capitalism and corporate journalism

medialens | n his latest excellent book, 'Beyond the Profits System', the British economist Harry Shutt observes that one of the most striking features of the financial crisis has been:

"... the uniformly superficial nature of the analysis of its causes presented by mainstream observers, whether government officials, academics or business representatives. Thus it is commonly stated that the crisis was caused by a combination of imprudent investment by bankers and others [...] and unduly lax official regulation and supervision of markets. Yet the obvious question begged by such explanations - of how or why such a dysfunctional climate came to be created - is never addressed in any serious fashion."

Shutt continues:

"The inescapable conclusion [...] is that the crisis was the product of a conscious process of facilitating ever greater risk of massive systemic failure." (Harry Shutt, 'Beyond the Profits System: Possibilities for a Post-Capitalist Era', Zed Books, London, 2010, p.6)

In several books and articles, David Harvey, a social theorist at the City University of New York, has cogently written of how capitalism has shaped western society, risking and even destroying nations, populations and ecosystems. Not only are periodic episodes of "meltdown" inevitable, but they are crucial to capitalism's very survival. The essence of capitalism is self-interest; and any talk of reforming it through regulation or by imposing morality - a kinder, gentler capitalism - is both irrational and deceitful.

The bankruptcy of investment bank Lehman Brothers in September 2008 triggered the latest crisis of capitalism. Drastic action was required to save the system. And so, observes Harvey, a few US Treasury officials and bankers including the Treasury Secretary himself, a past president of Goldman Sachs and the present Chief Executive of Goldman, "emerged from a conference room with a three-page document demanding a $700 billion bail-out of the banking system while threatening Armageddon in the markets."

Harvey continues:

"It seemed like Wall Street had launched a financial coup against the government and the people of the United States. A few weeks later, with caveats here and there and a lot of rhetoric, Congress and then President George Bush caved in and the money was sent flooding off, without any controls whatsoever, to all those financial institutions deemed 'too big to fail'." (David Harvey, 'The Enigma of Capital: And the Crises of Capitalism', Profile Books, London, 2010, p. 5)

Shutt translates "too big to fail", that over-used defence employed by capitalists and their cheerleaders, as meaning that a tiny super-wealthy clique recognised that they risked losing vast fortunes if the markets were allowed to take their course free of intervention from the state. Wholesale nationalisation of insolvent banks would have posed an existential threat to elite power; or even led to the collapse of the capitalist profits system in its entirety. Rather than accept such a fate, rich investors tried to ensure that their toxic assets be "largely transferred to the state, thereby adding unimaginable sums - officially estimated at $18 trillion world-wide - to already excessive public debt." (Shutt, op. cit., p. 36)

As ever, the public were made to pay the price for private greed. In simple terms: it's socialism for the rich, and capitalism for the rest of us.