Marx, Capitalism, and The Second Depression

Marx was so prolific and so opinionated and so emotional that not only was he powerful, but he has also been very hard to digest. Also, virtually no one, including me, reads Das Capital - kind of like Wealth of Nations. We all know something about it - widgets for WON, maybe Labor Theory of Value for DC, if that's where it comes from - but we know most of what we know from rumor.

But, even with the difficulty of knowing only by rumor rather than having read the original, let me venture an observation on the present crisis. It is this: Marx predicted that capitalism would inexorably have blow offs and crises, and that capitalism would lead to the increasing degradation of the proletariat. (He then gave a roadmap to utopia, but let's not discuss that.) What he failed to consider was the ameliorative policies that capitalist government would come up with. One part of the amelioration is regulation. Another is what people would call wealth-redistribution, which I have no problem with, but which is a derogatory word in the minds of the untutored.

So, I think you see where I am going with this. Governments have since Marx come up with a great many ameliorative policies, from Bismarck's time to the present. The state intervenes to cushion the swings and preserve the system, and also to prevent the degradation of the proletariat. The state recognizes the need for unions for extra-state cushioning, as an example. It regulates stock offerings, the functions of capitalistic institutions, all so that the marketplace will operate in a functional manner. There need to be rules.

so if we see extreme ups and downs in the business cycle, we should look for the absence of counter-balancing forces. We certainly see too far up and too far down now. There can be no better indicator that counter-balancing forces have been stripped away.

One measure stripped away would be the Glass-Steagall Act of 1933, which separated deposit banking from investment banking. From Wikipedia: Provisions that prohibit a bank holding company from owning other financial companies were repealed on November 12, 1999, by the Gramm-Leach-Bliley Act, which passed the U.S. Senate in one form on a party-line vote of 54 (53 Republicans and 1 Democrat) to 44 (all Democrats) and on a 343-86 vote in a different form in the House of Representatives, before being resolved by a joint conference committee; the conference report was approved by both houses of Congress (Senate: 90-8-1, House: 362-57-15) and signed by President Bill Clinton.^[2][3] We have seen where this has led.

Another was regulation by the SEC. This function was virtually eliminated over the past decade, much to the joy of Bernard Madoff, it seems.

There are many others that I can't name offhand but you might well be able to.

So, the point is that stripping away the ameliorative functions of the state to reveal the naked effects of capitalism have led us to a situation which Marx would recognize. He was right, and it would have been nice for ignoranti like Phil Gramm, pretender to wisdom but purveyor of ignorance, to have recognized. It would have been nice for the Clintons not to have been carrying water for the banks. It would have been nice.

Not that deregulation is a bad thing per se. Regulation can go way to far, can be far too interventive for little reason, and can be counterproductive. I personally am no fan of unions, having seen unions of nurses and hospital workers up close. No question. But the ignorant and greedy stripped away far too much.

Now we are in unknown territory again, as we were in the 1930's. Roosevelt knew he would have to innovate and experiment, and discard what didn't work. Experimentation is good and exciting, but in the face of such suffering, it's not a necessity we should be faced with. We can lay this necessity not only at the greedy -- that's to be assumed, after all, that's why we have regulation -- but at the evil and the ignorant. I cite Phil Gramm as the typical persona behind whom many others lurk because he is prominent and particularly disagreeable. He is a symbol that Marx would recognize. And, unfortunately, this is a situation he would recognize.

Budd Shenkin