[OPE] "an immense accumulation of factors": Rick Wolff's partial list of causes of the economic crisis

From: Gerald Levy <jerry_levy@verizon.net>
Date: Sat Nov 15 2008 - 06:54:16 EST

Rick Wolff, "Policies to "Avoid" Economic Crises"Here's a short excerpt from one of his short articles which I wanted to
call to your attention to because - whether you agree with it or not - it
offers a brief, summary narrative of the causes of the crisis. Clearly
he thinks there is over-determination here. No mention of value
categories, but that's not surprising. Also noteworthy are his comments
about state economic policy.

In solidarity, Jerry

>From "Policies to "Avoid" Economic Crises"
The problem is this: today's economic crisis was caused by an immense accumulation of factors, far too many for any policy to manage. Here is a partial list. Workers' wages stopped rising since the 1970s; thereafter, they accepted rising loans instead of rising wages as compensation for their greater work and productivity. Corporate profits exploded because they got ever more output per worker (via computerization, etc.) while not paying their workers any more. Corporations deposited their rising profits in banks who then loaned part of them back to workers, another part to investors for stock and then real-estate speculations, and yet another part to businesses for mergers. Other factors included low taxes, expensive wars, and resulting US government deficits. Then, too, China's industrialization flooded the US with inexpensive products as that country accumulated our massive dollar payments for them. China then lent those dollars back into the US to finance the government's deficit and further increase banks' loanable funds. All these very different factors helped build up the house of credit that has now crashed the entire economy.
   Still other factors also shaped the crisis. New mortgage brokerage practices and credit card promotions induced more debt than borrowers could afford. Competition among rating companies yielded incorrect assessments of financial risks of trillions in newly invented financial instruments (derivatives). This led to staggering global misallocations of scarce resources. Homebuilders' competition yielded excess construction. The Federal Reserve increased the money supply and lowered interest rates to offset the dot.com bubble burst in 2000.
   Nor is this list of factors even nearly complete. No policy emerging from deals between conservative and liberal legislators beset by armies of lobbyists could ever begin to control or manage the immense diversity of the causes of the current crisis. Indeed, no policy of any kind -- whether imposed by a dictator, produced by democratic consensus, or anything in between -- can "fix the problem." No policy ever did. There are just far too many causes of crises that one can see and list -- and too many more not yet seen.
   The whole idea of policy is bizarre. <snip, JL> URL:< http://mrzine.monthlyreview.org/wolff061108.html>

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