The Global Financial Crisis for Beginners
by Jim Stanford, Canadian Auto Workers
No.165, June 19, 2008
For the last year, the world’s financial system has been roiled by a cascading crisis of confidence. The consequences so far have included collapsed banks and brokerages, some $250 billion worth of officially declared losses by financial companies, a marked slowdown of real economic growth in several countries, and a recession in the U.S. More ominously, there may be a darker, deeper storm coming. Many observers (both critics of the current system, and its defenders) fear this latest panic might just lead to “the big one”: a structural conflagration that produces depression, chaos, and dramatic change.
Personally I’m skeptical of this judgment, and don’t think we should get carried away with doomsday prophesizing. The global financial system has survived at least six major crises since the advent of neoliberalism in the late 1970s. Each time the system manages to rebound and regroup – ever more unequal, unbalanced, and distorted, but still viable nonetheless. So I’m doubtful that this particular meltdown is indeed the one that will bring global capitalism to its knees.
Nevertheless, the current crisis is not remotely over, and could get much worse before it gets better. And the events of the past year have proven that the financial system is both structurally unstable and impossibly unpredictable. So whether it causes larger and more disastrous problems or not, the current crisis is a fitting opportunity to challenge the effectiveness and credibility of the whole neoliberal project – not just its financial and monetary policies, but the way it runs the real economy, too (including a failure to foster real capital accumulation, and failures of public finance)...