The end of an era in financial capitalism
The
crisis of the century
By
Ignacio Ramonet Read Spanish Version
Le
Monde Diplomatique
The
earthquakes that shook the stock exchanges during the past "Black
September" have accelerated the end of an era of capitalism. The
international financial architecture has tottered. And the systemic
risk remains. Nothing will return to its previous state. The state is
back.
Wall
Street’s collapse is comparable, in a financial context, to what the
fall of the Berlin Wall represented in the geopolitical world: a
changing world and a Copernican shift. As stated by Paul Samuelson,
Nobel laureate in economics: "This debacle is to capitalism what
the fall of the USSR was to communism." It is the end of the
period that began in 1981 with Ronald Reagan’s formula: "The
government is not the solution; it is the problem." For 30
years, market fundamentalists repeated that the market was always
right, that globalization was a synonym for happiness, that financial
capitalism built paradise on earth for everybody. They were wrong.
Wall
Street’s "golden age" is over. So is the stage of
exuberance and waste represented by an aristocracy of investment
bankers, the "masters of the universe" denounced by Tom
Wolfe in The
Bonfire of Vanities (1987),
men possessed by a logic of short-term profit, spurred by a quest for
exorbitant benefits.
Men
willing to do anything to make a profit: abusive short-selling,
manipulations, the invention of shady instruments, entitlement of
assets, contracts for risk coverage, hedge funds. The fever of easy
gains contaminated the entire planet. The markets overheated, fed by
an excess of funding that facilitated an increase in prices.
Globalization
led the world’s economy to assume the shape of a paper economy,
virtual, lacking in substance. The financial sphere represented more
than 250 trillion euros, in other words, six times the amount of the
world’s real wealth. And suddenly that giant "bubble"
burst. The disaster has apocalyptic dimensions. More than 200 billion
euros have vanished. The investment banks have been wiped off the
map. The five leading institutions crumbled: Lehman Brothers,
bankrupt; Bear Stearns, purchased (with the aid of the Federal
Reserve) by Morgan Chase; Merrill Lynch acquired by Bank of America;
Goldman Sachs and Morgan Stanley (partly acquired by Mitsubishi UFJ
of Japan), converted into ordinary commercial banks.
The
entire chain of operations of the financial apparatus has collapsed.
Not only the investment banks but also the central banks, the
regulation systems, the commercial banks, the savings banks, the
insurance companies, the risk evaluation agencies (Standard &
Poor’s, Moody’s, Fitch), even the auditing firms (Deloitte, Ernst &
Young, PwC.)
The
sinking should surprise no one. The scandal of the "junk
mortgages" was known to all, same as the excess of liquidity,
with an eye to speculation, and the delirious explosion of housing
prices. All this has been denounced — in [Le Monde Diplomatique] —
for a long time now. And nobody batted an eye, because the crime
benefited many. And people continued to insist that private
enterprise and the market would fix everything.
The
administration of President George W. Bush has had to renege that
principle and resort massively to government intervention. The
principal institutions of real-estate credit, Fannie Mae and Freddy
Mac, have been nationalized. So has the American International Group
(AIG), the world’s largest insurance company. And Treasure Secretary
Henry Paulson, former president of Goldman Sachs, has proposed a plan
to rescue the "toxic" shares from "junk mortgages"
(sub prime) for about 500 billion euros, to be paid by the state,
rather, the taxpayers.
Proof
of the system’s failure, these state interventions — the largest in
economic history, in terms of volume — demonstrate that the markets
are not capable of self-regulation. They have self-destroyed through
their own voracity. In addition, a law of neoliberal cynicism is
confirmed: profits are privatized, losses are socialized. The poor
are made to pay for the irrational eccentricities of the bankers and
if they refuse to pay they are threatened with further
impoverishment.
U.S.
authorities come to the rescue of the "banksters" (gangster
bankers) at the expense of the citizens. Some months ago, President
Bush refused to sign a bill that offered medical coverage to 9
million poor children at a cost of 4 billion euros. He described it
as a useless expenditure. Today, to save the Wall Street ruffians,
nothing is too much for him. Socialism for the rich and savage
capitalism for the poor.
This
mess occurs at a moment of theoretic vacuum among the lefts, which
have no "plan B" to take advantage of the disaster —
particularly the European lefts, frozen by the shock of the crisis.
This would be the time for a refounding and for boldness.
How
long will the crisis last? "Twenty years, if we’re lucky, or
less than 10 if the authorities act firmly," predicts neoliberal
columnist Martin Wolf (1). If political logic existed, this context
should favor the election of Democrat Barack Obama to the presidency
of the United States next Nov. 4. It is likely that, like Franklin D.
Roosevelt in 1930, the young president will launch a new New Deal
based on a neo-Keynesianism that will confirm the return of the
government in the economic sphere and will finally award greater
social justice to the citizens. Economists will turn toward a new
Bretton Woods. The most savage and irrational stage of neoliberal
globalization will come to an end.
(1)
Financial Times, London, Sept. 23, 2008
Taken
from Rebelión: http://www.rebelion.org/noticia.php?id=73489
