David McNally, ‘From financial crisis to world slump: accumulation, financialization, and the global slowdown’, Marx and the Financial Crisis of 2008, December 2008
As the International Monetary Fund observed some months ago, we are living through “the largest financial crisis in the United States since the Great Depression.” But that was to understate things in two ways. First, the financial crisis is no longer largely about the US. It has gone global, rocking the UK, the Eurozone, Japan, and the so-called “emerging market economies.” A wave of devastating national and regional crises is just getting started, having already hit Iceland, Hungary, the Ukraine, and Pakistan. Secondly, this is no longer simply a financial crisis; a global economic slump is now sweeping through the so-called “real economy,” hammering the construction, auto and consumer goods sectors, and clobbering growth rates in China and India. Manufacturing output is sharply down in the US, Europe, Japan and China. The Detroit Three automakers, reeling from losses of $28.6 billion in the first half of this year, are teetering on the verge of collapse. World trade is in a stunning free fall.
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Filed under Article, Canada
Rising East, UEL journal
Vol 1, Series 1, No 1 April 8th 2009
In 2008, the ‘credit crunch’ progressed from financial crisis to global economic recession, its impact spreading from the US housing market to western financial markets and, by the end of the year, to most nations and sectors of the international economy. Its origins in the highly technical character of the ‘toxic’ products spawned in the financial world of intermediation and risk management have informed a hesitant and, in turn, managerial analysis of causality. This hesitancy was reflected in the statements expressed by politicians and business leaders throughout much of 2008 as they oscillated between inaction and reaction and expressed fears, in turn, about the crisis realising uncontrollable inflationary or deflationary trends.
For much of 2008, American and British politicians and business leaders were anxious to downplay the problems created by the credit crisis until the financial world reached the brink of collapse. The UK government, spent much of the year in denial about the weakness of the British economy – it was sound in its essentials, blaming US and wider international developments for the position the UK economy is in 1; while the US government dithered over a bailout plan which was initially designed to buy up all the worthless, toxic assets of the finance sector but eventually took the form of buying shares in US banks.
The combination of denial, hesitancy and indecision that has characterised responses to the current economic crisis has its origins in the political and business world’s interpretation of the recent performance of the western, mainly Anglo-American, model of capitalism. Those who have sought to manage it have created a rhetoric laced with words such as stability, expansion, and globalisation when, in reality, the leading Western nation, the USA, and its satellite, the UK, have sought to manage economies whose productive dynamism has disappeared and who rely increasingly upon servicing the productive activities that take place elsewhere in the world. A thin veil of respectability has been lent to this perception by the theorisation of knowledge as the intangible, magical ingredient of a new type of Western economy that lives by its wits rather than by what it makes 2.
The hollow character of these ideas and policies is now perhaps exposed, creating an opportunity for a more considered and reflective view of what is really happening in the West and the wider world. This essay discusses the causes of the current economic crisis and examines the social conditions of its emergence, as well as exploring the limitations of the actions currently being taken to tackle it; the limits, in other words, of what some commentators refer to as a Keynesian programme of state intervention 3.