My friend John Wight presents a jargon-free, thoroughly understandable Marxist analysis of the current financial crisis at Socialist Unity.
Rise of the Free Market
Of course, this new economic orthodoxy was also infused with an ideological belief in the laissez-faire economic liberalism of the past, confusing the notion of freedom with the accumulation of private wealth and an attack on the redistributive role of the state in ensuring social and economic justice in order to enhance social cohesion.
In the UK the new doctrine came to be known as Thatcherism, in the US Reaganomics. Both were responsible for a sharp rise in poverty and inequality, the wholesale destruction of working class communities, a concomitant rises in crime, drug and alcohol abuse, and an overall breakdown in social cohesion.
Fictitious capital
Private debt spiraled as a virtual economy of inflated property prices and stock market speculation was built upon a foundation of fictitious capital – i.e. capital without any material basis in commodity production.
The absurdity of the short termism that lay at the heart of this process is reflected in the sub-prime mortgage crisis which finally brought about the current crisis. In their greed for profit, banks were now borrowing from other banks to lend, instead of lending only what they held in deposits, as previously. But in order to lend they required a ready supply of new customers to lend to. As such, they began selling mortgages to people who couldn’t afford to pay them back.
As Karl Marx wrote in the Communist Manifesto: “Modern bourgeois society with its relations of production, of exchange, and of property”¦is like the sorcerer who is no longer able to control the power of the nether world whom he has called up by his spells.”