The left, the right and the ‘return of the 1930s’ thesis
Posted on Thursday 25 September, 2008
Filed Under Economics
The idea that the world economy is about to undergo a re-run of the 1930s is becoming so common among mainstream economic commentators that is in serious danger of becoming a cliché.
But when likes of George Soros toy with that idea, they do so for express symbolic effect. Resort to any notion of a return to the years of Great Depression is the kind of talk purposely designed to shake people up. It is, in effect, the most serious warning it is possible to give.
That decade is deeply entrenched in the collective memory of the free market right as the years in which the wheels nearly came off the capitalist show.
We’ve all seen the black and white newsreel footage; the Jarrow March (pictured), the soup kitchens, the Hoovervilles, the rise of fascism in country after country.
Many of us will augment those pictures with the stories we heard as children from older members of our families who were caught up in the crosscurrents. In my case, educated men were reduced to shining shoes for a living, or ignominiously deported from countries in which they tried to find work without a work permit.
It’s worth noting that this still is 2008 and not 1931; some sections of the left have at times given the impression that they would relish a slump of Great Depression proportions, on account of the effect they imagine this would have in radicalising popular political consciousness.
Given the sheer extent of the human misery this would entail, that is unforgivable. It also seems to forget that – at the level of government, at least – the principle beneficiary of hard times is all too often the reactionary right.
Little wonder, then, that the ‘1930s in slow motion’ perspective developed by Tony Cliff at the start of the 1990s proved to be wishful thinking during a period which saw the start of sustained capitalist expansion, disastrously wrong-footing the Socialist Workers’ Party for an entire period.
What conclusions can we draw? At the very least, the financial markets crisis of 2008 is likely to mark an important political turning point. When governments of the ideological stripe of George W Bush are forced to resort to state intervention on a titanic scale, it cannot fail but to bolster case for tighter regulation of the free market.
It suddenly turns out that the very things that globalisation supposedly rendered impossible for nation states in this day and age – the nationalisation of major financial institutions, or a ban on short selling, for example – can be done in no time flat if need be.
Deregulation has been an integral component of neoliberalism as it has emerged in the west over the last 30 years. One of the first actions of the Thatcher administration was to scrap wage, price and exchange controls, and it followed through with the Big Bang in 1986.
The climate is all of a sudden very different, and could expand the political space available to modern social democracy, and perhaps revive a current that has sometimes seemed at death’s door in recent years.
But what if the pessimists are right? Such a possibility must be at least measurable. In that case, the basic underlying question of all economics – which class gets what – is back on the agenda in a way it has not been for a long time.
That will mean an audience for radical answers to that question. Perhaps it’s not for nothing that the Archbishop of Canterbury has suddenly taken to favourably mentioning of Karl Marx.
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12 Responses to “The left, the right and the ‘return of the 1930s’ thesis”
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The biggest threat to capitalist society comes from the right, not the left. Undiluted neoliberalism is driving the economy onto the rocks. Ironically, it is left-of-centre solutions that have consistently saved capitalism from itself.
Even now we have the same commentators that claimed that deregulation was the way forward asking if captalism can survive a regulatory backlash. The question they should be asking is, can it survive without a regulatory backlash? Continuing on a course of ever more ‘innovative’ ways of borrowing money isn’t sustainable.
The oil that smoothes the wheels of the market is trust, and when that evaporates the whole machine seizes up. If go to my local market and ask for some fruit, then get home to find the stallholder has passed me off with bruised apples I’m not going to buy from him again. All the banks have been doing is slicing up and mixing good and bad debt and then parcelling it up – with the help of a backhander to the credit ratings agencies – as AAA. Like bad apples, the bad debt contaminates the whole package, credit lines seize and the ever-higher leveraging collapses in on itself.
Without any serious regulation and oversight markets can’t operate.
Incidentally, the $700bn is probably just a downpayment. It approximates less than 0.2% of the estimated value of derivatives on world markets – and no one is too sure which is legitimate.
“It suddenly turns out that the very things that globalisation supposedly rendered impossible for nation states in this day and age – the nationalisation of major financial institutions, or a ban on short selling, for example – can be done in no time flat if need be.”
Blimey – I’m being a bit slow here but the significance of the ban on short selling that you pick up on here hadn’t fully struck me before I read that. The myth of the powerless state in the era of globalisation was finally well and truly popped.
Of course the Archbishop is quoting Marx. Unfortunately, the haggard and uppity left, completely devoid of ideas, is now going towards the Third World for intellectual debate. The Archbishop, in a profoundly ridiculous and, quite frankly, embarassing manner, is now leaning towards the Theology of Libertation that killed so many people in Nicaragua.
But derivatives are largely hedge bets and therefore their nominal total bears no relation to the amount of money really at threat.
The $700bn represents around 13% of all outstanding sub-prime mortgages, combined with writes offs of around $530bn already and an additional $400bn loans to banks and other financial support i.e. to the FDIC, this is a very significant moment.
And they can always go back for more if its not enough.
Things will be clearer in the next few weeks. According to Jim O’Neill of Goldman Sachs, this package, when combined with the falls in raw materials prices and cuts in interest rates world wide, will be enough to contain the crisis.
If I’m honest I probably agree. For what that’s worth.
Wasn’t it Rocket Ronnie’s contras that were killing people in Nica-… oh why do I bother with this knobhead.
Ha, to be fair he didn’t exactly sing Marx’s praises – he just took the bits of Marxist thinking that suited his purposes and ignored the rest.
They had this debate over at the Devil’s Kitchen, so I’ll just repeat what I said there.
This is not the 1930s and this crash will leave most people no better and no worse off than they were before. In 1932 my father had just come out of his time and found himself unemployed. He spent the rest of the decade either unemployed or working as a waiter in a pub. Millions of others were in that situation because the factories closed for the duration.
However, the jobs that ordinary people did ended a generation ago, which is when their standard of living collapsed. Thus most of my nieces and nephews in England have either spent their lives unemployed or doing McJobs.
Now this is a credit crash – it’s a bit like 1929 rather than 1932 – and given that few of my family even have credit cards and none have mortgages, how in the name of God’s left bollock is this going to effect them? Even if it does turn into an other great depression the McDonald’s will probably survive and the social is unlikely to cease paying out.
Sorry, Dave, but we can sit this one out. Just like the middle class did when our factories were being closed.
Might as well have a read of an article on why capitalism will not collapse written in 1932 by the only socialist party still in existence from that period .
“…Capitalism from time to time develops acute industrial and financial crises; and at the depth of these it does appear to many observers that there is no way out, and that society cannot continue at all unless some way out is found. Men of very different social position and political convictions have been driven to this conclusion—reactionaries and revolutionaries, bankers and merchants, employers and wage-earners…
…Each period of trade depression produces its own prophets of catastrophe. However those politicians and business men who foretell collapse now are no more to be relied upon than the others who foretold collapse in past crises…
…Our knowledge of past history and of the way in which the social system develops, convinces us that no crisis of Capitalism, however desperate it may be, can ever by itself give us Socialism. Socialism cannot come by stealth. It can only come by the deliberate act of workers who understand Socialism, and are organised politically to obtain it through control of the machinery of government. The blind revolt of desperate workers would cause great distress and destruction. It might prove troublesome to the capitalist authorities, who would have to exert themselves to suppress it, but the outcome would not be Socialism…
…So long as the workers are prepared to resign themselves to the evils of Capitalism, and so long as they are prepared to place in control of Parliament parties that will use their power for the purpose of maintaining Capitalism, there is no escape from the effects of Capitalism…”
http://www.worldsocialism.org/spgb/pdf/wcwnc.pdf
Is it treasonable to ask if we should run on the banks? See Mr Brown is assuring everyone that the contagion within the American banking system does not affect the British. Does this sort of thing lead to hyper- or even moderate inflation? Makes me laugh though. The blind optimism that capitalists have in their system. how could they have really believed that capitalism is infinetly expanding? Actually, I don’t think they do/did, they just want to make their pile and get out. A friend of mine tlod me months ago that there were going to be massive job losses in the City, so they’ve seen it coming. Labour isn’t even tail-ending the unions on this, it’s flatly denying that there’s anything up. Jack Straw did slip in a remark while being interviewed at the Labour Party conference that this was the worse crisis since the Depression, but the interviewer didn’t pursue it and you wouldn’t have thought so listening to the speeches. I ask again, is it time to take a run on the banks? We don’g want our savings to disappear into a black hole (especially not now, they’ve turned off the Hadron Collider!).
How about the following demands?:
1/ Nationalise the banks – at least to the extent they have to be bailed out!
2/ Fixed ceilings on bosses’ pay and parachute payments!
3/ Authorise the cops to track down all the fat cats who made fortunes during the fraudulent boom and prepare to arraign them before the courts!
4/ Introduce laws to force the fat cats to repay their super bonuses and compensation payments.
5/ Use the returned ill gotten gains to help save workers from the loss of their homes where there is the danger of mortgage forclosure!
Now these demands might be thought to be a triffle extreme – even Posadist in tone. Actually they are all demands that a range of US Senators have called for publicly in recent days. Demands 1 and 5 appear to attract Democrat Senators while 2, 3 and 4 have all been voiced by right wing Republicans.
We have heard nothing on these lines from Nu Labour. Come to think of it we have heard nothing on these lines from the left either. Amazing.
That is a particularly shrewd observation, though you do of course make many others, the speed at which TINA has been abandoned in the US (though less so here) is breathtaking and must open up new opportunities for political opposition, though sadly it may come from the far right not the left
‘It suddenly turns out that the very things that globalisation supposedly rendered impossible for nation states in this day and age – the nationalisation of major financial institutions, or a ban on short selling, for example – can be done in no time flat if need be.’
Sorry, referring to this part of the article