Global Financial Crisis 2008 – Article No 12
by Humphrey McQueen
If she blows
If it is dodgy to speculate about the timing of, or the immediate trigger for a depression, six consequences can be predicted with almost 100% accuracy.
Above all, a collapse of real existing capitalism is not going to move the world one toenail closer towards being a kinder place in which to live. On the contrary, a depression will make every problem worse. Those whose labours paid for the boom will pay seven times seven for its collapse.
On the macro-economic front, the normal process of oligopolisation will spike. The benefit of a depression to capitalism as a whole is, as the conservative economist Joseph Schumpeter recognised, from a gale of creative destruction. That means the destruction of firms of the size of GM and Ford.
At the micro-economic level, even a serious recession will shatter generations X and Y, who have never known more deprivation than retail envy. Their harrowing will be much harsher than poverty was on the 1930s victims who had been weaned on frugal comforts, not expecting super-affluence. Far fewer will know how to feed themselves once they are no longer compelled to eat out because of their excessive hours at work.
This material deprivation will provoke identify crises. Bourgeois individualism has shrunk from being defined in the Renaissance by what one creates, to what one makes, to what one owns, and now to whatever gadget one has most recently bought. Self-esteem is reduced to the exchange of credit for a commodity which loses its prime use value by being purchased. What happens to the sense of self when the buying has to stop?
The social consequences of an end ot retail therapy will rip through civil society. Reflecting on the recession of the mid-1970s, the then head of CRA, Sir Roderick Carnegie, warned that “A society raised on champagne tastes may not be a polite or a pleasant one if it is reduced to a beer income.” That shadow over bourgeois democracy is larger in this era of anti-terrorism.
The environmental consequences will be catastrophic. Although the burning of fossil fuels and the use of other non-renewables will be cut as a result of the slashing in effective demand, the corporations and the poorest alike will be driven to plunder the wealth of nature for survival. Expensive renewables will be out of the window. It remains to be seen how many promoters of carbon markets will be happy to pass the fate of their goddess to the traders who brought on this pillage.
That skim through the consequences leaves us with a pendant to the pivotal question: if capitalism can indeed collapse, can it also rise again? To approach an answer, we must look again at the 1930s. The conventional belief is that Roosevelt’s New Deal rescued the US. In truth, the downturn of 1937-8 was as steep as that at the start of the deflationary cycle. What dragged the world out of depression was global war. That gale of destruction lost some of its creative promise at Hiroshima.
(Crikey declined an earlier version in July 2007 as “too depressing”.)
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