The left and the crisis in the financial markets
Posted on Friday 17 August, 2007
Filed Under Economics
What’s going to happen next in the global financial markets? Talk to senior bankers – and I have been doing just that today – and most will admit they simply don’t know.
There’s a minority view that the fundamentals are strong enough to haul through. The IMF is still predicting 5.3% growth in the world economy for both 2007 and 2008.
If that prognosis pans out, this will be the first occasion since the 1970s that growth has topped the 4% mark for five consecutive years.
On the other hand, some commentators are clearly spooked. Here’s what one guy told the Financial Times:
Ken Murray, chief executive of Blue Planet Investment Management, who ran the UK’s best performing investment trust last year, warned that markets could fall by a further 20 per cent.
He said: “We are entering one of the greatest banking crises in decades. The credit cycle has turned, bad debts are soaring, banks will go bust and stock markets will fall much further.”
Of course the serious left should steer clear of mechanical ‘catastrophism’: the belief that a rerun of the Great Depression will automatically see the scales fall away from the eyes of the working class and suddenly catapult tiny Trot sects into the big time.
Call me a middle-age sell-out if you like, but I’m not actually praying for a serious economic downturn. Like many British workers, I’ve got a mortgage round my neck, and I’m kind of hoping that there will be enough money in my pension pot to fund a few years of retirement at some point before I drop dead.
As a long-term unemployed youth in the early 1980s, I learned the hard way that the working class always gets the worst of it in a slump.
Nevertheless, the idea that capitalism is a cyclical system that moves from boom to bust is at the heart of the socialist critique and of our advocacy of a planned economy.
A major recession is not a price anyone in their right minds would happily pay for a propaganda opportunity. But if that’s the way things are heading, we should not refrain from showing how it underlines our case.
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16 Responses to “The left and the crisis in the financial markets”
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Dear Dave,
Very true!
There has been an element of “End of history” in economic writing in the media for some time. It is quite funny to see these voices go quiet at about the time the American economy catches a cold and it spreads to other major economies in Europe, Asia, etc.
The Left should make the case for much tougher credit controls on banks and individuals; Tobin tax on specualtive currency transactions; etc. We need to put a few genies back in the bottle.
The other interesting issue will be to see if economic alternatives to New Labour emerge. The fetish for the City of London has actually left us more vulnerable to these economic downturns than before. Germany and Japan might be in a better position to with stand such down turns due to their manufacturing industries still being strong.
I agree with all the above save the stuff about the pension plan.
It may be the view of a few infantile ‘Trots’ that a slump is good news but that wasn’t the view of Trotsky who called such talk ‘infantile slumpism’.
Workers are going to think twice about possibly losing their job through strike action when there aren’t other jobs to walk into.
Having said that it’s also hardly the case that when you can just walk straight into a job – as I’m sure must be the case now in places with long boom e.g. Singapore – means that the more confident workers will form or improve trade unions. The same might be said about Britain now, to a degree.
So I’m pretty ambivalent about any depression or boom. It’s war or the aftermath of wars that are the opportunity Franco-Prussia 1870, Russian-Japanese 1905 etc etc And wars can arise from Depressions.
Southpawpunch: ambivalent about depression or boom; gung-ho for world war III? Not just Washington and Moscow but international destruction?
Few – well apart from the savoury remnant of die-hards, pray for a slump.
But there’s also the slippery slope. I mean, if you want your pension to be good Dave, then maybe you want the market to continue as Casino Capitalism? Eh? Anyway that’s what they say down at the cottages of the big folk: the feasts of the rich always leave some orts for the rest of us..
So according to Southprick:
It’s war or the aftermath of wars that are the opportunity Franco-Prussia 1870, Russian-Japanese 1905 etc etc And wars can arise from Depressions.
Yes, What an incredible opportunity a war represents. The people of the Congo must be delighted that they stand in the forefront of progress with two million slaughtered, the people of Iraq are also probably proud that the day to day bombings, kidnappings, slaughter and carnage are providing an opportunity for wanky PR executives in london to mouth off about r-r-r-revolution.
What sort of r-r-r-revolution is worth having if the people advocating it are oblivious to human suffering?
Southprick exactly personifies the threat of Trotskyism, that sacrificies the actual here and now interests of the working class in favour of building a “r-r-r-revolutionary party” for the future.
Interesting innit that this time the proletariat has caused the crisis through its capital. If low-income families in the US had kept up their mortgage payments this might not have all started…
Would be surprised if this actually causes a recession since, as many people have commentated, underlying economic growth is pretty strong. Stockmarkets tanked in 2000, with the FTSE heading downwards for three years on the trot, without it causing anything significant to happen to the ‘real’ economy. Everyone knows that debt has been very cheap in recent years so it was inevitable both people (mortgages) and companies (private equity) would make use of it. Equally inevitably the party had to stop at some point. We are curently seeing all the bets on cheap debt unwind.
I don’t think Southpaw intended his remarks to come out as callous as they did, but none the less the Left has got to stop talking in these cold mechanical terms. We’re supposed to be on the side of – indeed representative of – the people who get shafted in these sorts of situations.
Hey read the comment. It’s a shame some wreck these threads through remarks based on ignorance and abuse.
I said that war is generally an opportunity – I think that’s pretty undisputable, I don’t think, for example, there would have been a Russian revolution without WW1.
You show me the bit where I say that I welcome or hope for war.
Communists have to say what is, without gloss. War is an opportunity, and indeed so even can be mass exterminations e.g. the Peasant’s Revolt arose through the shortage of labour caused by (enormous death toll – 33%, 66%?) of the Black Death.
Last i recall, the Black Death threw back the development of capitalis by several hundred years – the population growth and wealth of peasants had been amassing before it struck – it was a catastrophe, and the revolt was a sign of the set-back, not the growth, just as we only strike when we aren’t winning…
Keith Harvey’s written quite an interesting analysis here.
http://www.permanentrevolution.net/?view=entry&entry=1604
What’s unclear at the moment I think is whether this is a late cycle correction, like the Latin American crash of 1997 and the crash of 1987, or an end cycle crash like the bursting of the Hi-tech bubble in 2000.
I incline towards the former as underlying growth and profitability remain very strong.
But there is a separate issue, which is about the nature of the longer period. Basically while there is a business cycle with a major cycle about every 10 years, what the recovery after the Hi-Tech boom implied was that capitalism had broken from the downward phase of the 1970s/80s.
In contrast the majority of the left SP, SWP, WP etc remained determined to assert that any slowdown represents the end of capitalism – hence Callinicos “world economy on a precipice” etc.
Basically they think that all they need is a crisis and then everything’ll be ok.
Unfortunately for them, not only will a crisis probably not be as deep as they want, even should it occur it still won’t solve all the lefts problems by a long chalk.
I’d say there was no argument that the Peasant’s Revolt was an ‘opportunity’ – ‘When Adam Delved And Eve Span, Who then was the Gentleman?’ as some of them said.
And no we don’t just strike when we aren’t winning. That’s primitive slumpism.
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I don’t doubt Bill J (and Dave Osler) know a lot more about economics than I do.
I don’t doubt firms of stockmarket analysts carry out incredibly detailed of share prices so as to decide whether to buy or sell.
I do know that these firms sometimes get it spectacularly wrong and also never see to beat the market by that much. I suspect the reason for that is while all things are knowable, their understanding of the data and its significance is but a very small fraction of how things are.
I suspect the predictions of Bill J, Keith H are not even approaching very small.
The predictions of other Marxists can not even approach minute. Read an old copy of Socialist Appeal and just see how spectacularly wrong were Alan Woods predictions.
ISTR Sun Tzu saying never fight a battle you don’t know you’re going to win in advance – sage advice. If we get the pay, terms, conditions etc. we ask for, without a strike, it’s usually because market conditions make it impossible for our employers to say no – if they start digging their heals in and fighting back, that’s because they think market conditions are good for them to withold from us.
“Last i recall, the Black Death threw back the development of capitalis by several hundred years – the population growth and wealth of peasants had been amassing before it struck – it was a catastrophe, and the revolt was a sign of the set-back, not the growth, just as we only strike when we aren’t winning…”
I was led to believe that the Black Death decrased the supply of labour, putting the surviving peasants in a better bargaining position. It’s certainly a fact that agricultural wages went up and unpaid serfdom practically disappeared during that time. I thought the Peasants’ Revolt happened largely as a result of the imposition of the Poll Tax (the Hundred Years war wasn’t going well, and with no French plunder to tax, the State introduced the Poll Tax as a way of replacing the missing revenue), with better-off peasants who’d seen their lot improve over a generation becoming bolshy over what the ruling class demanded from them. The mob’s main target was John of Gaunt, the wealthist landowner in the country.
well undoubtedly its only possible ever to know a fraction of the info that’s out there. but fortunately, if we are sagacious we can select which information we need to know and make judgements based on that.
the internet is really a fantastic innovation, for the first time its possible to have access to all the uptodate information at the same moment as its issued – and what’s more thanks to the wonders of the spreadsheet do really fairly complex calculations pretty easily.
And the proof of the pudding is after all in the eating – we’ll know how good our predictions are – by whether or not they’re in fact more or less accurate.
But all this does make you wonder, why, at the very moment when its finally possible to do some reasonably good forecasting on a amateur basis (which lets face it we all are) the left’s just given up – just dumbly repeating the mantra about capitalism’s immanent collapse.
Bill’s correct in saying that the proof is in the pudding.
What would be good would be a OfLeft. Giving stars to left groups based upon how accurate their predictions turned out to be.
No stars for Militant perspective of yesteryear. British revolution by 1990/1995 they told me in 1980.
I was led to believe that the Black Death decrased the supply of labour, putting the surviving peasants in a better bargaining position. It’s certainly a fact that agricultural wages went up and unpaid serfdom practically disappeared during that time.
It was certainly the saving of Wales, if Gwyn Alf Williams* is to be believed; according to When was Wales?, when the plague hit a settlement programme was gearing up, with the indigenous population were facing serfdom at best and uprooting** at worst. The increased demand for labour after the plague meant that the English*** were in no position to dictate terms.
* Who was a Bordighist. Not relevant but mildly interesting.
** Not sure if this is the right word. I’m thinking of one of the nastier forms of colonialism – expropriation, enforced servitude, assimilation of the lucky ones, impoverishment and brutalisation for the rest. Result: population decline, cultural extinction.
*** Norman barons, mainly, but I guess by this stage they have to be considered English.