Thursday, August 18, 2011

roubini: karl marx was right

Video - Nouriel Roubini mainstreams a bit of the old doomerism.

IBT | There's an old axiom that goes "wise is the person who appreciates candor almost as much as good news" and with that as a guide, place the forthcoming decidedly in the category of candor.

Economist Nouriel "Dr. Doom" Roubini, the New York University professor who four years ago accurately predicted the global financial crisis, said one of economist Karl Marx's critiques of capitalism is playing itself out in the current global financial crisis.

Sees Marx's Critique Playing Itself Out Now
Marx, among other theories, argued that capitalism had an internal contradiction that would cyclically lead to crises, and that, at minimum, would place pressure on the economic system.

Companies, Roubini said, are motivated to minimize costs, to save and stockpile cash, but this leads to less money in the hands of employees, which means they have less money to spend and flow back to companies.

Now, in the current financial crisis, consumers, in addition to having less money to spend due to the above, are also motivated to minimize costs, to save and stockpile cash, magnifying the effect of less money flowing back to companies.

"Karl Marx had it right," Roubini said in an interview with "At some point capitalism can self-destroy itself. That's because you can not keep on shifting income from labor to capital without not having an excess capacity and a lack of aggregate demand. We thought that markets work. They are not working. What's individually a self-destructive process."

Roubini also argues that the social uprisings in Egypt and in other Arab world countries, in Greece, and now in the United Kingdom, are economic in origin (primarily unemployment, but also, in the case of Egypt, due to the rising cost of living).

Further, the view from here argues that while no one should expect an 'imminent collapse' of capitalism, or even a collapse of the American version, corporate capitalism -- capitalism and free markets are much too nimble and capable of adapting for that -- to say that the current economic order is not experiencing a crisis would not be accurate.


nanakwame said...
How Europe and the U.S. Dropped the Baton
Indeed, China was a highly organized society, heavily dependent on writing and recordkeeping, when the countries of Northern Europe were the homelands of a collection of illiterate warring tribes…
From 1500 onward, European control of the seas, its use of slave labor in depopulated colonies and the development of new technologies created the transformation that culminated in the Industrial Revolution. The pace of change accelerated throughout this period. This is illustrated by one critical measure: life expectancy.
In the year 1000, the average infant could expect to live about 24 years. A third would die in the first year of life, while hunger and epidemic disease would ravage the survivors. There was an almost imperceptible rise up to 1820, mainly in Western Europe. Most of the improvement has occurred since then. Today, the average infant can expect to survive 66 years.