In the not so distant past I was fortunate enough to see David Harvey give a talk on the global economic crisis. What follows is a summary of some of the key points he made.
Mainstream analysis of the crisis is totally inadequate on at least two fronts. First, it has no historical depth. It hardly even bothers to connect recent events with things that went on in the 1990s, let alone the 40-year global economic trend known as neoliberalism.
Second, there is no sensitivity to the geographical dimensions of the crisis. It's important to see where the crisis has been concentrated and where it has been felt most acutely. Globally, skyrocketing unemployment is most acute in the US. Compare this to China and Argentina, both of whose economies are still growing steadily. Though China has been growing, however, there are many signs of overproduction there. There's a question about whether the crisis will hit there next.
The center of the crisis has to do with the banking systems that were plugged into collateralized debt obligations in the US. Banking systems that were insulated from that dirty business have largely been able to weather the storm so far.
Importantly, capitalism doesn't solve it's crises, it moves them around geographically. For example, consider the East Asian Financial crisis in the late 90s. Loads of profits went to those who speculated on it- but the crisis, at the end of the day, was not solved. It was moved around geographically.
In Vol. 2 of Capital, Marx talks about the flow of capital in a "healthy" capitalist system. In his view, a "healthy" capitalist system is one which is growing via the exploitation of labor. Any blockage of capital flow, he notes, can cause crisis. Capitalism must, in order to function, constantly expand. If you're a capitalist, for example, you must reinvest constantly in order to remain a capitalist (i.e. in order to compete and stay afloat in the market).
When capitalism cannot expand it goes into crisis. This creates a deep problem for the system. As more and more capital is accumulated, more and more profitable investments need to be found to absorb all of this surplus. When there are not enough profitable investments to absorb this surplus, the system goes into crisis because the flow of capital, the expansion and growth necessary for capitalism, have ground to a halt.
It doesn't take a lot of reflection to see that this process cannot continue ad infinitum.
But the system isn't rational: it isn't self-aware and it does not "learn" from its mistakes or reconfigure itself to be sustainable. It is like a car driving towards a cliff with no one at the wheel. Thus, the pressures to expand and accumulate that drive investment and production create increasingly irrational processes. The huge turnover in consumer products created by "planned obsolescence" has been steadily increasing over the last 30 years- this is a desperate way to try to prop up profits (because if you sell someone a blender that lasts for 50 years, they won't need to buy another one for a long time).
Another "bellwether" here is Olympics opening ceremonies (probably the same is true of Super Bowl halftime shows). They get progressively more and more costly, spectacular over time. There is a push to make the NFL season longer and longer and it is well known that the Super Bowl itself is being pushed back further and further to allow even more TV build-up and ad dollars to accumulate.
Looking at the crisis in broad historical context requires, first of all, that we say something about the crisis of the 1970s. This seems to have dropped out of the popular discussion of economics and finance entirely, but it's important to compare and contrast our present situation with that of the early 70s.
The view from the top holds that the crisis of the 1970s was caused by the "excessive" power of organized labor. Labor was too powerful and was able to bargain too effectively. In other words, labor's power was getting in the way of profitability insofar as trade unions were able to win decent contracts with relatively high wages, good benefits, pensions, and all the rest of it. The power of labor and social movements meant that nation states were, relatively speaking, under pressure from below to meet some degree of human needs. Moreover, the relative power of the nation state in the global system meant that it was not easy to move capital around globally.
The big problem for the ruling classes in this situation was that they were being taxed too heavily and made to negotiate with labor on terms that were far too close (for the taste of the ruling class) to equality. Mind you it was not anything like "dual power" between labor and capital- but even this modestly equitable arrangement was not to the liking of capital once a global recession set in and profits were down across the board. Something had to give.
One strategy was to loosen up immigration. This was passed in the US in the 60s in order to try to undercut the bargaining power of organized labor thus driving down wages. It didn't work. Thus the ruling class pushed for the "liberation" of the financial institutions so that they could more easily move capital all over the globe. This enabled off-shoring and outsourcing so that capital could get access to the global "reserve army" of labor. This enabled it to avoid dealing with the social power of labor in the advanced capitalist nations.
But ruling class praxis was not entirely indirect. The late 70s and early 80s were a time of intense attack from above on the power of labor. Thatcher and Reagan were elected to break the back of labor and they largely succeeded in doing so.
All of the above factors lead to a stagnation of the living standards for working people, which had been steadily on the rise during the period from 1945-1973. The gap between what labor was earning and what it could purchase (because prices continued to rise) began to be covered by credit cards and other forms of debt from the early 80s onward.
It was true, from a ruling class perspective, that the power of labor was "too strong" in the early 70s in order to keep profits rolling in. But nobody could really say that labor is the problem this time around. In fact, labor has been so thoroughly beaten back by the last 40 years of neoliberalism, it would be laughable to try to blame this crisis on the excessive power of labor. As everyone seems vaguely aware, the present crisis was caused entirely by the reckless speculation of financial elites.
What is the story with the bailouts? Bailouts are not a new concept. When, for example, Mexico was threatening to declare bankruptcy, this scared the shit out of New York financial institutions. They were scared because if Mexico really did go bankrupt, they would have been fucked because of all the money they had tied up there in investments. Thus, the ruling class pushed for the US to bail out Mexico. They pushed for the bailout so that they didn't lose out on their investments.
Let's be clear: the bailout wasn't administered for the protection of the well-being of the Mexican people. On the contrary, it was purely a move aimed at protecting the investments of New York financial institutions. Thus, the bailout came with conditions: it would be administered only if the Mexican government promised to implement punishing austerity measures, so that the investors can make their $ back as quickly as possible.
This happened in various different ways, all over the globe. The process came to be known as "structural adjustment". The IMF would give massive loans to cash-strapped developing countries on the condition that they consent to structural adjustment (i.e. austerity).
That is more or less what the US is undergoing right now. We are undergoing structural adjustment. The ruling class is using the power of the state to create a "good business climate", i.e. a situation in which corporate taxes are low, toxic assets are moved from private to public rolls, interest rates are near zero, labor is docile, etc.
Why is this happening? Because this whole rotten system only works when it is making handsome profits for capitalist investors. It only works when capitalism is growing and expanding. And given that it is clear that the State is not an enemy, but an enabler of profit accumulation, we shouldn't be surprised that everything the State is doing right now has to do with attempting to jump start the process of profit accumulation again. If that means punishing ordinary people, cutting living standards, wages, and jobs for the masses.... so be it. The State isn't set up to meet human needs- it's basic function is to create the conditions for profit accumulation, what the bourgeois press calls "growth". So when the contradictions are laying out in the open for all to see- we shouldn't in the first instance find fault with the State itself, but with the whole rotten system of which the state is but one element.