Not Like the Great Depression…but rather
Economist philosopher John Gray suggests that the present crisis of capitalism is not like the Great Depression, but rather more like the collapse of communism. Dave here - it is an interesting comparison. Just as the Soviet empire collapsed under the weight of an unsuccessful war in Afghanistan, the American empire collapses under the weight of its own military misadventure in Iraq. And just to ensure the death knell of an insolvent empire , Obama chooses to enlarge the American presence in Afghanistan.
Back to John Gray on the crisis, from the attached Guardian clip. It is not possible to get the show back on the road. We are at the end of debt-based financial capitalism. There is no obvious replacement paradigm , thus we are in for an extended period of uncertainty.
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The largest bubble and the biggest bust will likely lead to regime instability and geopolitical change. Think China.
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Falling back on Keynesianism is a chimera. The situation is different. We are in a different world. IN the 1930s the US was the world’s manufacturing base. Today it is China.
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Once deflation is over, prices, energy prices, will rise quite quickly.
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Neither the political leadership nor the intellectual leadership have grasped the magnitude of the problem. Dave here – this is an interesting point and begs the question of whether it is indeed even possible. Are we dealing with what Donald Rumsfeld might call an “unknown unknown?”
Two worthy policy options placed by Gray are:
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One: treat banks as utilities. This policy option needs serious debate. If banks are the life-blood of our economic system, is it prudent to leave them to the private sector. Are not the externalities associated with banking so huge as to require utility designation. What is the point of boundless creativity if it comes at the risk of total destruction?
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Two is to the return of the welfare state so as to provide state assurance in the time of social and economic crisis. This is a vital form of risk mitigation in times of crisis, so as to maintain the fabric of society and civility when all may be lost and animal spirits turn to the dark side.
