Robert Brenner on the Roots of the Current Crisis
An interesting column – roots of the crisis are seen to lie in the continual injections of financial liquidity required to keep growth going in a global economy with a serious underlying deflationary bias, the result of excess capacity in manufacturing.
“Merely cutting the cost of borrowing will do little to remedy the long-term weaknesses of the advanced economies”
Wednesday September 26, 2007
The mortgage lending and banking turmoil in Britain and America seems to be contained, but its future course remains very much in doubt. If, as senior officials have long contended, economic fundamentals are strong, fears about the impact of the crisis should be allayed. But are they?
Not the result of some contingent “excess capacity in manufacturing” but “a CHRONIC tendency towards overcapacity in global manufacturing, going back to the late 1960s”, as Brenner notes in the article.
Brenner, in his book The Economics of Global Turbulence, attributes this tendency to the increased competition in the global economy following the revival of the West German and Japanese economies. Economists in the Monopoly Capitalism school (pioneered by Paul Sweezy, Harry Magdoff and Paul Baran) differ in assigning responsibility for the slowdown in the real economy to the monopolistic structure of modern industry, while Leo Panitch and Sam Gindin have taken Brenner to task for not paying enough attention to the fact that this slowdown has been overcome on the broken back of labour (though that doesn’t seem to be the case any more).
Perhaps most significant is the fact that every time a financial crisis hits, the First World get a Minskyian bailout while the Third World (which now includes much of what was once the Second World) gets a Fisher deflation, as Doug Henwood has put it. Thus, the worst effects of the long downturn are visited on the weakest members of the global economy.
What is the cumulative effect of these cycles of bubbles and bailouts? Is the financial house of cards getting taller and more precarious with each go round or can the ill effects be endlessly passed off onto the working class and the Third World? Let’s hope we can find a way to close off that escape route for the capitalists.