The Present Danger

Exploitation leads to over-consumption  (29 September)
Even if $US700bn cauterises the collapse of the sub-prime mortgage market, it will not touch the core of the crisis. The root cause is the exploitation of wage-labour by capital.

That fact played next-to-no part in the opposition to WorkChoices. Even the Left focussed on Howard’s personality or his ideology. The ACTU is left with no explanation for Gillard’s Fairness as a different way of organising capital and disorganising labour. Worst of all, the Left grouplets missed the chance to revive an understanding of the laws of capital among militants. The present upheaval offers a chance to repair that fault.

Marxist-Leninists do not possess a magic wand for tracking the snakes-and-ladders of the financial chaos of the past fifteen months. Nor do we have a solution up our sleeves.  Still less can we predict where the market will be tomorrow, or the system rupture next.

What we do know for sure is why such events are intrinsic to the expansion of capital. The competition among capitals combines with pressure from wage-slaves to drive each corporation to increase output. The resultant increase in commodities must be sold if capitals are to profit from the surplus value added by the workers. There’s the rub. The exploitative nature of the system means that the workers must not get the full value of our labour-time. The result is a gap between production and consumption.

Capitalism has outlasted Marx’s expectations by coming up with ways to counter the necessity of its over-production - war-making and mass marketing built on consumer credit. In the employment relationship, capital advances wages out of the money-capital it has accumulated from previous exploitation. The sales effort introduced a twist on this process. The worker is advanced money on the labour-time of years ahead, not days or weeks. Wages are paid to let the wage-slaves buy the commodities we need to reproduce our capacities to labour – food, shelter. By contrast, loans are made to help those workers buy up the expanded commodities. In the main, that credit is repaid with interest.

However, 60 years of expanding household debts had reached the limit for those who could afford to repay. As Robert Brenner put it, the affluent were using their houses as ATMs by borrowing against their rising prices. Hence, the financiers pushed beyond the boundaries of prudence towards embracing those who had been denied loans even for household items, let alone houses. (aka NINJAs – No Income, No Job or Assets) But needs must. The risk, of course, was recognised. Slicing and shaving the loans was going to limit the defaults to any one institution. Instead, it spread them globally.

Here is the path between the class struggle and the sub-prime. To absorb excess capacity, capital has added “over-consumption” to its catalogue of solutions that spawns ever more problems.

In the days to come, I shall pen further 500-word comments on the previous points, and plenty more. Tomorrow, I shall return to the bail-out to dispose of the chatter about its being socialist.

Meanwhile, the best short course is to spend three hours, pen in hand, with Marx’s Wage-Labour and Capital.

Not socialism (30 September)
“Casino socialism” is how some US Republicans have denounced the proposed $700bn bailout of the mortgage market. Meanwhile, the “S” word is being revived by everyone alienated by the past thirty years of free marketeering. A temptation to Schadenfreude is understandable as devotees of the discredited Marx watch his old enemy stagger. But the collapse of capitalism is no time for self-indulgence. Nothing is more vital in class politics than having a clear head about the nature of the state.

[Given the stupefaction induced by the “news”, that clarification perhaps needs to start by pointing out that the “state” about which we speak is every form of government apparatus, not just those known as States, such as Queensland or California.]

Now let’s remind ourselves of what the state is with four aphoristic definitions:

1. The state is the executive committee of the bourgeoisie.

2. The state is the more-or-less open or more-or-less covert dictatorship of the bourgeoisie.

3. The state organises capital and disorganises labour, as we see with Gillard’s “Fairness” in the IR laws.

4. The state attempts to do for the expansion of capital what its managers cannot achieve through their corporations.

From this perspective, the bail-outs, the nationalisations and the guided mergers are what the capitalist state has always existed to do. It has either paid for the infrastructure projects needed to perpetuate the expansion of capital, or provided tax breaks and other concessions. Also to that end, the state wages wars and breaks strikes. The state is not our friend.

The state remains, however, the site for all the conflicts between classes and within them. Every temporary resolution of those disputes must pass through the apparatuses of the state to appear as legitimate. This seal of “law and order” means that the struggles that result in victories for the working class are contained within government programs. The welfare state, for instance, was never a transition beyond capitalism but a means for controlling its gales of creative destruction. In addition, much social welfare spending is a way of passing the costs of reproducing labour power back onto those workers who cannot avoid the PAYG tax regime.

The clawing back of even those concessions has sown confusion around the Left about the meaning of “private” and “public”. Private schools are not private but tax-funded non-government businesses. The government ones are not there to serve “the public” but to supply corporate capital with employees skilled enough to add value. There has been next-to-no privatisations in the recent past. What we have suffered is the sell-out to corporates. In a rare instance of privatization, Warwick Fairfax failed to reclaim the family newspaper chain in 1987. The $700bn bail-out is a different form of privatisation, this time on behalf of the conglomerates, with its success as doubtful.

Wall Street will reveal its conversion to socialism once it has smashed the bourgeois state and started building the dictatorship of the proletariat.

Why pick on bankers? (1 October)
Much of the outrage around the $US700bn bailout has been aimed at the golden parachutes handed to CEOs tarred with the sub-prime crisis. This moralising is as predictable as it is dangerous. It regurgitates the defence that stockbrokers and police always throw up: the miscreants are one or two rotten apples in a barrel of sound fruit.

In addition, anti-Semitism taints the anti-banker rhetoric against The Kingdom of Shylock. Excoriating Jews, such as Soros or Lehman Brothers, for the evils of capitalism remains fool’s socialism.

So let’s be clear: all capitalists are parasites, most are swindlers, and, if financiers seem to be the worst that is because they pass around the filthy lucre.

For example, who is the biggest parasite - George Soros, Warren Buffett, or Bill Gates? Soros speculates in currencies. Buffett invests in everything from the Washington Post and Coca-Cola to insurance houses. Gates sits atop a firm that makes computer software. They represent the spectrum of capitalism. Soros ruined the lives of millions by trading monies accumulated from the exploitation conducted by firms like those presided over by Buffett and Gates.

To call capitalists parasites is not to speak pejoratively. Indeed, it is a statement of fact. As the personification of capital, capitalists contribute nothing to the expansion of values. Of course, if a boss gets down and dirty in the trench with a shovel, as Loui Grollo used to do, he supplies a mite to his profits. But, in doing so, he has ceased to be the personification of capital and become, for a couple of hours, the embodiment of labour-time, alongside his employees.

The question of what capitalists-qua-capitalists do for their money is so embarrassing for the academic apologists of capitalism that the subject has fallen out of sight. The English writer, Nassau Senior (1790-1864), offered a once popular defence for profit as the reward for abstinence. He contended that, instead of spending their money on champagne, the capitalists deprived themselves of such pleasures to invest in the expansion of values. Hence, they deserved to be rewarded for a negative capability. Senior weakened his case for a contribution from the owners by opposing any reduction in the working-day on the grounds that their profits came from the “last hour”.

Property is not all theft. Capitalists, as a class, do not steal from their workers. On the contrary, as Marx revealed, they pay for the full value for the commodity – labour power – which the wage-slaves are compelled to sell to them. The expropriation of surplus value begins after that fair and equal exchange. Only then do bankers, lawyers and accountants enter the equation. Some of the services they sell to the other capitalists are essential to their survival. But every cent of their bonuses and packages comes from the expropriated surplus value.

No matter how much cash sticks to the fingers of financiers, that sum has already been expropriated from wage-slaves by other capitalists. The bankers would have nothing to cream off had other capitalists not taken away the surplus value.

How to lose a trillion. (2 October)
When the radio news reported that the New York Stock market had “lost” a trillion dollars, my eyes glazed over.

A trillion is what Douglas Hofstader calls a Very Big Number, meaning that we have no way of coping with so many zeros after the one ($1,000,000,000,000). Those Arabic symbols might as well be in Roman numerals for all the use they are. According to Hofstader, the newsreader might as well have said “zillions”, for all the information that “trillion” conveys.

Those noughts add up to a sense of hopelessness. Therefore, the development of the class struggle, or a retirement plan, requires that we deflate the Very Big Numbers. The way of doing so is to puncture that non-doing word, “lost”.

We understand what it means to lose a wallet or a purse. We also know that those objects almost certainly still exist somewhere. It’s just that we cannot put our hands on them for the moment. One little difference is that the trillion dollars no longer exist because - and this is the key - they never did.

The “value” put on each company’s stock is determined by the latest bid price for one of its shares, multiplied by the number of shares issued. The “value” of the entire stock market, in turn, is calculated by multiplying the prices paid for the fraction of shares traded each day by the total number of shares of all listed firms.

Take a homely contrast. In the first case, you have paid $300,000 of your earnings into your industry super fund. The market plummets and you have to retire on $200,000. You have indeed lost at least $100,000. Now, consider this alternative. While you were buying $300,000 worth of super, its realisable value went up to $600,000. Had you cashed it in, you would have made $300,000. But, alack, the market collapsed before you go grey-nomading so that you have to live off only $500,000. You feel as if you have lost $100,000, although that is money you never paid out. (OK, OK, there were also opportunity costs.)

For many traders, the trillion dollar loss was also on paper. Of course, there are some real losers, those who did not find a Greater Fool to buy them out in time.

On Monday, New York went down by a trillion, then, on Tuesday, it went back up by $600bn. That bounce was not from the influx of $600bn of capital. After all, the justification for the $700 billion bailout is that those sums are not available.

All that happened was that enough bargain-hunters bought just enough shares at a marginally greater price than the day’s before so that when those handful of bids were multiplied by all the shares, they added up to $600bn.

Had everyone offered to sell all of their shares on either day, all the stocks would be worthless. The bailout and nationalisations are to deter investors from fleeing into bonds or gold. Should that happen, the aged pension will be cut by $30.

Adding McValue (3 October) 
[An earlier version appeared on Crikey, 20 July 2007]

McBankers justify their multi-million dollar bonuses as rewards for “adding value”. That phrase went feral among private equity merchants just as their world began to implode in mid-2007.

But what kind of value? To answer “the share price” makes a $90bn takeover sound cheap, at least, aesthetically. Yet public affairs consultants had succeeded in re-branding “price” as “value”, and vice versa.

That prestidigitation is replete with paradox. Three instances can be tracked across three domains, first, economic theory, secondly, into accountancy, and finally through stock-broking.

From the 1870s, the jettisoning of “value” as a metaphysical concept was the launching point for the Neo-Classical economists, the progenitors of today’s orthodoxy. What mattered to them was not some intrinsic value in a commodity, but its price as determined by supply and demand. Out went Marx’s definition of value as congealed labour time, and in came the marginal utility ability to determine the price of a cup of tea. To reach this position, the neo-Classical turned their backs on Adam Smith.

Then, in 1926, the neo-Ricardian Piero Sraffa showed that the Neo-Classicals had been calculating capital and profit in terms of each other. For the next fifty years, the brightest and the best of them tried to redeem their premises. Failure led them to pretend that the circularity in their algebra was merely “technical”.

The above will surprise most economics graduates since the history of their discipline is eschewed in many Australian universities as subversive. Eternal truths have neither origins nor development: they simply are, like the market.

Meanwhile, accountants had no “technical” bolt hole. Their scholarly literature was blotted with worries about which number to inscribe into the capital goods column. Should they be entered at their historic cost? Or at the cost of replacement? The oldest swindle for “adding value” was to switch back and forth between these two criteria for pricing stock and plant.

Because McBankers claim to “add” value, their accountants do need some measure with which to quantify the performance bonuses. In the old days, one basis could have been an increase in the price of a share in some toll road; an alternative might have been the growth in the capitalised value of that business.

But the value-adders at McBank are no longer bound to either the past or the present. Values at McBank are neither “historic” nor “replacement”, but “futurist”. Executives who could not put a number on their current debt, knew with certainty what the earnings from that leverage would be several years hence.

In promising bonuses for all, the McBankers have learnt from the mistakes of the dot.com boomers whose share prices went stratospheric without ever turning a cent of profit. The McValue-adders operate a new law of value: dividends first, profits later.

[The points presented here become easier to follow after spending a few hours with Marx’s Value, Price and Profit. The advantages from so doing, instead of subjecting oneself to more of the pap known as the “news”, is that we gain some intellectual ballast to carry forward into every twist of the expansion of capital.]

The Market for futures (6 October)
If Main Street despises bankers, then it loathes the brokers who trade in futures. Bankers, at least, assemble the money necessary for expanded production. Traders in futures make their fortunes by speculating. Worse still are the brokers who trade in financial derivatives.

Allocating dealers to their respective circles in hell tells us nothing about what capitals must do to survive. So, instead of consulting the petty parasites at the St James Ethics Centre, we have to ask how a trade in futures can help the corporations that produce pork or plastics. In finding the answer, we shall also glimpse how Wall Street learnt about futures and derivatives from the Chicago commodity market, developing since the 1860s.

The point of capitalism is to end up with more money to re-invest than you had when you started. Capital cannot expand merely by exploiting labour. The surplus value that results from that relationship is useless until the commodities in which it is embodied are sold. Nor is selling enough. For instance, a corporation marketing roses has to sell its bunches while they are fresh, otherwise, they are marked down and the sale price will be less than the cost of production. Here is one way in which a futures market helps capital. Instead of selling physical flowers in spring, the corporation sells virtual flowers in winter. This deal means sharing the profit with the traders and possibly accepting a lower return than if the agribusiness had waited to see what price it could get six months hence. The advantage is that the corporation is guaranteed a predictable level of income.

Suppose now that that corporation has sold its future roses at a price which delivers the average rate profit. Its managers’ worries are not over. They still have to lay hands on that money in the shortest possible time. Business is conducted on credit of thirty or more days. While waiting for the income to wind its way back from tens of thousands of florists, the growers depend on their banks. The longer it takes for the sales money to arrive, the more interest the producers pay out of their profit.

To complicate matters, corporations plan their finances much more than thirty days ahead. QANTAS orders a fleet of 797s in 2005 to take delivery in 2009. The final cost for those aircraft fluctuates with the turbulence of the global economy. Hence QANTAS buys “money” at a future price. The traders allow it to bet against an unfavourable shift in the terms of its contract, for example, as the exchange rate swings up and down.

To see how traders service capital is not to accept that those go-betweens provide a social good. There are no “human” interests, only the interests of specific classes. Within the capitalist class, those interests are fractured between kinds of capitalists who cannibalise each other for the largest possible slice of the surplus value from us wage-slaves. Swindling and cheating each other remain the order of the day for production as much as in low finance.

The housing question (7 October) 
With mortgages the tripwire for the sub-prime implosion, clarity about the relationship between home-ownership and capitalism seems overdue. In brief, a mortgagee does not become any kind of capitalist with the final interest payment.

Two examples demonstrate the long-standing confusion of owning personal property as capitalist. At the 1949 elections, the Minister for Post-War Reconstruciton in the Chifley government, John Dedman, lost his seat after declaring that the Labor Party was not interested in creating a nation of small capitalists by promoting home-ownership. Sixties radicals joked about becoming POMs - Property-Owning Marxists - when they took out a mortgage. Both statements represent the triumph of petty-bourgeois moralising over scientific analysis.

Owning one’s own dwelling cannot make you any kind of capitalist, even if that house is a penthouse in Dubai. In that case, you almost certainly needed to have been a big capitalist to afford such an abode. More significantly, paying for it could put an end to your being a capitalist by soaking up all your funds for reinvestment.

For the rest of us, rent is one of the socially necessary costs in the reproduction of our labour power. We struggle to make sure that our wages cover that outlay, along with food and clothing. If rents or interest rates go up, so does the pressure on wages. Equally, if all the workers in a labour market were to posses their own dwellings, employers would strive to push down wages until the homeowners would be no better off than those in the rental sector. The outcome, of course, depends on the relative strengths of the contending classes.

In 1936, the South Australian government demonstrated this principle by setting up the Housing Trust with low rents to reduce average wages in order to attract manufacturing to the State. 

Erstwhile head of Treasury and the Reserve Bank, Bernie Fraser, has never owned his own house, arguing that it is more profitable to rent and to invest his savings. High returns are more likely with his skills and contacts. However, his exceptionalism underlines that homeownership is not the first step to becoming a capitalist.

What about the situation that more Australians have put themselves in lately by buying into a rental property? In those cases, they benefit indirectly from the values added elsewhere in the economy, making them rentiers. Had they set up a small building firm, you would live off the direct exploitation of their employees, and indirectly from the purchasers, so that they become part-capitalist and part-rentier.

Australian workers seek homeownership to escape the costs and disruption from eviction. In addition, owning your own place has been insurance against impoverishment in old age. Both reasons remain part of the socially necessary costs of reproducing labour power. They are not shortcuts to living off the labour power of others.

[Engels wrote a booklet The Housing Question which should be on every re-reading list. However, the sections dealing with ancient issues can be skipped by most readers.]

Globalisation (8 October) 
To announce that “we live in a global economy” has all the explanatory power of saying that “The earth is pretty much round.” The implosion of world finances both confirms and challenges the conventional wisdoms flowing from two decades of gabble about globalisation. On one hand, liabilities continue to spread throughout the banking sector, from Boston to Belgium. The slicing of sub-primes to reduce risk has infected every cranny of the system, even Iceland.

On the other hand, the claim that globalisaion has rendered nation-market-states redundant has taken as big a battering as the Australian dollar. Who, if not nation-market-states, have been riding to the rescue of the globalisers? Those financiers got their $700bn bailout via the US imperium, not from the corporations that were supposed to rule the world by themselves.

One rung down from the big picture of a borderless – indeed, a “flat” - world, we find that even the most powerful regional grouping, the European Union, has fractured. Germany broke ranks to guarantee its saving-bank deposits. At most, its oldest members are “sticking apart”.

“Globalisation” became like an overcoat concealing a multitude of ignorances, many of them willful. The globalisation pap could get traction because the Left had submitted to the bourgeois phrase “nation-state”, which omits the very practice - “market” - that capital needs is state apparatuses to uphold. Hence, Marxist-Leninists need to argue in terms of nation-market-states and imperial-market-states.

Nation-market-states are there to preserve the interests of clusters of capitalists. Above all, they exist to sustain class rule inside their own borders. To repeat: the state organises capital and disorganises labour.

Ellen Mieskins Wood reminded us that capital needs the state in ways that slavery and feudalism do not. Surplus value has to be realised in sales from as widespread a market as possible, before the profits must make their way back. Those pathways have to be policed against competitors and workers.

Not all nation-market-states are equal. Hence, globalisation has weakened some of them, both within their home sphere of operations, and also in relation to the empire-market-states, primarily, the US of A. However, that hollowing out could not be allowed to go too far. The dangers were as exposed during the 1997 Asian meltdown as that crisis unravelled the IMF’s “tough-cop” packages of structural adjustment which had been compelling governments to abandon swathes of social action, such as health and education.

The revolt against Indonesia’s Suharto precipitated a new stratagem from the World Bank. The soft cop swung its checkbook behind building “effective” states, meaning those that could control their populations when they rose against the economic blows.

Each crisis has its contingent features. Globalisation is not one of them since capitalism was born global in the Venetian and Dutch merchants, to be weaned on the triangular trade of slaves and sugar/cotton from Africa to North America and onto England. Nor is there anything new in global reverberations from financial flops. For instance when bad loans in the Argentine rocked Barings Brothers in 1889, the shockwaves hit Marvellous Melbourne; gold bars had to be rushed from Paris to stabilise “The City” of London.

Not the 1930s (9 October) 
Eleven years after the Asian financial tail-spin and twenty since a flight of funds cut 30% off stock prices, central bankers are running up warning flags about the fragility of their global system. As far back as June last year, the International Bank of Settlements raised the stakes by using the D-word – a Depression of 1930s dimension - not just a recession like that of the late 1970s.

Returning from two years in Toyko in April 1990, I waited for the bursting of its real-estate and stock-market Bubbles to torpedo the world economy. Instead, Japan’s technocrats navigated through a protracted deflationary cycle by ignoring the advice of free-market economists to deliver a short sharp shock of the kind with which Jeffrey Sachs was harrowing post-Soviet Russia.

Having got Japan wrong, and not keen to join those commentators renowned for predicting eight of the last three recessions, I stopped asking “When will capitalism collapse?”, instead, pondering the question “Can capitalism collapse?”

Whatever happens next will not be a replay of the 1930s. The first obvious difference from the 1930s is that the world economy is now several times larger. The force needed to stop its expansion will have to be that much larger than it was around 1930-32. The momentum of the current system might allow it to keep from stalling while growing at a lower rate. 

Connected to this increased in size is that the global order now has three principal centers, Europe, North America and East Asia, against three halves 80 years ago. In the last 15 years, the global economy has sometimes got by on a single engine until at least one of the others restarted.

Two points of similarity with the 1920s remain. The first is that the Wall Street Crash of October 1929 was a symptom of the depression, not its cause. The flood of funds into the stock market had followed the drying up of opportunities to gain average rates of return from investing in the production of surplus value. One instance of this over-supply today is that, were all the car plants in North America to close down, the auto factories in the rest of the world would be able to roll out more vehicles than there is credit to buy them (ie, “effective demand”). Also like then, any tripwire will be in the financial sector because its bubbles have resulted from the latest bout of excess manufacturing capacity. The sub-prime crisis is not infecting the physical economy. That is where it started.

On top of these objective factors comes a psycho-sociological reason why the triggers for another depression will not replicate October 1929. Too many people are watching that possibility. Danger spots erupt wherever no one with the power to act is looking. The cliché that those who forget the past are condemned to repeat it forgets that those who are fixated on a version of the past are condemned to be run down because new things keep happening. That’s dialectics for you.

'19 October 1987' (10 October 2008)
The attention being lavished on bank failures and failing bailouts deflect attention from another faultline. The US economy remains dependent on the in-flow of funds to pay for its imports and to fund its three tiers of government. Here, the parallel is not with October 1929 but with October 1987.

That plunge had its source in the redemption of the US economy through  driving the less productive firms to the wall through an appreciation of the US currency. That policy made imports cheaper and exports harder to sell. Devastation created the rust-belt.

By the start of Reagan’s second term in 1985, the purge had done its work. US capital and its competitors both needed to wind back the value of the dollar. On 22 September 1985, at the New York Plaza Hotel, the “Plaza Accord”. The plan was to ease the dollar down by 10-12%. Instead, it fell by around 50% against the Yen and the  Deutschmark.

A thought experiment helps us to understand what happened next. You are the Sumitomo Bank with investments in the US stocks and bonds. The dollar loses a quarter of its value against the Yen. Instead of owning 100 units, Sumitomo now owns 75 units. All indications are that the dollar will continue to slide. Do you leave money in New York and Washington in the hope that the exchange rate will eventually move in your favour? Or do you pull your investments out and taking the 25% drop rather than risking a 50% loss?

While Sumitomo is pondering what to do, so are all the other investment houses. They are watching the exchange rate and each other. If you are going to exit, you need to get out first to minimise the dangers from a run on the dollar driving down the value of your investments even more.

The flight from the dollar precipitated the plunge on Wall Street on “Black Monday”, 19 October 1987. Catastrophe was averted when the Bank of Japan and the Ministry of Finance instructed Japanese institutions to bear the unbearable by carrying the losses to preserve the global system.

One medium-term consequence of being burned was to encourage smaller investors to look closer to home, thereby feeding the real-estate and stock-market bubbles which went wild until the early 1990. Thereafter, Japanese capital entered into a deflationary cycle from which it still has not escaped, with an interest rate of 0.5%, an effective minus.

A longer-term outcome is that the Japanese were no longer in any position to rescue global capital. Moreover, they were no longer the ones pouring most savings into the USA. That place has been taken by the Mainland Chinese. And that should make us very afraid. China’s financial sector itself conceals an Everest of bad debt and has no guardians comparable to Japan’s in 1987 to marshall financial resources.

Against the tide the declines, the Greenback has been appreciating. So far, so good. The worst case will be a falling US dollar with a collapse of US stocks. That combination will encourage overseas investors to cut and run. One impediment to that solution will be finding a better hole in which to hide. Buy gold

If she blows?  (11 October)
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 to 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.

(An earlier version was rejected by Crikey in July 2007 as “too depressing”.)

A fiction on fictional capital (9 October) 
House of All Nations, the 1938 novel by Christina Stead, is described by The Oxford Companion to Australian Literature (1994) as “epic in scale, encyclopaedic in detail, cinematic in form; it is a scathing account of the world of international finance, although once again the eccentricity of private obsession rather than generalised class interests holds the foreground.”

Stead extracted the following epigrams from her characters to form an opening “Credo”:

Jules Bertillon, the protagonist and a merchant banker:

No one ever had enough money.

There’s no money in working for a living.

If all the rich men in the world divided up their money amongst themselves, there wouldn’t be enough to go round.

Here we are sitting in a shower of gold, with nothing to hold up but a pitchfork.

Woolworth’s taught the people to live on nothing and now we’ve got to teach them to work for nothing.   Every successful gambler has a rentier sitting at the bottom of his pants.

It’s easy to make money. You put up the sign BANK and someone walks in and hands you his money. The façade is everything.

William Bertillon, his brother:

If there’s a God, he’s more like Rockefeller than Ramsay McDonald.

A speculator is a man who, if he dies at the right time, leaves a rich widow. 

E. Ralph Stewart:

Of course, there’s a different law for the rich and the poor; otherwise, who wold go into business?  

Michel Alphendery:

The only permanent investment now is in disaster.  

A self-made man is one who believes in luck and sends his son to Oxford.

Comtesse de Voigrand:

There are poor men in this country who cannot be bought: the day I found that out, I sent my gold abroad.

Henri Leon:

Everyone says he is in banking, grain, or peanuts, but he’s really in a dairy. 

Dr Jacques Carriere:

Patriotism pays if you take interest in other countries.

Frank Durban:

With the revolution coming, there’s one consolation – our children won’t be able to spend out money.