A series of six parts, on the relation between Capital and the State in the epoch of Financialisation _____
Financialisation and State Capture (Originally "What can we say about the crisis of 2007/2009?") "Financialisation is best understood as an epochal transformation of capitalism" Costas Lapavitsas, Theory and Struggle, Marx Memorial Library, 2014 We can say first of all that this was a global crisis. If you look at the data, towards the end of 2008 all mature economies dived together. So, there is no question this was a global crisis, although it affected mostly mature capitalist countries rather than newly emerging ones. The second thing we can say is it was systemic. Clearly, it was something to do with the way finance, production and distribution were woven together. It wasn't an accidental event. It wasn't an isolated event. It was systemic and it was structural as well. Something was deeply wrong with the accumulation of capital and how the financial system interacted with the accumulation. That was clear. The next thing we can say about the crisis is that it emanated from the financial system. This wasn't a crisis that emanated from the productive sector. There's no evidence during that period that we had some major malfunctioning of production. There are plenty of things wrong with production, of course, and I will mention them, but the crisis emanated from the financial system, the US financial system in the first instance, and the British financial system and other major financial systems closely related to the US. Next, and things are now becoming increasingly strange, the crisis came out of loans made to the poorest section of the US working class. These were loans made to people without any assets, without any income, without any credit history, who were often black or Latino and lived in urban areas of the United States that were previously off-limits to banks and credit. That's a very strange development. Never before has a global crisis of capitalism emerged connected to loans made to the poorest section of the working class. It would have been unthinkable to Classical Economists or Marxists that something like this could ever have taken place. The last thing we can say about the crisis is that it was fed by enormous financial speculation, financial innovation as they call it, but really speculation. It was the creation of paper on the back of paper, to create even more paper, to result in profits not from lending, but from dealing in paper, from transacting in paper, from buying and selling paper among the financial institutions to generate fees, commissions and all the other profits that the dealers in these financial assets secure for themselves as they trade in the markets. The State How was the crisis dealt with? Think about it. Who dealt with it? The state. Quite clearly in the absence of the state there would have been total collapse in the summer of 2008. There wouldn't have been a major bank standing in the United States and quite possibly in this country too. Whether the banks were directly involved in the speculation that I mentioned, or not, there wouldn't have been a major bank standing because healthy banks also fall when problematic banks go under. So the crisis was dealt with through intervention by the state. And it is this intervention that requires thinking about, because it shows how the state and contemporary capitalism are connected. What was the major thing that the state did? It drove interest rates down to zero. That's the most decisive policy undertaken by the state. What the State did for the Banks I know it isn't obvious, so let me explain why it's so important. The state drove interest rates down to zero through the central bank - by using public resources. The rate of interest that was driven down to zero is that charged by the central bank, a public rate of interest. By driving it down to zero what the state did was to create profits for the commercial banks. The reason is that commercial banks borrowed at next to nothing - at zero-rate - from the central bank, and then they on-lend to private borrowers and could make a secure profit. In this way, the state subsidised the banks and ensured that the banks could make secure profits. This was the biggest intervention by the state, a massive public subsidy to banks through the rate of interest. The second thing that the state did was to give to the banks vast public funds. Particularly in the United States, an enormous system of public funding for the banks was instituted and banks were effectively buttressed with tax income. Tax income was mobilised and passed onto banks to make sure they didn't go under. The third thing that the state did was to create liquidity for banks. Not to give them public funds (or tax money) but fresh money created by the central bank that was lent to the banks. And this allowed banks to continue their normal business and not to go under, because in a crisis banks are typically short of liquid funds. So the state created the necessary liquid funds for the banks. In these three key ways public intervention rescued the banks and saw to it that the worst of the crisis was confronted. Public resources, public credit-worthiness, public liquidity were mobilised to rescue the private banking system that had created the crisis in the first place. The fourth part of dealing with the crisis of course related to working people. For working people, however, the conditions that prevailed were the opposite of those for banks. To working people were given austerity, fiscal retrenchment, and cuts in welfare expenditure. What the state was giving with one hand - the largesse towards the financial system to rescue it - was actually taken back by cutting, restraining and restricting welfare spending - austerity in other words - and at the same time wage restraint. That was a clear demonstration of the class character of the modern state, of where its priorities lie. ~ * ~ From: http://www.marxlibrary.org.uk/theory-struggle/item/175-what-can-we-say-about -the-crisis-of-2007-2009 To read a facsimile of the original, on line, complete with all the graphs, go to: https://issuu.com/marxmemoriallibrary/docs/14junefinal_1_/2?e=16494710/14316 995 -- -- You are subscribed. This footer can help you. Please POST your comments to [email protected] or reply to this message. You can visit the group WEB SITE at http://groups.google.com/group/yclsa-eom-forum for different delivery options, pages, files and membership. To UNSUBSCRIBE, please email [email protected] . 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