Saturday, July 30, 2011

An Untold Marxist Story of Financial Crises: Japan, the United States, and the European Union

This is the story that Marxists haven't told yet. In my view, though, this story is perfectly consistent with not only most Marxists' theories of capitalism but also their traditional (usually implicit) policy preferences.

Let's evaluate policy responses in the wake of the most recent financial crises of Japan, the United States, and Europe, beginning not in 2008 but in 1991, with the ranking based on policy impacts on the overall economy and more importantly on the working class.

Central Banks

1. The Fed: Could have been better, but it's clear Bernanke knew what he needed to do and was determined to do it
2. BOJ: Confused and feckless

Stimulus and Output

1. Japan: The sum total of public spending for this purpose is respectable, and so is per capita GDP (as opposed to total GDP) growth
2. US: Way too small, ending too soon, leaving the US infrastructural deficit intact, though it's not as if it did nothing to sustain GDP and consumption as the Right claims
3. EU: Terrible squeeze of the periphery from Day 1, disaster capitalism par excellence

Composition of Fiscal Policy + Labor Market Policy + Budget Financing Method

Here there is no ranking. It's a story of "every unhappy family is unhappy in its own way." This is basically where the Japanese working class were done in: even as the government spent a great deal on contingent public works, structurally it made (by the standard of rich nations already small) social benefits smaller, especially for old people, while facilitating the rise of contingent labor without establishing a new social safety net for the precariat; and moreover taxes on corporations were cut while those on workers were raised. The same is now being done to American and European workers, though exactly how it's done politically varies.


Don't make it sound like a Great Depression is what the working class should fear facing a financial crisis; if you do, you are only defending a Maginot Line and motivating workers to turn to bastard Keynesians rather than Marxists. A modern state knows how to avoid a Great Depression, by breaking up a panicked financial crowd by a big monetary water cannon, except in cases where it wants to deliberately inflict a depression on workers for the purpose of effecting structural change, as the ECB is doing to the euro periphery.

Make sure the working class bark, and bark up the right tree. The right tree in the case where the state has its own money and controls its own monetary policy, with little to no pressure from foreign creditors, (as in the cases of Japan and the United States), is people determining the composition of fiscal policy, the labor market policy, and the budget financing method. To get the working class to bark up the right tree, Marxists must fight against right-wing populist mystification about "always uniformly bad and morally hazardous bailouts," (bailouts are not at all alike in their impacts on workers -- it all depends on how they are done and how they are financed; and, if workers are well organized, politically conscious, and militant, they can turn them into opportunities to assert social control over the bailed-out enterprises and/or sectors), without leaving that battle to Keynesians.

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