out of traditional referential frameworks is speeding up, affecting increasing numbers of sectors and countries, enhancing the loss of meaning of indicators used daily or monthly by stock markets, governments, or official sources of statistics, and accelerating the widespread awareness that "the usual indicators" can no longer give any insight, or even represent the current world developments. The world will thus reach summer 2009 without any reliable references available.

Of course, everyone is free to think that a few points� monthly variation of a particular economic or financial indicator, itself largely affected by the multiple interventions of public authorities and banks, carries much more value on the evolution of the current crisis than those stepping out of century-old referential frameworks. Everyone is also free to believe that those who anticipated neither the crisis nor its intensity are now in a position to know the precise date when it will end.

Our team advises them to go see (or see again) the movie Matrix [5] and to think about the consequences of manipulating the sensors and indicators of one�s perception of given environment. Indeed, as we will examine in detail in our special summer 2009 GEAB (N�36), the coming months could be entitled � Crisis Reloaded � [6].

In this 35th issue of the GEAB, we also express our advice on which indicators, in this period of transition between two referential frameworks, are able to provide dependable information on the evolution of the crisis and the economic and financial environment.

The two other major themes addressed in this May 2009 issue of the GEAB are, first, the programmed failure of the two major economic stimulus plans: namely the Chinese and American plans, and, secondly, the United Kingdom�s appeal to the IMF for financial assistance by the end of summer 2009.

In terms of recommendations, in this issue, our team anticipates the evolution of the worlds� largest real estate and treasuries markets.

[visitorq]

[Enrico Palazzo]

[arjuna]