December 1, 2008
The historic testimony by former Federal Reserve Board chairman Alan Greenspan before the House Committee of Government Oversight and Reform on October 23, 2008, represented such a startling turnaround for an individual previously given such nicknames as "Maestro" and "Oracle," that it might well have been entitled "The Education of Alan Greenspan." Taken to task for the enormous and still growing economic disaster, Greenspan acknowledged that he was "shocked and dismayed" by the emergence of what he called a "once-in-a-century credit tsunami." In his effort to account for the complete failure of foresight at the Fed, Greenspan explained that the supposedly sophisticated asset pricing models that he and others in the financial community had relied on had been based almost exclusively on the experience of the last two decades during a period of rapid financial expansion, and had failed to incorporate the negative shocks visible from a longer-term historical perspective. As Greenspan himself put it
November 1, 2008
In the Notes from the Editors for the September issue of Monthly Review (written in late July) we asked why, with the United States bailing out the financial sector of the economy to the tune of hundreds of billions of dollars, there was no public outrage. As we observed at that time, "In the end there seems to be no satisfactory explanation for lack of popular protest over a series of ad hoc grants showering hundreds of billions of dollars of public money on the masters of finance, collectively the richest group of capitalists on the planet. And that raises the question: Is this outrage present nonetheless, growing underground, unheard and unseen? Will it suddenly burst forth, like some old mole, unforeseen and in ways unimagined?" The collapse of Lehman Brothers on September 15, the resulting freezing up of credit markets, U.S. Secretary of Treasury Henry Paulson's emergency plan for a $700 billion bailout of financial firms, offering "cash for trash," i.e., proposing to buy up the toxic waste of virtually worthless mortgage-backed securities at taxpayer expense—quickly answered our question. When the U.S. Treasury got into the act with its bailout proposal, requiring Congressional authorization (previously the Federal Reserve had led the way in bailouts, to the point that treasury securities had sunk to just over half of the Fed's assets, as we explained in September), all hell finally broke loose. Suddenly, the public outrage that had been growing beneath the surface burst forth. The U.S. capitalist class was abruptly confronted with a major political as well as economic crisis
October 1, 2008
The United States in the opening decade of the twenty-first century is dominated by a new imperial project that is affecting all aspects of its society. The most obvious manifestation of this (see this month's Review of the Month) is the expansion of the military-industrial complex. However, another, in some ways even more insidious, manifestation, as Rich Gibson and E. Wayne Ross pointed out in a February 2, 2007, Counterpunch article entitled, "No Child Left Behind and the Imperial Project", is the current assault on the nation's public schools through the No Child Left Behind law enacted by the Bush administration with broad bipartisan support. As Gibson and Ross explained, "Any nation promising perpetual war on the world is likely to make peculiar demands on its schools...and its teachers and youth....NCLB [No Child Left Behind] is the result of three decades of elites' struggles to recapture control over education in the U.S., lost during the Vietnam era when campuses and high-schools broke into open-rebellion and, as a collateral result, critical pedagogy, whole language reading programs, inter-active, investigatory teaching gained a foothold."
September 1, 2008
Just over a year since the beginning of the worst U.S. financial crisis since the Great Depression, and only six months after the federal bailout of Bear Stearns, the seizing up of credit markets continues. The failure of eight U.S. banks this year, including IndyMac, and the recent instability that struck the two government-sponsored mortgage giants, Fannie Mae and Freddie Mac, requiring a special government rescue operation, has had the entire financial world on edge. Mortgage-related losses by themselves "could cause a trillion dollars in credit to vaporize," according to a special July 28, 2008,Business Week report. The downside effects of financial leveraging (the magnification of results associated with borrowed money) mean that each dollar lost by financial institutions could lead to reductions in lending of fifteen dollars or more, creating a shockwave so massive that it could reveal structural weaknesses throughout the economy. Already the economy is reeling, with faltering growth, a deep slump in housing, massive job losses, rapidly rising oil and consumer goods prices, and a falling dollar
September 1, 2008
Beginning in March 2008 and extending through the last Democratic primaries of early June, the United States witnessed the most brazen demonization in its history of a person based on his race, his creed, and his ties to a presidential candidate. One major purpose behind these attacks was to use the demonized figure to discredit the politician. But participation in the attacks also fed the voracious, twenty-four-hour-aday media appetite, and quickly took on a life of its own. When we look back at the ugly spectacle then taking place, the evidence suggests that, despite much optimism about narrowing racial divides and an emerging "post-racial" consciousness, something much closer to the opposite had gripped America.
May 1, 2008
The subprime mortgage crisis that emerged late last summer in the United States led to a massive seizure in the world financial system that has had capital staggering ever since. This has now carried over to the "real economy" of jobs and income. As reported in the Wall Street Journal on April 4, "The National Bureau of Economic Research probably won't say this for months. But why wait? The U.S. economy fell into recession sometime in January" ("Job Market Hints Recession Has Started"). World economic growth as a whole is expected to decline sharply this year…
April 1, 2008
The United States and the world economy are now experiencing a major economic setback that began in the financial sector with the bursting of the housing bubble, but which can ultimately be traced back to the basic problems of capitalism arising from class-based accumulation (see the Review of the Month in this issue).…Things are clearly much worse, with respect to the general public understanding of these problems, here in the United States, the citadel of capitalism, than elsewhere in the world. We were therefore bemused by an article entitled "Europe's Philosophy of Failure" by Stefan Theil, Newsweek's European economics editor, appearing in the January–February 2008 Foreign Policy. Theil writes of the "prejudice and disinformation" incorporated in French and German secondary school textbooks dealing with economics. Such textbooks he complains "ingrain a serious aversion to capitalism."
December 1, 2007
This year marks the 150th anniversary of the birth of Thorstein Veblen, the greatest critic of U.S. capitalism in the early twentieth century and one of the foremost social theorists of all times. Veblen was the subject of a special issue of Monthly Review fifty years ago last July in celebration of the centennial of his birth. He remains important today from our perspective for at least three reasons: (1) he was the first to develop a theory of monopoly capitalism, including a recognition not only of the implications of the rise of a big-business dominated economy, but also the new role assumed in this era by finance, advertising, the penetration of the sales effort into the production process, excess productive capacity, etc.; (2) Veblen provided a strong critique of the ecological destruction of U.S. capitalism (particularly the devastation of forests); and (3) Veblen's unbridled wit and sardonic language coupled with his keen analysis cut to the heart of capitalist ideology. Thus, for instance, he wrote of the ahistorical character given by orthodox economics to such categories as capital and wage labor
November 1, 2007
Former Federal Reserve Board Chairman Alan Greenspan’s new book The Age of Turbulence (Penguin 2007) set off a firestorm in mid-September with its dramatic statement on the Iraq War: “I am saddened that it is politically inconvenient to acknowledge what everyone knows: that the Iraq war is largely about oil” (p. 463). The fact that someone of Greenspan’s stature in the establishment—one of the figures at the very apex of monopoly-finance capital—should issue such a twenty word statement, going against the official truths on the war, and openly voicing what “everyone knows,” was remarkable enough. Yet, his actual argument was far more significant, and since this has been almost completely ignored it deserves extended treatment here.
September 1, 2007
We have been arguing in these pagesfor more than three decades that the dominant economic reality of advanced capitalism is a tendency toward stagnation of production accompanied by financial explosion. In an article on "The Centrality of Finance," in the August 2007 issue of the Journal of World-System Research, MR and MR Press author William K. Tabb writes:
Real global growth averaged 4.9 percent a year during the Golden Age of national Keynesianism (1950–1973). It was 3.4 percent between 1974 and 1979; 3.3 percent in the 1980s; and only 2.3 percent in the 1990s, the decade with the slowest growth since World War II. The slowing of the real economy led investors to seek higher returns in financial speculation.... [I]increased liquidity and lower costs of borrowing encouraged in turn further expansion of finance. The coincident trends of growing inequality and insecurity...and the spreading power of rapid financialization do not suggest a smooth continued expansion path for a society based on increased debt and growing leverage.
