Breaking it Down: Industrial Capitalism vs. Financial Capitalism (or, Why We’re F*cked)

Michael Hudson asks: “In light of the enormous productivity gains since the end of World War II – and especially since 1980 – why isn’t everyone rich and enjoying the leisure economy that was promised?”

The answer (per Hudson) is painfully obvious, but bears repeating (ad infinitum):

What was applauded as a post-industrial economy has turned into a financialized economy. The reason you have to work so much harder than before, even when wages rise, is to carry your debt overhead. You’re unable to buy the goods you produce because you need to pay your bankers. And the only way that you can barely maintain your living standards is to borrow even more. This means having to pay back even more in years to come.

That is the Eurozone plan in a nutshell for its economic future. It is a financial plan that is replacing industrial capitalism – with finance capitalism.

Industrial capitalism was based on increasing production and expanding markets. Industrialists were supposed to use their profits to build more factories, buy more machinery and hire more labor. But this is not what happens under finance capitalism. Banks lend out their receipt of interest, fees and penalties (which now yield credit card companies as much as interest) in new loans.

The problem is that income used to pay debts cannot simultaneously be used to buy the goods and services that labor produces. So when wages and living standards do not rise, how are producers to sell – unless they find new markets abroad? The gains have been siphoned off by finance. And the financial dynamic ends up in austerity.

And to make matters worse, it is not the fat that is cut. The fat is the financial sector. What is cut is the bone: the industrial sector. So when writers refer to a post-industrial economy led by the banks, they imply deindustrialization. And for you it means unemployment and lower wages.

As they say, read the whole damn thing.

And weep.

h/t

(Image: jesse.millan, Flickr)

Shorter Rick Santelli: “My wife feels you’re glib, Matt.”

by matttbastard

The preceding exchange–especially Dylan Ratigan’s asinine contention that Rick Santelli is “channeling an emotion that everyone in America is feeling”–ties in with what Glenn Greenwald was saying the other day about how the Beltway press corps is still obsessed with transmitting and furthering GOP talking points in the name of some mythical ‘bipartisanship’,  basically making shit up about public opinion, regardless of all evidence to the contrary:

The political establishment has never come to terms with, and the media establishment just refuses to acknowledge, how deeply unpopular and discredited the GOP is among most Americans in the wake of the eight-year Bush disaster.  Political and media elites don’t want to acknowledge that because they lent their continuous support for eight years to Republican power, yet — even with Bush gone — it’s scarcely possible to imagine how a major political party could be held in lower esteem among voters.  By huge margins (63-29%), Americans believe the GOP opposed Obama’s stimulus package for political reasons, not because they genuinely believed it would be bad for the economy; they overwhelmingly disapprove of Congressional Republicans (38-56%) while approving of Obama (68-25%) and even Congressional Democrats (50-44%); trust Obama over Congressional Republicans to handle the economy (61-26%); and trust Democrats over Republicans “to do a better job in coping with the main problems the nation faces over the next few years” (56-30%).  Those are enormous margins.

The punditry’s claims that Americans want Democrats to dilute their policies in order to attract and include Republican support is entirely misleadingThe endless media stories that Eric Cantor, Michael Steele and Rick Santelli are now riding some resurgent, anti-stimulus GOP wave are pure fiction.  And the incessant calls for “bipartisanship” are anti-democratic in the extreme.

The Villagers stubbornly insist on reading from a hackneyed, out-of-date script, one that no longer even remotely resembles reality (if it ever actually did).  But no matter what steaming, stinking bullshit manufactured outrage merchants like Santelli, Ratigan, or Michelle Malkin brazenly peddle,  as Greenwald notes the bottom line is this:

[T]he reason that Americans voted overwhelmingly in favor of Democrats in the last two elections and overwhelmingly against Republicans is because they want Democratic policies and not Republicans [sic] policies .  They drove Republicans out of office in massive numbers because they don’t want Republicans and their policies governing the country.

In other words, spittle-flecked fauxpulist motherfuckers like Rick Santelli can suck it.  Hopefully he gets banished to the PJTV wilderness post haste, so he can serve heaping plates of bloody red meat to the Chicago Tea Party massif alongside his ideological (and, um, intellectual) brethren Glenn Reynolds and Joe the Plumber.  And the rest of us can get back to, y’know, trying to fix the mess we inherited from the previous administration.

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Dividing the Spoils

by matttbastard

Um, Alison, I’m not sure if this what John Quiggin meant when he said “Citigroup’s global operations are too big for the US to handle alone.”

Still, your scoop does lend credence to the theory that modern capitalism was invented by pirates.

Ahem.

Related: For more on Citigroup’s woes (and how fucked we are), see The Wall Street Journal, Yves Smith, and Shaun Mullen, who wryly observes that “[b]eing shocked [by the economic freefall] implies that you still have faith in government and the markets.”

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The Stench of Desperation (I am [not] Joe).

by matttbastard

Right wing identity politics and carefully-manufactured pseudo-populist rage against ‘vote fraud’; Race/red/God-baiting Obama to ridiculous extremes; the hyperbolic overreaction to McCain’s latest campaign stunt FAIL.

Oh, and my personal favourite, McCarthyism redux from Rep. Michele Bachmann:

Everywhere you turn, it seems doctrinaire right-wingers, in concert with the McCain campaign, are flailing wildly, lashing out with every trick they know, every demonstrative tactic that used to be filed under ‘slam dunk’ in the wingnutosphere handbook.

But you know what?

None of it means a goddamn thing, because–sorry, wingnuts–it’s still the fucking economy, stupid; all the irony-free ‘I am Spartacus’ circle jerks in the world won’t magically reverse the real average Joe and Josephine’s negative home equity, protect their jobs, nor will it restore their 401k, inoculate them from losing it all. Like it or not, in this election cycle, issues are trumping (trouncing, trampling) identity. Which is why your out of touch, totally overwhelmed and over-matched Maverick is losing.

Deal with it.

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Dow Drops Another 500 Points, Closes at a 5 Year Low; TSX Drops Over 400 Points, Lowest Close Since 2005

by matttbastard

As Atrios would say, WHEEEEEEEEEEEEE!

Oh, and for us Canucks, WHEEEEEEEEE, EH!

h/t Kyle for the CNN link

Related: WaPo:

“Quite frankly, what the market is looking for is some kind of coordinated action from central banks around the world.” said Kathy Lien, director of currency research at GFT Forex. The Paulson plan, she added, is like a “Band-Aid for a problem that stretches way beyond the banking system now.”

Also see Steven Pearlstein, who says this is no longer a financial crisis but rather “a meltdown — an uncontrolled and largely uncontrollable financial chain reaction that threatens serious harm to the broader economy” and may “take most of the global economy into recession.”

In other words, we are fucked.

(Psst Uncle Steve — that includes us.)

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Happy Market Meltdown Monday!

by matttbastard

So, what did we learn this weekend (besides the fact that Sarah Palin is the spiritual reincarnation of Richard Nixon and John Sidney McCain III has, according Howard Wolfson, jumped the shark)?

Well, the European banking crisis is spreading; US bank failures are expected to increase in ’09; US consumer confidence is next-to-non-existent, with a new CNN/Opinion Research Corp poll showing that 59% of Americans believe a depression is imminent and 84% consider the economy to be poor.

And now it’s Monday and the markets are open.

You know what that means:

We are fucked:

U.S. stocks plummeted in early trading today as economic turmoil rippled through Europe and investors questioned whether a bailout of the financial sector would be enough to prevent a global recession.

The Dow Jones industrial average fell more than 500 points by mid-morning but then retreated to more than 400 points lower by 11:18 a.m. It was the first time since October 2004 that the Dow fell below 10,000. The Nasdaq and Standard & Poor’s 500-stock index both fell by 6 percent but by 11:18 a.m. had come back slightly, down 5 percent and 4.7 percent, respectively.

The day started with a negative momentum that has turned into a global panic, said Art Hogan, chief market analyst at Jefferies & Co. “It is just a realization that the global economy is going to be stagnant for the next 12 to 16 months” even with the rescue plan, Hogan said.

Investors remain concerned that the $700 billion financial bailout plan enacted by the federal government last week is not enough to address the country’s fundamental economic problems, including rising unemployment and falling home prices. Banks remain reluctant to lend to each other, keeping the credit markets frozen, and overseas banks are increasingly facing problems of their own.

European officials are scrambling to bolster financial firms, and Asian investors have grown worried that a global recession will undercut their export-dependent economies. Europe has been forced to prop up other banks in recent weeks. Markets in Asia and Europe were down from between 4 and 6 percent.

“People realize that the [bailout] is not going to prevent a more serious economic downturn in the U.S., including a couple of quarters of negative economic growth,” said Marc Chandler, head of currency trading at Brown Brothers Harriman & Co. “The banking crisis spreading to Europe is another negative. It means the crisis is getting bigger.”

The price of oil fell as low as $88.89 a barrel in morning trading today, off its peak of $147 a barrel in July. The price of gold jumped as investors sought a safe haven from the market turmoil.

Glad I have today off, as I feel the need for a drink, to be quickly followed by another.

Oh, and memo to Uncle Steve: Canada is most definitely included in that aforementioned ‘we’. This is not simply a financial crisis for the US–it’s a global (yes, global) crisis.

A global crisis that, as Marc Chandler noted, is growing bigger.

We are fucked.

h/t James Curran for the vid

Related: Must read op-ed by David Rothkopf, visiting scholar at the Carnegie Endowment for International Peace and the author of Superclass: The Global Power Elite and the World They Are Making, who argues that the financial crisis is a paradigm-shifting event “bigger than 9/11”:

We now know that the costs to the U.S. government associated with this crash will surpass those associated with the wars in Iraq and Afghanistan. We also know that all such government cost estimates tend to be on the low side. We further know that the U.S. economy recovered quickly after 9/11 and that we are in the midst now of a global downturn that may last for many months and perhaps years. We know that there have been vastly more job losses — 600,000 recorded thus far this year in the United States — than were associated with the 9/11 shocks, and that the global job-loss totals that a recession is likely to bring will be measured in the millions. Among the poorest, the likely shocks to emerging markets caused by the United States’ inability to spend freely will take a devastating human toll.

By all the metrics available to us, then, the current financial crisis easily exceeds the post-9/11 war on terror in economic terms. Human costs are harder to measure, of course, and the tolls of both events have been devastating. But the financial crisis will certainly touch many more people in many more countries than did 9/11. And even greater crises may loom ahead, thanks to our unwitting creation of a financial Frankenstein’s monster of unregulated, risk-laden, global derivatives markets.

As the dithering U.S. governing class is grappling with the disposal of “toxic assets” in the U.S. economy, the world is moving on to debate what is widely seen as a toxic ideology: a form of market fundamentalism that promotes inequality.

As they say, read the whole damn thing.

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