Fed cuts rates; crisis over?

Louis Proyect lnp3 at panix.com
Thu Oct 15 13:15:01 PDT 1998


Doug Henwood:
>But the slowdown is only relative to the Golden Age; recent growth is in
>line with pre-1950 rates. (And why should a slowdown in growth be read
>catastrophically anyway?) Here are growth rates by period for four
>important countries:
>

Doug, you are missing the point. It is not politically acceptable for growth to be in line with pre-1950 rates. The political problems of the ruling class in the United States is directly related to its inability to return to the Golden Age. What has been happening for the past 25 years is a series of economic/political measures that will give the illusion of returning us to a Golden Age but which only increase the contradictions of capitalism itself.

When capitalism is forced to resort to risky investments (hedge funds, "emerging" markets, junk bonds, etc.), it is not because it finds such investments "sexier" but because they are the only means available to sustain the financial returns that investors expect.

You have to look at things globally, as anybody trained in Marxism should. The most important thing for Marxists right now are happening in East Asia where there were huge expectations about capitalism's ability to provide growth. Those hopes are dashed and sooner or later this will have revolutionary implications. On top of this, Russia has taken a decisive turn away from the free market and this has powerful political implications as well. Brazil is also facing a huge economic and financial crisis as well, which the Federal Reserve Bank has little ability to affect.

The up and down motions of the Dow-Jones are entirely secondary. The problems revolve around overcapacity and the threat of deflation. The rise in stock market prices is fueled by the same unrealistic expectations that have been a feature of life in capitalist America for the past 10 years. It is a speculative bubble whose sharp rise upwards is as healthy as a rise in one's body temperature.

Louis Proyect

(http://www.panix.com/~lnp3/marxism.html)



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