The Financial Crash of 2008 Started in 2000
Source: The Age of Information and Telecommunications, 1971-???This crash has had two stages. The first occurred in 2000 when the latest technology bubble - the "dot-com bubble" - burst.
The second is now, eight years after the Bush Gang failed to realize that serious reform was needed in financial markets. In 1971, the Intel microprocessor was made public in Santa Clara, California. Today, every science is also computer science.
Itself an outgrowth of the previous generation's electrical, information and materials research – the microprocessor introduced cheap electronics, then computers, then software, then telecommunications, then control instrumentation, then biotechnology, and further revolutions in materials science.
Massive infrastructure investments in fiber optics networks, satellite and cable global systems; the Internet, e-mail, and other e-services; multiple source electrical networks, higher-speed physical transport links by land, air and water – have again changed occupations, lifestyles, demographics – all social relations – across the world.
The crash of this cycle however, as each before it, has familiar, but also new features.
We do not have to go back beyond living memory to recall the eruption of the semiconductor and software surges of the 1980's, and the frenzy of speculation from the mid-1990's through 2000 – when the latest turning point, and build up to the current crash, began.
The Current Crash This crash has had two stages. The first occurred in 2000 when the latest technology bubble, referred to as the "dot-com bubble," burst. The second occurred now, eight years after the Bush administration did not get the hint that serious reform was needed in financial markets.
Instead, Bush loosened regulation even further under the influence of a "free-market fundamentalism" perfectly fitting a frenzy mentality overtaking an entire government. As with previous revolutions, finance capital overshot the rate at which the new technology could reach its full potential.
However, instead of channeling finance capital back into production through institutional reform – necessary in order to truly deploy the technology – an unbalanced and crippled regulatory system of another era helped enable reckless speculation in largely fictitious real estate assets. Inequality accelerated.
Globalization, especially globalization of financial securities and the balance sheets of banks, multiplied the speculative frenzy many times.
(A piece of your home mortgage could actually be subsidizing a Norwegian town fire department pension fund.)
And of course, in the international arena governance and reforms required to restart and regulate economic activity must themselves be "international", and there is currently very skimpy governance.
Global institutions significantly stronger and broader based than the IMF and World Bank, and a much strengthened UN, will have to come into being. The full impact of this technological revolution and how transforming its world wide deployment can yet barely be glimpsed.
It is though we are driving a 1930 automobile trying to see the world after World War II before it happens – which makes the difficult questions of global governance all the more compelling to solve. But a few features are becoming clear:
* Economic infrastructures, including much of the financial system must be further socialized. This is necessary to begin the large institutional restructuring process without which recovery is impossible.
Institutions whose failure creates systemic risk must be nationalized in whole or in part.
* At the same time well-functioning markets must not disappear, but in fact improve.
A big government, more socialist, regime can correct many instabilities, can improve the distribution of wealth to moderate inequality, and it can train and pay intellectuals and scientists to invent new ideas.
But it is notably less successful at deploying the benefits of new technology throughout an economy, at least insofar as the myriad of unimportant transactions between producers and consumers of goods and services are concerned.
Markets are mandatory tools for the efficient allocation of scarce resources with the appropriate institutional support and infrastructure. Markets are not natural entities and can be designed to serve a wide range of human ends. Ideologies associated with the frenzy and the crash, like free-market fundamentalism, however, are going into a lengthy and well-deserved decline.
* The reuniting of finance capital with production capital to fully deploy the new technologies will likely require huge public and international investments.
For the next decade, at least, we should expect a public intervention on the scale of up to 100 percent of GDP, or more. The initial trillion dollar bank bailout represents about 10 percent of current GDP – by comparison.
The precedent: World War II spending reached 110 percent of GDP, and finally lifted the economy out of the great depression.
* It is also clear that innovation is inherently destabilizing. In addition, compared to previous eras, its pace may increase.
Some separation between finance and production capital is thus also inevitable and a key challenge will be to understand the process better and establish a balance between financial instructions, government and production that hopefully will permit growth and innovation – without either excessive instability, or stagnation from an over-regulated environment.
* The strategy of full employment is the best long-term antidote to instability.
It permits society to tolerate the inevitable destabilizing impacts of innovation, imperfect competition and increasing returns to scale with far less risk of catastrophe.
* The new technologies tie the world together in millions of myriad new ways that can provide the foundation for emerging from the crisis without world war. But of course, we are betting against historical trends in this regard.
* The new technologies have the potential to de-proletarianize much of labor, even banishing from public discourse the corporate view of workers as "maggots with hands."
Nationalized health care, retirement, and education, shorter hours, plus the freedom to organize, promise to erode the "labor-power" market and replace it with a more protected "labor" market.
This is where work is compensated proportional to its product, or the actual value of the service rendered, not merely what subsistence it takes to them to return to complete alienation from the product of labor each day, and with a declining share of national income as well.
It is this last point that crystallizes the role of Marx's communist ideal as a valuable guide with which to approach the possibilities and dangers before us. The opportunity to move forward from this crisis towards an enlightened society is here.
Marx often characterized the emergence of communist society as the bourgeois rights of the Enlightenment, given voice in the Declaration of Independence for example, extended to all workers – "from each according to their ability, to each according to their work."
The slogan will serve us, our country, and our world well in the troubled times ahead, as once again, we set forth to remake the world.More...