Why Do Markets Crash?

Mark Jones Jones_M at netcomuk.co.uk
Mon Jul 6 01:41:09 PDT 1998

Days after a petulant Thabo Mbeki (Mandela's anointed

successor as President of S Africa) complained to his

ex-SACP comrades of the unreasonableness of making

socialist demands at a time 'when our financial markets, like

others in other parts of the world, are afflicted by great

turbulence [and] the whole world is gravely concerned about

the Japanese and other East Asian economies and their

impact on the world economy,' *Insurrection* publishes Michael

Perelman's seminal extended essay on just why markets love

to go pear-shaped.

Michael Perelman writes:

"...With the collapse of the Soviet Union, capitalism now

proudly proclaims its ultimate triumph. Formerly socialist

states frantically scramble to remake themselves as market

economies. In the United States, everything left of the

political center has all but disappeared from the national

political dialogue. Markets are now supplanting virtually

every kind of service that the state previously supplied.

Public schools, public prisons, public streets and even police

work are being privatized.

Even so, I am confident that capitalism's victory will be

temporary. The market system is so familiar and our

institutional memories so short, we tend to forget even if we

knew in the first place that capitalism is, by its very

nature, an inherently unstable system. Capital has enjoyed

moments of triumph before, but they have always been followed by a

subsequent disaster...."

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