An Inquiry Into the Life and Times of Teridon

One of the most well-researched and plausible explanations of the systemic financial crises of the world capitalist system has been given by capitalism’s primary ideological nemesis – Marxist political economy. Even before the Great Depression, one of capitalism’s most famous instances of systemic financial crises, Frederick Engels and Vladimir Lenin already surmised that the crisis of overproduction in the capitalist world would be the primary trigger of the systemic financial crises in the world economic order in which the resultant answer to such a crisis is the phenomenon of imperialism by advanced capitalist states of less developed, Third World countries (Andreyeva 2000). Such a crisis of overproduction, Marxists the world over quipped, is the primary culprit in historic systemic financial crises which have caused the spread of poverty, deaths and hunger in many continents and states. According to a paper presented to the Eleventh International Communist Seminar (2002), the contemporary nature of the crisis of overproduction was defined–

Owing to deregulation, privatisation, and liberalisation, there has been a marked decrease in the effective demand in the world. Structural Adjustment Policies in the third world and flexible work relations in the first world are contributing to a steep decline in demand. At the same time, the introduction of new technology (silicon chips, computers, fiber-optics, internet, robotics and so on) has rapidly increased the capacity for production but also made millions unemployed. Therefore, the increases in productive capacity are accompanied by a decline in the capacity to buy these products. This tendency has produced a chronic crisis of over-production in the world capitalist economy today. The October 1987 stock market crash, the East Asian currency crisis, followed by crisis in Russia, Brazil, and Argentina represent a global crisis of over-production. With the deregulation of state-managed capitalism, these oscillations (called cycles by bourgeois economists) have become enormous and threaten to become totally unmanageable. The imperialists have decided to allow sinking economies to sink because there is simply no political motivation to act otherwise (as was the case after the Second World War). Furthermore, the imperialists are increasingly unwilling to pay the economic costs of such an act. As stated earlier, the national and international debt are already high and an attempt to stave off the current crisis of overproduction by borrowing may possibly further aggravate this crisis.

According to classical Marxist political economists, the economic spasms caused by the crisis of overproduction have considerably hindered the working peoples of the world from purchasing the goods they produce as their wages continue to remain stagnant. This trend is detrimental to capitalists of all kinds, industrial, commercial and financial, as the purchasing power of the people will significantly be less that goods will be bought less in retail stores and supermarkets triggering a decrease in production in factories due to low demand, notwithstanding the inability of the people to deposit their savings in banks as a result of increased prices and low wages.

Nonetheless, one of the most brilliant ways in averting such crises of overproduction in industrial capital has been the development of finance capital in the forms of banks, hedge funds, and speculative capital. According to Global Finance Capital and the Philippine Financial System (Villegas 2000, p.68), finance capital mainly subsist on credit-capital or fictitious money, as distinct from money-capital (the latter based on a metallic standard like gold or silver) to accumulate more profit. As a result, credit-capital can thrive on speculation of future values of stocks and securities in which finance capital can overextend its credits beyond its actual reserves in the expectation of recovering the principal and increasing profits through interest. This phenomenon, while effective in the short-term leads to disastrous results as it merely creates a bubble economy. Due to over-extension of credits, bubble economies have led to severe financial crises when capital markets fall as what happened when Japanese capitalists withdrew $7.5 billion of their investments in East Asia since 1995, due to the Japanese recession and collapse of Japanese real estate prices. (Goldstein 2000) This withdrawal contributed much to the Asian Financial crisis of 1997 which caused the bankruptcies of hundreds of banks, closures of thousands of enterprises, and the laying-off of hundreds of thousands of workers, notwithstanding the withdrawal of speculative capital by Western investors on Asian businesses. While over-extension of credits may save economies in advanced capitalist states on the brink of overproduction, an economic-set-up like such is unsustainable as finance capital will always have to yield to the current state of industrial capital in these countries. If the economic contradictions brought about by the crisis of overproduction is never resolved, the bubble economy will burst, which can lead to collapse of entire economies of countries, as what happened in Southeast Asian countries in 1997.

In the globalization of trade, services and finance capital, government economic policies can only do so much to avert the trend of severe systemic financial crises of the world capitalists system. Truth to tell, the over-extension of credits through speculative capital, trusts, hedge funds, among others, are the best defenses of countries, especially in the developed world regulating an ensuing crisis. Governments, even in those hit by the 1997 crisis continue insisting on the value of investments as multipliers of production, which does improve enterprises in the short run, but until when? In the Philippines, the real estate market is again growing, and investments from the world over continue to flow to different projects, through direct capital and speculative capital. However, these were the same conditions present before the Thai baht was devalued in 1997. Will the bubble burst once again? In the ultimate analysis, for as long as economic contradictions between capital and labor continue to subsist in all corners of the world, whether developed, developing or underdeveloped, a resolution to any systemic financial crisis can never be achieved.

References:

1. Villegas, E. 2000, Global Finance Capital and the Philippine Financial System, Institute of Political Economy, Manila

2. _________ 2002, Economic Crises and the Possibility of a Major World Crisis, Eleventh International Communist Seminar, Brussels, Belgium

3. Andreyeva, N. 2000, Imperialism and Revolution, Available at http://www.wpb.be/guests/imperial.htm

4. Grant T. 1997, An Analysis of the Global Economic Situation, Socialist Appeal

5. Goldstein, F. 2000, The Free Market Myth and Japan’s Banking Crisis

6. Brenner, R. 1998, The Economic of Global Turbulence, A Special Report on the World Economy, 1950-98, New Left Review, London

7. Bullard N. 1998, Taming the Tigers: The IMF and the Asian Crisis, Tigers in Trouble, edited by Jomo K.S., Hong Kong University Press

# posted by Terry Ridon : 1:24 AM