Ga Young (Gina) Jeon
Professor Jesse Goldstein
“Four Crises of the Contemporary World Capitalist System”
Author: William K. Tabb
Before constructing an outline for this article, I’d like to inform you that Tabb approaches the financial analyses with the motivation to “inform progressive governments and movements for social change (1).” Tabb critiques the contemporary crises in four distinct yet inter-related reasons. He states the following:
“Crisis one: Financialization and Financial Crisis:
Tabb says:
“The first problem is the financial turbulence that has gripped the economy of the United States and has had widespread effects. It is a crisis that further discredits mainstream Anglo-American economics. I do not know that it is the crisis of capitalism. For this to be the case it would not only have to become much deeper, but its impacts would have to be felt more dramatically as a systemic failure……a deep and painful crisis will be, at best, only the occasion for reforming and not abolishing capitalism (1).”
Summary:
Tabb indicates that the “financial meltdown” has already begun. He begins to question whether or not “financial capitalism can sustain itself.” Tabb mentions two critiques that he feels our financial system is experiencing: the first one being that “capitalism is mutating (Martin Wolfe),” and the second stating that our economy is in a “new hybrid phase: monopoly-finance capital (John Bellamy Foster).” Tabb makes a legitimate argument in stating that:
“the financial sector gained leverage over the rest of the economy, in effect gaining the power to dictate priorities to debtors, vulnerable corporations, and governments. As its power grew, it could demand greater deregulation, allowing it to grow still further and endangering the stability of the larger economic system (2).”
Basically, Investors made a large sum of money by investing at risk. Investors began to follow the M-M’ circuit, “in which money could be made solely out of money, without the intervention of actual production (2).” As a matter of a fact, globally, investors borrowed money at low interest rates and “invested in high return U.S. financial assets, junk bonds, and derivatives of all sorts (2).” Many investors began to follow this money-making strategy. As a result of this, we are currently experiencing a financial crisis.
The diagram below may help you to better understand why the facts stated above became a large burden on our economy.
Investors
Borrowed money à purchased more than they could afford à bidding up prices à debt
Sadly, this cycle continues producing more debt than manageable. Tabb views this process as a bubble ready to pop.
Tabb says that:
“Financialization as an accumulation strategy has brought not only severe crisis with the failure of financial markets but has put the United States in a position resembling that of a poor nation in debt to foreign creditors—its currency declining, its trade policies favoring elites, and its government demanding that some taxpayers pay more to recapitalize the financial system while providing more tax cuts to the affluent and corporations (2).”
Basically, while our country is in major debt, it doesn’t fail to discriminate the lower class. It continues to deprive its less fortunate citizens of their needs and fortunes. As a result of this, the financial cycle chokes itself. The circulation (circulation = money) is cut off. Thus, the working class is left to pick and fight over jobs and basic human rights.
Tabb suggests that there is a connection between the following:
Financialization + rising inequalities + declining economic fortunes
It stinks for the working class because seemingly, our government is controlled by corporations and the wealthy. Pessimism dwells among the citizens of the working class.
1. Corporations bring production of goods and services to foreign countries where they can pay less skilled workers less money to do more work.
2. The development of technology continuously puts workers out of work.
3. It is difficult for unions to form because even if a strike breaks out, because of the demand for jobs, the corporations can just hire new people for less money (credited to the National Labor relations board).
Furthermore, it is ironic that
“The U.S. forces its financial regime and rules on the developing world through the mediation of the International Monetary Fund and World Bank, but capital has been expanding financial operations into the so-called emerging markets. Now we see a meltdown on Wall Street and the irony of foreign sovereign wealth funds and other investors having to rescue the pillars of the U.S. financial empire. How should we understand these contradictory developments? This is a political question. It needs to be answered like any other economic matter in which a small elite benefit at the expense of the many (3).”
To the foreign countries, America must look like a greedy pig that fell because it could no longer sustain its own weight. In cases like this one, it is very likely that countries that once conformed to the capitalist patterns of the U.S. will begin to defend their own interests.
“Crisis two: U.S Imperialism- Losing Hegemony:
Tabb says:
“A second crisis is that of U.S.-led imperialism, which has been discredited both in terms of its regime-change-wars-of-choice and the increasingly effective resistance to the international financial and trade regime we know as the Washington Consensus. Because of the incalculable harm neoliberalism has done, and continues to do, it is now ideologically on the defensive.”
Summary:
There are so many controversies that continue to be debated at the present moment. Tabb indicates that especially after the failure in Afghanistan and Iraq, U.S. has been discredited domestically and abroad. The U.S. elites utilize times of war as a means for making profit. Tabb specifically mentions key figures in the government: Vice President Cheney, Robert Rubin, and Donald Rumsfeld as recent political figures heavily involved in profit making during times of war abroad. The recent complaint is that the U.S. not only lost Iraq, but jeopardized the stability situations in Afghanistan. In addition, U.S. failed to prioritize domestic needs such as adequate jobs and health care. As a result of this, U.S. credibility declined immensely.
Tabb also mentions the role of the IMF (International Monetary Fund) that brought “instability, not growth” to the areas facing the financial crisis.
Furthermore, Tabb points out that U.S. continually “cradles” the mistakes; and never takes the initiative to “correct” it.
Increasingly, groups fight against traditional imperial powers because it benefits them in NO way. For example: the IMF works in the favor of the elite, ignoring the dire needs of the people in the given country.
Well, Tabb says: “WAKE UP AMERICA!” because the developing countries are no longer going to follow the U.S. like blind sheep. The Banco del Sur serves as a perfect example in this case.
“The Banco del Sur operates on a one country, one vote principle and, building on the Venezuelan Bank for Economic and Social Development priorities, favors cooperatives and community ownership, offering below-market interest rates to public and social enterprises. With a proposed capitalization of seven billion dollars, it represents a serious challenge to the U.S.-controlled Bretton Woods Institutions as well as the Washington-dominated neoliberal Inter-American Bank.”
The weak dollar also serves as a symbol of this “break down.”
“The advantage the United States has enjoyed by being able to borrow in its own currency has been undercut by abuse, outsized current account deficits, and the buildup of dollars in foreign hands. This has progressed to the point where the money creation and lower U.S. interest rates implemented by the Federal Reserve to stave off financial collapse have driven down the currency’s value and encouraged further flight from the dollar.”
As a result of this, the Euro could become a more important reserve currency than the dollar.
“Crisis three: The New Centers of Power:
Tabb says:
“A third point of crisis is the rise of new centers of power in what had been the peripheries of the capitalist system and the tensions this has unleashed, providing room to maneuver for countries wishing to break with the United States.”
Summary:
By “new centers of power” Tabb is referring to the “E7” (Brazil, China, India, Indonesia, Mexico, Russia, and Turkey) Tabb says that the “E7 is 25 percent larger than the current G-7 and will be driving the growth of the global economy.” Some of the key countries that Tabb points out are:
China: “Beijing Consensus”
This is based on “respect for sovereignty and mutual economic benefit….. is widely appealing as an alternative to Washington’s version of spreading democracy and the “free” market by means of violence.
“SCO” (Shanghai Cooperative Organization) – energy conservation program in which U.S. was denied membership.
Russia:
Selling advanced military systems while working with China and India on energy conservation.
“Oil access/control”
“Crisis four: Resources and Sustainability:
Tabb says:
“A fourth area of crisis has to do with resource usage, the uneven distribution of the necessities of life, and a growth paradigm that is no longer sustainable. Here grassroots social movements in South Africa and elsewhere are leading actors in resisting privatizations and the imposition of a hyper-individualism that brings disaster for the most oppressed and exploited.”
Summary:
Tabb states a valid argument in stating that “the sustainability of human life is simply not consistent with inherently wasteful capitalist growth.” There is so much pressure being added to the resource base of the planet. There is an important need for ecological development. Tabb indirectly suggests to the United States that there is a need for sincerely assisting developing countries instead of throwing them short-term solutions that serve them no long-term benefit.
For example:
“Malawi, which for years hovered at the brink of famine, with five million of its thirteen million people needing emergency food aid after a disastrous 2005 maize harvest, decided to subsidize its poor farmers and was soon exporting hundreds of thousands of tons of maize thanks to the help it gave the farmers, whose yields grew dramatically. The United States, while willing to provide food aid from its agricultural surplus (grown with huge federal subsidies to U.S. farmers), refuses to assist farmers in poor countries. Even as it insists that they follow the free market, the United States undermines the ability of third-world farmers to compete by dumping free or low-cost agricultural exports in their countries.”
The prices of grains continued to rise. As a result, America began to sell “white flour, corn sweeteners, and corn-fed animal fats is replacing traditional diets for too many of the world’s people. Refined sugars create obesity and promote diseases such as diabetes by replacing the complex nutrients of traditional foods. The uncontrolled profit motive is destroying health and increasing medical costs dramatically as it poisons its customers with adulterated and unhealthy foods (9).”
Tabb shows that U.S. profit motives degrade the quality of lives of the people of other countries. He goes on further to say that media blinds our eyes from seeing the pain that capitalism causes in our profit driven world.
Commentary:
It’s so interesting to me how easily the “human genome” is bought by corporations and the elite. I mean, this article just reveals that there are so many alternative stories beyond the ones that we are “fed” by each morning through corporate owned news channels. It sucks that the elite have to be so selfish. But, in my opinion, the corporations and the elite are enslaved as well. They are enslaved to this competition driven market in which they’ve created. It’s almost as if they’ve created a monstrous creature that now lives on bullying the world market, thus creating instability and continually perpetuating social inequality. (Think about our current financial crisis.) How in the world are rights legitimized? Who determines who should, and who should not have basic human rights? Inequality is continually fostered in this capitalistic-profit driven market. And, yes, it stinks.. This article articulates a perspective that is hardly ever exposed to ordinary American citizens. It’s sad to think about the damage and inequality that U.S. continues to foster globally. It’s something to think about. Are you also a product of this capitalistic society?
You may find the article on the site stated below:
http://sites.google.com/site/radicalperspectivesonthecrisis/finance-crisis/linking-crises/four-crises-of-the-contemporary-world-capitalist-system
