The “Great Recession” of 2008 continues to be a lesson in Marx’s theory of value and crisis as Capitalist government’s attempts to, once again, save the economic system from its own contradictions. As Marx shows, Capitalism’s inherent contradictions, specifically the production of great quantities of commodities, capital and wealth while simultaneously limiting the means to continue creating such, creates a crisis of overproduction. This is an inevitable dilemma as Capitalism demands the continued assumption of wealth in the hands of an elite few and spurs incredible technological advances, both of which have categorized the early 21 century.
The current economic crisis is the result of an over production in housing and construction markets which created an outrageous incline of value. This also lead to a massive increase in credit markets which, taken together, characterized the “housing bubble.” For nearly 20 years, the ability of the productive forces to create value through commodity production, for which housing is but a small part of, has increased dramatically and produced massive amounts of wealth. At the same time, the cost of labor has plummeted through increased competition from the opening of newer and cheaper labor markets abroad combined with union busting at home guised as “cost saving” measures which have led to wage decreases and a near elimination of benefits. In the late 1990s and early 2000s, homeownership, the first step in the accumulation of capital, was lauded as the perfection of the phantom middle-class’ “American Dream.” However, since the vast majority of capital and wealth is now held primarily by large financial institutions, the proletariat has been forced to mortgage the market value of their home; ultimately giving up any actual right of ownership to the lender who holds the note.
However, whilst simultaneously being promoted by the political elite, the consistent drawback in real wages meant that more and more of the value of one’s home would be in the form of mortgaged debt, thereby adding to overall consumer debt. Since most well-to-do families were already “homeowners,” new schemes were created to allow low-income earners the chance at purchasing a home. With the entrance of these low wage mortgagees into the market through these schemes, capitalists were able to extract and create more value by speculating on the potential increased future-value of the home. Therefore, the ability to borrow off the speculated future-value increased dramatically. This process, which included selling bundled mortgages in the form of securities, by which their value is determined by the comparative gain of the future value, created the need to artificially inflate the value of homes to keep capital – and credit – flowing.
As home values continued to rise, the petty-bourgeois followed the lead of the institutions for which they are indebted, taking out credit advances on the ever increasing value of their home. However, the realization of this over-valuation and over production of homes, prompted by the massive defaulting of millions of people – unable to pay their mortgages after losing their job, seeing a decrease in pay, or through the rise in poverty taxes – drove the devaluation of the entire market, causing a burst in the bubble and eventually the general economy as its very foundations rested on the quicksand of debt.
For many workers, it seemed to come out of nowhere and hit them like a snowball on a dark winter night. However, this current crisis goes to the very nature of the problem of capitalism. Through its insatiable desire for profit, capitalism’s consolidation of wealth can only be done by limiting the costs of labor, while maintaining production, as it is the only real generator of value. The continuous decrease in wages inhibits people from purchasing the very commodities they create and thus limiting economic activity. This shows itself for the contradiction it is.
The Stimulus and the Rise of the Tea Party
In January of 2009, as President Obama was inaugurated – which was hailed as a near completion of American racial integration and was tasked with giving a new approach to American politics – the economic situation was grim at best. In order to continue to remain profitable, businesses had been cutting the most expensive portion of the bottom line, labor. However, in so doing, the crisis was exacerbated by the fact that the low wage job, eliminated as part of the attempts at profitability for American Finance, was the last thing filling the coffers of the institutions themselves. In order to stave off a great collapse of these firms, the Bush Administration proposed a bailout of the largest financial institutions deemed “Too Big to Fail”, citing the impending and inevitable collapse of the general economy if the institutions were allowed to fail individually. This Domino Theory is not new, and is used over an over again as the justification for outrageously pro-capitalist and other destructive programs. A small amount of firms, whose own policies led to their insolvency, upon the collapse of the bubble, were given $700 billion dollars to do – in general – whatever the wished. All of this while workers were seeing their homes foreclosed and jobs being shed by hundreds of thousands each month.
The solution proposed by the new Obama administration was to institute a “stimulus package” which would spur economic activity through shear government spending. However, the majority of these stimulus funds came in form of tax cuts for the most wealthy, and, as would be expected, only went to prop up the profit margins of the largest financial institutions and the wealth of the capitalists who own them.
Another portion of the stimulus was spent on governmental infrastructure projects and tax breaks for new companies deemed “The Recovery Package.” The main goal of this program, stabilization of the downward spiral, succeeded, but that is where the activity ended. Two years in to the Obama presidency, the Republican Party was elected in a landslide victory in legislative races, helped in part by the new Tea Party Movement. This movement is representative of the ideology of the 21 century petty-bourgeois. In short, they want the government to quit spending, specifically on wasteful programs such as the bank bailouts, and reduce the size of the National Debt. The newly elected officials, baptized in the political era of Ronald Reagan, refused to acknowledge the most recent crisis of over-production, wealth inequality, and the principle of overproduction which is central to the cause of the crisis, and instead make the government -and Democrats – the great boogeyman to blame.
Interestingly, the Tea Party shows that, through the organization and mobilization of people based on generally-accepted, unfair programs and policies, the masses of workers can unite together against a common enemy. Ironically, those who deserve blame for the crisis and who continue to foreclosure on homes and shed jobs (all while continuing to report record profits) are exempt from criticism. Instead, latent racism, reflective of the divisive nature of the competition of labor – necessary to hold off class war – helps to promulgate anger in the direction of an African-American President and other contemptible politicians. This is characteristic of the backward development of class-consciousness in America today.
However, what the Tea Party lacks in vision, they make up for in gusto and one would be unwise to let this remain a wry group wandering in the wilderness of modern American politics and 24-hour news cycle. In short, we should be extra vigilant to contest any allegation that this crisis was caused by working people taking on too much debt that they could not afford. Likewise, the contention that the American government – either in its outrageous spending habits, its relaxed oversight of banks and lending companies or by sheer promotion of corrupt officials, not that these are not all at least partially true – is solely to blame should be dismissed as only representative of the true cause of economic crisis.
One must always make the point to our friends and comrades that the real cause of this crisis is the inherent contradictions of capitalism, specifically the push for the concentration of wealth by a handful of people. If asked about this, most people acknowledge this fact, but capitalist propaganda, promoted by news outlets (outside of radical and socialist papers) and the education system, have created a myth which has been generally accepted by the people. That is, that through hard work, they too can, and should strive to be, obscenely wealthy like the Finance Barons of Wall Street. This makes the real targets for anger much more is illusive, yet one need only look at the skyline of any major American city to see where to lay blame. For Socialists, this crisis is an opportunity to seize upon the grand realization by American workers that something is wrong…and we know what is. Therefore all that is needed is to go forth to teach and organize them against the real enemy capitalism.