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John Bellamy Foster |
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ESSAYS ON:
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The Triumph of Financial Capitalism The announced subject of this conference is "New Trends in Turkey and the World." I shall not try to say anything about new trends in Turkey, partly because of my ignorance but more importantly because Turkey is very much part of the world, and in this period the mother of all new trends is global in nature. To understand what is happening in any part of the world, one must start from what is happening in the whole world. Never has Hegel's dictum "The Truth is in the Whole" been as true and relevant as it is today… June 1994 The Financial Explosion Credit where credit is due. For a long time now we have been harping in this space on the theme of a monetary system out of control; of the wild proliferation of new financial institutions, instruments, and markets; of the unchecked spread of a speculative fever certainly more pervasive and perhaps even more virulent than any recorded in the long history of capitalism’s get-rich-quick obsessions. With few exceptions, accredited economists, as is their wont, have ignored these bizarre goings-on: they are not part of the way the economy is supposed to operate and are hence unworthy of "scientific" attention. The media, on the other hand, especially the serious business press, have reported the facts as they have unfolded—the rapid growth of options and futures markets, the near bankruptcy and rescue by the government of one of the country's largest banks, etc., etc.—but have generally steered clear of any attempt to put these discrete developments into a coherent account of an enormously powerful dynamic process rooted in the nature of the economic system and loaded with implications for the country’s future… December 1985 A Failed Economy: John Bellamy Foster Interviewed by Amandla (South Africa) Amandla: Early in 2009 you published your book The Great Financial Crisis (coauthored with Fred Magdoff). Could you reflect now almost a year later on what made the current recession more severe than previous recessions? Why has it been compared to the Great Depression and what type of recovery are we likely to see? Can we say that the bailouts and the other emergency measures undertaken by the USA and other countries were successful? JBF: As a general rule, if an economic crisis is extremely severe, as in the present downturn, we can say that long-term forces are at work, going beyond what are considered the normal, short-term fluctuations associated with the business cycle.… November 2009 What Needs to be Done: A Socialist View Today the capitalist economies of the world are in deep trouble. Some economists have theorized that the linkages between the United States and the rest of the world had been weakened as other nations gained more economic autonomy. A decoupling thesis was presented claiming that a crisis in one part of the system (say, North America) would not affect other major parts (say, Europe and Asia). We now know this is not true. Toxic assets were sold around the world, and banks in Europe, Asia, and Japan are in trouble too. Housing bubbles have burst in Ireland, Spain, and many other countries.… November 2009 The Financial Crisis and Imperialism: Interview of John Bellamy Foster BMR: What is the likely impact of the present financial crisis on geopolitics, especially if the crisis is considered in the context of the energy crisis including the peak oil issue, the food crisis, The Great Hunger, the environmental crisis, and the declining dollar? Will the world experience war(s) as an effort to survive? Will monopoly-finance capital attempt to create another bubble, as capital is gripped with contradictions within and without? JBF: The Great Financial Crisis and the Great Recession that followed close upon it have uncovered the depth of the contradictions facing capitalism in this phase, which I have labeled “monopoly-finance capital.”… September 2009 The Credit Crisis: Is the International Role of the Dollar at Stake? As the first tremors of the looming financial crisis ripped through Wall Street, with the meltdown of the subprime mortgage market in the summer of 2007, the dollar plunged sharply. Perversely however, even as some financial pundits were foretelling its collapse, the deepening of the crisis following the bankruptcy of Lehman Brothers in September 2008 actually saw the dollar gain ground sharply.… April 2009 A Failed System: The World Crisis of Capitalist Globalization and its Impact on China In referring in my title here to “A Failed System” I do not of course mean that capitalism as a system is in any sense at an end. Rather I mean by “failed system” a global economic and social order that increasingly exhibits a fatal contradiction between reality and reason—to the point, in our time, where it threatens not only human welfare but also the continuation of most sentient forms of life on the planet. Three critical contradictions make up the contemporary world crisis emanating from capitalist development: (1) the current Great Financial Crisis and stagnation/depression; (2) the growing threat of planetary ecological collapse; and (3) the emergence of global imperial instability associated with shifting world hegemony and the struggle for resources.… March 2009 Interview of John Bellamy Foster on The Great Financial Crisis MW: Do you think that the American people have been misled into believing that the current financial crisis is the result of subprime loans and toxic assets? Aren't these merely the symptoms of a deeper problem; financialization? Can you explain financialization and how the economy became more and more detached from productive activity and more and more dependent on the accumulation of paper wealth? JBF: I think it is true, as you say, that the American people have been misled by analyses of the crisis into focusing on mere symptoms, or on the straws that broke the camel’s back, such as subprime loans. There is still a great deal of toxic financial waste out there in the financial superstructure of the economy, but the real problems go much deeper. One reason for this failure to account realistically for the crisis is that those at the top of the system have very little clue themselves, given the near bankruptcy of orthodox economics. A second reason is that the dominant ideology is designed to naturalize/externalize economic disaster, pretending it has nothing to do with the inner contradictions of the system but is simply the result of human psychology, mistakes of federal regulators, deregulation, corruption of a few individuals, etc. Under these circumstances, what you get from the elites and the media is mostly nonsense, though there are individuals in the financial community, in particular, that are now analyzing the problem at a deeper, more realistic level.… February 2009 Latin America Faces the Global Crisis It is true that banks are less leveraged, but the outflow of capital is intensifying. Internationalized industry is hit by global overproduction, and lower prices of raw materials depress growth. Moreover, attempts at stimulation collide with reduced resources from the central economies.… February 2009 The Crisis of Global Capitalism and the Environment: Interview with John Bellamy Foster by Eleftherotypia (Greece) CP: After twenty-five years of sporadic growth and extreme polarization of income and life conditions around the world, actually existing neoliberalism seems to be on the verge of collapse. Where do you situate the current crisis in the history of the development of global capitalism? JBF: Neoliberalism has clearly collapsed. But as Fred Magdoff and I have argued in our book just published by Monthly Review Press entitled The Great Financial Crisis: Causes and Consequences, neoliberalism is best looked upon as merely the ideology of the system during more than three decades of deepening stagnation and financialization. The real answer to your question is therefore to be found more at the level of the underlying changes in accumulation that have occurred in this era, which we have termed “monopoly-finance capital.”… February 2009 Capitalism’s Burning House:
Interview with John Bellamy Foster WIN: According to a quotation by Jim Reid that you and Fred Magdoff included in your article entitled “Financial Implosion and Stagnation” (Monthly Review, December 2008), the U.S. financial sector has made around 1.2 Trillion ($1,200) of “excess” profits in the last decade relative to nominal GDP. How has the structure of the capital economy contributed to the ease with which such excess profits were obtained by the banks and lending institutions? JBF: Jim Reid in London is the Deutsche Bank’s chief credit strategist. He made the observation you refer to in July 2008 when the financial implosion was already a year old, but a couple of months before the serious bank crisis that followed the failure of Lehman Brothers in mid-September, leading to a deepening of the financial crisis. In the piece by Reid that Fred Magdoff and I referred to in our article, he provided a chart showing that financial profits and profits in general had been skyrocketing on top of a sluggish U.S. economy. Based on the notion of a “mean reversion” whereby growth of profits would have to revert to the average growth rate of GDP, he concluded that there were $1.2 trillion in excess profits over the last decade, suggesting that a massive devalorizaton of capital, much more than had occurred by then, was due. This was similar to arguments that we had been making for some time in Monthly Review… January 2009 Bernanke and “The Great Moderation” Four Years Later In 2003-2004 the U.S. economy seemed to many to have recovered quickly and miraculously from the 2000 stock market crash and the 2001 recession. There were those then, however, who argued that this was not a genuine recovery of accumulation, and that the fast rebound was due to the advent of a massive housing bubble, which was destined to burst in the end. Thus Monthly Review’s editors (John Bellamy Foster, Harry Magdoff, and Robert W. McChesney) wrote in April 2003… December 2008 Postscript to “The Financialization of Capital and the Crisis” (Monthly Review, April 2008) Six months ago the United States was already deep in a financial crisis — the roots of which were explained in this article. Yet, the conditions now are several orders of magnitude worse and are affecting the entire world. We are clearly in the midst of one of the great crises in the history of capitalism. More than a mere financial panic, what is taking place is a major devaluation of capital of still undetermined dimensions. Marx explained that capital was invariably over-extended in a boom and that in the crisis that followed a part of that capital was devalued, enabling the rest to return to profitability and to the process of accumulation and expansion. However, we are now to some extent in uncharted territory: a phase of monopoly-finance capital that is in many ways unprecedented… October 2008 Monopoly-Finance Capital and the Crisis Klassekampen: Is the credit crisis a symptom of overaccumulation of capital? It seems to me that investments worldwide, but especially in the United States, were funneled into the traditionally "safe" housing market following the bursting of the dotcom-bubble. This overinvestment in turn generated a new bubble, thus causing today's havoc. Is this correct? JBF: Yes, I agree that this is due to what might be called an overaccumulation of capital in a number of senses: an overbuilding of productive capacity (physical capital) in relation to a demand constrained by monopoly within what economists call the "real" (as opposed to financial) economy, an overamassing of profits and wealth at the top of society, and a hypertrophy of financial claims to wealth. In terms of the financial crisis itself, there has been a massive, highly leveraged expansion of money claims to wealth, creating a huge debt overhang, and forcing, at this moment, a massive devaluation of capital. All of this is related, however, to the breakdown of the capital formation process, accumulation proper, in an increasingly stagnant real economy. These are contradictions of what I have called the phase of "Monopoly-Finance Capital" (Monthly Review, December 2006)… October 2008 Can the Financial Crisis Be Reversed? Página/12: What is your opinion about the decision of the Treasury Department to consider taking ownership stakes in many United States banks? Do you think this is the right political-economic strategy? I mean, will it lead to the recovery of the system? JBF: The Treasury Department proposal to purchase majority shares in major U.S. banks (the extent of this is still not clear) is, in a U.S. context, an act of sheer desperation, following a whole series of increasingly desperate actions. It signals that the crisis is out of control. The standard operating procedure whenever there is a major credit crisis is to activate the lender of last resort function and for the central bank to flood the economy with liquidity, while bailing out large financial and economic institutions that threaten to bring down the whole ship.… October 2008 Where We Stand: Monthly Review and the Credit Crisis Sunday afternoon, October 5th, 2008, a moment at the height of a global credit crisis, the like of which has not been seen by anyone under the age of eighty. The time will come when calm has returned, and when we at Monthly Review will point to a record over the last several years of an attempt at persuasion (not with much success) and prophecy (with much greater success) as credible and accurate as any offered anywhere. But at this moment suddenly we are receiving requests from our friends and subscribers that we address the conjuncture — the combination of momentary circumstances and events producing the day-to-day shocks of the current crisis… October 2008 Four Crises of the Contemporary World Capitalist System This essay examines aspects of the global political economy that I hope will inform progressive governments and movements for social change. It evaluates the constraints and opportunities presented in the current conjuncture of world capitalist development by analyzing four areas of crisis in the contemporary world capitalist system. These are not the only contradictory elements in the contemporary conjuncture, but they are, in my view, the most salient… October 2008 The Subprime Debacle As the United States braces itself for the onset of a recession, much of the blame for the current downturn is being attributed to the recent subprime mortgage crisis. While boom and bust cycles in real estate markets are nothing new, what distinguishes the current crisis is that the massive run-up in home prices was driven by the proliferation of new forms of securitized finance that permitted massive sums of loan capital to be pumped into the property markets. Only a few years prior these exotic financial products were being touted for their ability to hedge risk and achieve a more efficient allocation of credit. Buoyed by an exuberant sense that the wizards of Wall Street had so thoroughly transformed the nature of risk that the rules of the game had been fundamentally altered, investor demand for these securities exploded, and the underwriting and trading of these new forms of engineered debt underwent an extraordinary period of growth… May 2008 Postscript to “The Financialization of Capital and the Crisis” Six months ago the United States was already deep in a financial crisis -- the roots of which were explained in this article. Yet, the conditions now are several orders of magnitude worse and are affecting the entire world. We are clearly in the midst of one of the great crises in the history of capitalism. More than a mere financial panic, what is taking place is a major devaluation of capital of still undetermined dimensions. April 2008 ‘Market Economy’ or Oligopoly-Finance Capitalism? Capitalism and market economy are not synonymous, as the dominant political discourse and conventional economists would have one believe. The specific characteristic of capitalism as a system is that it is based on private ownership of the means of production; an ownership which by definition is that of a privileged minority. This private ownership (aside from land ownership) has taken the form of exclusive rights over important equipment associated with modern production technologies, from the first industrial revolution at the close of the eighteenth century to the present day. The majority of non-owners are thus obliged to sell their labor power: capital employs labor; labor has no free use of the means of production. The bourgeois/proletarian divide defines capitalism; the market is only the management form of capital’s social economy… April 2008 The Financialization of Capital and the Crisis With the benefit of hindsight, few now doubt that the housing bubble that induced most of the recent growth of the U.S. economy was bound to burst or that a general financial crisis and a global economic slowdown were to be the unavoidable results. Warning signs were evident for years to all of those not taken in by the new financial alchemy of high-risk debt management, and not blinded, as was much of the corporate world, by huge speculative profits. This can be seen in a series of articles that appeared in this space: “The Household Debt Bubble” (May 2006), “The Explosion of Debt and Speculation” (November 2006), “Monopoly-Finance Capital” (December 2006), and “The Financialization of Capitalism” (April 2007). In the last of these we wrote… April 2008 The Explosion of Debt and Speculation In a series of articles in Monthly Review and in Monthly Review Press books during the 1970s and 1980s, Harry Magdoff and Paul Sweezy proposed that the general economic tendency of mature capitalism is toward stagnation.* A shortage of profitable investment opportunities is the primary cause of this tendency. Less investment in the productive economy (the “real economy”) means lower future growth. Marx wrote about the possibility of this very phenomenon… November 2006 More (or Less) on Globalization Much has been written about "globalization" in the last few years. It is not my intention to add to this literature but only to put the topic into the context of my own understanding of the history of capitalism. Globalization is not a condition or a phenomenon: it is a process that has been going on for a long time, in fact ever since capitalism came into the world as a viable form of society four or five centuries ago; (dating the birth of capitalism is an interesting problem but not relevant for present purposes). What is relevant and important, is to understand that capitalism is in its innermost essence an expanding system both internally and externally. Once rooted, it both grows and spreads. The classic analysis of this double movement is of course Marx's Capital… September 1997 |
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