Saturday, December 13, 2008

Comprehending the Financial Crisis

Two articles from the last year of the New Left Review provide the clearest explanation of the long-term causes of the financial crisis. In current American political discourse, both the right and the left have failed to make a clear public analysis of what is admittedly a very complex situation. While the right's claim that it was over-eager borrowers who took loans beyond the limits of their income is utterly vapid and ignores the real structural transformations of the finance industry, in ways the left's railing against "de-regulation" provides little more insight. Robin Blackburn and Robert Wade are worth reading in order to gain a good sense of the real structural and historical implications of the current crisis.

Robin Blackburn, "The Subprime Crisis," New Left Review 50 March-April 2008. 

While you will have to wade through some jargon of the financial industry "collateralized debt obligations (CDOs)," it is important to get a more than superficial understanding of the current destablization of the capitalist economic system.  The failure of the pricing mechanism which emerged from sub-prime crisis has interesting implications and an interesting historical legacy.  With property becoming ever more abstract and divorced from social reality, with markets and "instruments" of accumulation built up upon each other in ever more abstract ways, how long can this house of cards stand.  I am reminded of the warning of the political economist Joseph Schumpeter who wrote that the abstract forms of property that corporate capitalism would produce could never draw out the emotional and spiritual allegience that the personal accumulation of the entreprenurial capitalism of the nineteenth century produced.  

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