A view on the crisis from different angles
The focus on the flaws in the financial system may hide other causes of the crisis. The polarization in income distribution, in particular, tends to get glossed over as a potential cause of the crisis. Financial deregulation is only half of the story, the polarization of income distribution, thus the growth of inequality is another one; it is their interaction that provided the grounds for the crisis.
“Neoliberalism has led to a shift in power relations between capital and labour. As a consequence income distribution has shifted sharply in favour of capital. Economically this has a dampening effect on domestic demand (as demand is wage led in the world as whole) which provides the background in front of which the macroeconomic imbalances that erupted in the present crisis have to be understood.”
As wage moderation has been one of the structural causes underlying the present crisis, one condition for re-establishing the balance, is a change in wage policy, another would be the redistribution of labour time. Wages have to increase at least with productivity growth.
The previous analysis departs from a foucauldian discourse analysis but may well be endorsed by an undogamtic marxist. Bernard Lietaer worried about the structural instability of our financial system, took an eco-systemic approach. He has been publishing books and peer reviewed papers since 2000 about this matter. In an article ‘Making Money for Business: Currencies, Profit, and Long-Term Thinking‘ Bernard Lietaer and Gwendolyn Hallsmith propose the Commercial Credit Circuit as a means to counter the instability of our monetary system, they discuss:
“Small- and medium-sized businesses provide between 65 and 95 percent of private jobs worldwide. Their main challenge is access to working capital, which is crucial for job maintenance and creation. When credit lines get prohibitively expensive or are pulled back, as is the case today, the jobs evaporate.
A financial innovation—the Commercial Credit Circuit (C3)—provides critical working capital for small- and medium-sized businesses and already operates in several countries. It represents a substantial improvement on commercial barter by making its business-to-business (B2B) currency convertible into official national currency.”
You can read more about it in the article, below a diagram of the mechanism.
Another wider but less detailed approach on banking and financial sector reform can be found in ‘The Ecology of Finance‘, proposing:
- Credit unions, community development finance institutions and community land trusts.
- Green investment banks such as the Nordic Investment Bank.
- The Community Reinvestment Act in the United States.
- The Mondragon Cooperatives and Caja Laboral Bank in the Basque region of Spain.
- A Social Investment Wholesale Bank and innovations including social impact bonds.
Not the invisible hand of the market, but real people
Contrary to the widespread belief that markets must be liberated – markets don’t create themselves – markets have to be constructed and mantained. NAFTA and the EU are examples of this. Stockhammer writes:
“Based on a careful reading of the German ordo-liberal school and the USAmerican Chicago School Foucault argues that neoliberalism differs radically from classical liberalism in that it does not aim at liberating markets, but at creating markets and subordinating government activity under this goal. Markets don’t create themselves, if left on their own, but have to be constructed and maintained. Contrary to classical liberalism neoliberalism thus requires permanent and profound state intervention.
The title of the 2002 World Development report encapsulates this approach: Creating Institutions for Markets.” (Stockhammer, p. 10).
The wealthy may hide as $32 Trillion Offshore according to Tax Justice Network, a U.K.-based organization that campaign for transparency in the financial system. That’s no secret either. There were previous reports on that matter. You can read about all the ‘dodgy deals’ of the banks here.
There’s is no doubt that speculators have been able to capitalize on the crisis in recent years. It’s clear that their greed is relentless, that they are opportunist and cynical. But we may not forget that they could only reach their goals with the support of the tops of the governments, national and European institutions.
But though much of this occurs thanks to financial secrecy, you can find the names of the people organizing the market in Le Monde Diplomatique. There are many and they are not hidden. This makes power and the system tangible but also more complex.
An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of 147 super connected companies, mainly banks, with disproportionate power over the global economy.
Look how they are networked here, for the short version look here. But it’s not just some twelve intangible omnipotent families conspiring to control the whole world, if there were, injustice would be easier to identify and defeat. It’s about an elite defending greed, spreading prejudice and excluding the everyday more people of a decent life.
Thomas I. Palley, (2010), ‘The Limits of Minsky’s Financial Instability Hypothesis as an Explanation of the Crisis‘, Montly Review, 2010, Volume 61, Issue 11 (April)
Revealed – the capitalist network that runs the world (in The NewScientist The network of global corporate control)
Le Monde Diplomatique, Pourquoi les “indignés” ont raison, october 2011
Le Monde Diplomatique, ‘Coût du Capital, question qui change tout’, juli 2013