World Depression: Regional Wars and the Decline of the US Empire


by Prof. James Petras
Global Research, March 30, 2009


Introduction

All the idols of capitalism over the past three decades crashed. The assumptions and presumptions, paradigm and prognosis of indefinite progress under liberal free market capitalism have been tested and have failed. We are living the end of an entire epoch: Experts everywhere witness the collapse of the US and world financial system, the absence of credit for trade and the lack of financing for investment. A world depression, in which upward of a quarter of the world’s labor force will be unemployed, is looming. The biggest decline in trade in recent world history – down 40% year to year – defines the future. The immanent bankruptcies of the biggest manufacturing companies in the capitalist world haunt Western political leaders. The ‘market’ as a mechanism for allocating resources and the government of the US as the ‘leader’ of the global economy have been discredited. (Financial Times, March 9, 2009) All the assumptions about ‘self-stabilizing markets’ are demonstrably false and outmoded. The rejection of public intervention in the market and the advocacy of supply-side economics have been discredited even in the eyes of their practitioners. Even official circles recognize that ‘inequality of income’ contributed to the onset of the economic crash and should be corrected. Planning, public ownership, nationalization are on the agenda while socialist alternatives have become almost respectable.

With the onset of the depression, all the shibboleths of the past decade are discarded: As export-oriented growth strategies fail, import substitution policies emerge. As the world economy ‘de-globalizes’ and capital is ‘repatriated’ to save near bankrupt head offices – national ownership is proposed. As trillions of dollars/Euros/yen in assets are destroyed and devalued, massive layoffs extend unemployment everywhere. Fear, anxiety and uncertainty stalk the offices of state, financial directorships, the office suites the factories, and the streets…

We enter a time of upheaval, when the foundations of the world political and economic order are deeply fractured, to the point that no one can imagine any restoration of the political-economic order of the recent past. The future promises economic chaos, political upheavals and mass impoverishment. Once again, the specter of socialism hovers over the ruins of the former giants of finance. As free market capital collapses, its ideological advocates jump ship, abandon their line and verse of the virtues of the market and sing a new chorus: the State as Savior of the System - a dubious proposition, whose only outcome will be to prolong the pillage of the public treasury and postpone the death agony of capitalism as we have known it.

Theory of Capital Crisis: The Demise of the Economic Expert

The failed economic policies of political and economic leaders are rooted in the operation of markets – capitalism. To avoid a critique of the capitalist system, writers are blaming the leaders and financial experts for their incompetence, ‘greed’ and individual defects.

Psychobabble has replaced reasoned analysis of structures, material forces and objective reality, which drive, motivate and provide incentives to investors, policy makers and bankers. When capitalist economies collapse, the gods drive the politicians and editorial columnists crazy, depriving them of any capacity to reason about objective processes and sending them into the wilderness of subjective speculation.

Instead of examining the opportunity structures created by enormous surplus capital and the real existing profit margins, which in drive capitalists into financial activity, we are told it was ‘the failure of leadership’. Instead of examining the power and influence of the capitalist class over the state, in particular the selection of economic policy-makers and regulators who would maximize their profits, we are told there was a ‘lack of understanding’ or ‘willful ignorance of what markets need’. Instead of looking at the real social classes and class relations – specifically the historically existing capitalist classes operating in real existing markets - the psycho-babblers posit an abstract ‘market’ populated by imaginary (‘rational’) capitalists. Instead of examining how rising profits, expanding markets, cheap credit, docile labor, and control over state policies and budgets, create ‘investor confidence’, and, in their absence, destroy ‘confidence’, the psychobabblers claim that the ‘loss of confidence’ is a cause for the economic debacle. The objective problem of loss of specific conditions, which produce profits, as leading to the crisis, is turned into a ‘perception’ of this loss.

Confidence, faith, hope, trust in capitalist economies derive from economic relations and structures which produce profits. These psychological states are derivative from successful outcomes: Economic transactions, investments and market shares that raise value, multiply present and future gains. When investments go sour, firms lose money, enterprises go bankrupt, and those prejudiced ‘lose confidence’ in the owners and brokers. When entire economic sectors severely prejudice the entire class of investors, depositors and borrowers, there is a loss of ‘systemic confidence.’

Psychobabble is the last resort of capitalist ideologues, academics, experts and financial page editorialists. Unwilling to face the breakdown of real existing capitalist markets, they write and resort to vague utopias such as ‘proper markets’ distorted by ‘certain mindsets’. In other words, to save their failed ideology based on capitalist markets, they invent a moral ideal the ‘proper capitalist mind and market’, divorced from real behavior, economic imperatives and contradictions embedded in class warfare.

The inadequate and shoddy economic arguments, which pervade the writing of capitalist ideologues parallels the bankruptcy of the social system in which they are embedded. The intellectual and moral failures of the capitalist class and their political followers are not personal defects; they reflect the economic failure of the capitalist market.

The crash of the US financial system is symptomatic of a deeper and more profound collapse of the capitalist system that has its roots in the dynamic development of capitalism in the previous three decades. In its broadest terms, the current world depression results from the classic formulation outlined by Karl Marx over 150 years ago: the contradiction between the development of the forces and relations of production.

Contrary to the theorists who argue that ‘finance’ and ‘post-industrial’ capitalism have ‘destroyed’ or de-industrialized the world economy and put in its place a kind of “casinoâ€