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by Joachim Hirsch
Monday, Apr. 25, 2016 at 11:53 AM
Greenspan knew his policy would create a financial bubble that ultimately had to burst. The subsequent crisis was consciously accepted since it speeded up the process of creative destruction. Lessons from the 2008 financial meltdown include shrinking the financial sector and expanding the public sector.
PLANNED CRISES OR ALAN GREENSPAN’S “TSUNAMI”
By Joachim Hirsch
[This article published in March 2016 is translated from the German on the Internet, http://www.links-netz.de.]
“A targeted offensive to destroy the old capitalist world and build a new world” occurred. The last two crises of capitalism, the bursting of the New Economy – the 2001 bubble – and the 2008 world financial crisis, can be understood as that targeted offensive, not as a failure of the economic regulatory mechanism with the subsequent catastrophe. That is the central thesis of Detlef Hartmann’s book “Crises, Struggles and Wars.” He makes Alan Greenspan, the former chairman of the US Federal Reserve (Fed), a central actor of this strategy. Greenspan’s policy was continued by his successors. His goal was to restore the US predominance over Europe and Japan with a political-financial “tsunami,” the product of a glut of cheap money. Building a US technical-information industry dominating the world was central. This is associated with the names Google, Microsoft, Apple, Amazon and others. To establish this, Hartmann worked though internal protocols of Fed meetings including Greenspan’s addresses.
The author describes Greenspan’s “undiscovered agenda” this way. With the New Economy and the money glut, information technology startups were supplied cheap capital to finance their success and progress and a massive increase of economic productivity was encouraged. This aimed at a breach with the Fordist regime in all social areas and led to a decline of traditional industries. The inheritance of past emancipative movements was reconfigured to a regime of self-submission and self-optimization. New visions of freedom, entrepreneurship and privatization brought into the world by Greenspan himself gave this process its legitimation. An enormous ideological disorganization of the working class made possible by the new technologies and the revolution of working conditions were now strategies of the class struggle. Greenspan knew his policy would create a financial bubble that ultimately had to burst. The subsequent crisis was consciously accepted since it speeded up the process of “creative destruction,” the end of the Fordist regime and building a new capitalism under US rule. The often criticized “financialization” of capitalism, speculation and greed are functional elements of the new policy and of capitalist logic, not abnormal trends or malformations.
Greenspan – seconded by the Bush administration – reacted to the crisis caused by the bursting of the New Economy bubble with the creation of a new debt bubble. Stimulating private demand by mortgage indebtedness was uppermost. The weak business investments necessitated by the crisis should be compensated. This was possible since conditions were created for taking credits for houses that exceeded their real value and could never be paid back (“sub-prime”). The possibility of securitizing these debts and making them internationally tradable facilitated this policy and shifted the risk to the private saver. The massive private indebtedness led to subjecting wide areas of life to the financial- and credit regime. “The promise of the ownership society aimed at far-reaching expropriation.” A further phase of the class struggle focused on degrading the middle class. A new monetary policy tsunami was the reaction to the bursting of the sub-prime bubble and the following financial crisis that had worldwide dimensions.
In the last section of his book, Hartmann grapples with predominant economic theories, particularly neoclassicism and monetarism. He criticized them for not grasping economic and social reality with their mathematical model construction and rationality assumptions. The Marxist economic theory deserves a similar criticism. On the other hand, the subjective driving forces of the economic process and the significance of worldviews and narratives must be considered. Greenspan adopted this view. Crisis explanations are too simplistic when they do not include this side, the strategies and the central actors. Thus Hartmann urges a kind of behavioral economy that emphasizes conscious action and does not start from the existence of economic laws. In the analysis of the economic development of the last 15 years, he identifies what really speeds up the economic development, the “process of creative destruction” as described by Joseph A. Schumpeter with which traditional conditions are overturned and resistances against innovations broken. This process is not mechanical but an act of strategic businesspersons and politicians.
These reflections are certainly not erroneous. Hartmann’s treatise contains insights in this financial crisis. The apparent independence of the financial sector appears to him as a means of industrial- and social policy. His criticism of the prevailing economics and its model Platonism is also correct and has often been stressed. Hartmann tends to certain exaggerations – as in the form of extreme personalizations that make the world seem ruled and controlled by oversized individuals. So Alan Greenspan is stylized as a kind of general manager of the world economy who steers this world economy systematically. Seen theoretically, Hartmann presents a kind of reverse operaism. For him, capitalists cause the crisis with their political accomplices, not the workers as though there are no crisis mechanisms operating behind the backs of the actors. Great innovative advances can hardly be explained from the nature of entrepreneurs who only need to be motivated and outfitted with the right conditions. Entrepreneurs are forced to this to secure their profits. What makes the profit rate fall periodically? “Objective” economic processes are probably the causal agents. However Hartmann sees the reason for economic stagnation and over-accumulation “in the discrepancy between the strengthened forces of the offensive and the transformation- and adjustment abilities opposing them.” That the “strengthened forces of the offensive” could have something to do with the structure of the capitalist economy and its inherent laws does not seem worth considering.
Declaring Marxism – whatever that means – as antiquated is too simplistic when the changes in this theory since Marx are ignored. The ex-Greek finance minister Varoufakis warns against simplistic thinking.
Despite all his admiration, Hartmann does not praise capitalism and its managers. A call to social revolution resounds at the end. This happens somewhat abruptly. His analysis gives no indication by whom and how this should happen. This is not simple in a strategically managed capitalist process where there are only surmountable obstacles, not contradictions.
Hartmann does not declare the “process of creative destruction” as the decisive modus operandi of capitalism. The New Economy bubble may reflect “creative destruction.” But the later maneuvers of the Fed must be understood as rather limited reactions that did not change the continuing crisis. The claim that Greenspan’s policy restored the predominance of the US economy is certainly exaggerated. The dominance of the American IT-industry was confirmed. Whether that is enough to explain a regained US hegemony is questionable and contested in the literature. For example, German mechanical engineering that successfully incorporated the new technologies also profited from this development and is a worldwide leader.
Notwithstanding the many exaggerations, Hartmann’s study is readable because it focuses on hardly illumined connections – assuming people make the effort to grapple critically with his theoretical short-circuits. His theoretical economic reflections are very interesting. His insights in the financial world and its manipulative instruments are quite informative. The suggestion that economic processes are substantially influenced by the strategic actions of actors is important and does not require a conspiracy theory.
Detlef Hartmann: Krisen, Kampfe, Kriege, vol 1: Alan Greenspan’s Endless “Tsunami,” 2015
Marc Batko: Alternative Economics: Reversing Stagnation, e-book from Smashwords, 159 pages, April 2016, https://www.smashwords.com/books/view/627516
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