Credit, explained Karl Marx, allows capitalism to go beyond its limits. In other words, it artificially expands the market and gives the capitalist economy a new lease of life.
But there’s a catch – a very big catch.
The catch is that credit too has its limits. At some stage, it has to be repaid.
But what if it can’t be repaid? What if all the money has gone? What if all that remains is a huge mountain of debt?
Then the economy contracts, the bubble bursts.
And that is happening now, as global capitalism slumps into the biggest global recession seen since the 1930s.
Writes Rick Wolff, Professor of Economics at Massachusetts University:
‘Booming consumer lending in the 1980s, 1990s, and since 2000, especially in the deregulated financial world of Reagan and Bush America, provoked wild profit-driven excesses and corruption (the stock market "bubble" and then the real estate "bubble'). It also loaded millions of Americans with unsustainable debts. By 2006, the most stressed borrowers -- "sub-prime" -- could no longer pay what they owed. This house of debt cards then began its spiralling descent.’ (Monthly Review, 26 September)
Despite massive financial bailouts and government takeovers of major banks, the crisis continues to deepen. Despite the best efforts of politicians to appear in control, they basically have no idea where this crisis is headed.
Last week, in a lecture that went unnoticed by the mainstream New Zealand media, Alan Greenspan the former chairman of the US Federal Reserve, made some interesting comments.
Despite the fact he was one of the main culprits responsible for the massive speculative bubble, he actually warned his audience that capitalism itself was now in danger.
Said Greenspan: “The crisis will mean a return to the ideological struggle between socialism and capitalism. Many of us thought that struggle was over with the collapse of the command economies, but this is not the case.”
Greenspan is actually restating something that Marx wrote. The old man observed that capitalism casts a special shadow, namely the shadow of a movement that says modern society can do so much better without capitalism, by society being organised in a fundamentally different way. Karl Marx called that shadow the spectre that haunts capitalism.
Talking about a certain V.I. Lenin will earn you sideway glances from conservatives and liberals alike but Lenin got it so right when he famously remarked that capitalists can buy themselves out of any crisis, 'so long as workers pay.’
His words ring so true today, piercing the ramblings from so many of our mainstream journalists, seemingly unable to grasp the fact that capitalism is falling apart, seemingly unable to question the role of capitalism.
Not only is taxpayer money being used to bailout out capitalism but there will also be severe attacks on the living standards of ordinary people. It’s a double whammy.
There will be ‘unavoidable cuts’ to government funding and millions will be thrown out of work.
What we have to hope for is that organised working class resistance will meet and defeat these attacks.
And we also have to hope, as Professor Wolff writes, that ‘If the political winds continue to change far enough and fast enough, solutions responding to the current crisis by moving beyond capitalism might yet be tried.’