The past week has been a rough one for the U.S. economy. Several major investment banks went bankrupt and some companies, such as AIG, got bailed out by the government to the tune of 85 billion dollars. (It shouldn’t have to be said that the taxpayers are paying for this). In addition, the government has nationalized major mortgage companies Fannie Mae and Freddie Mac.
Now, I’m not a Marxist, but this is sounding awfully familiar. In my economics and government classes, I’ve read excerpts of Das Kapital and The Communist Manifesto. One of Marx’s most basic theories is his notion that history has progressed through several stages of class struggle: from feudalism to capitalism, to the eventual failure of capitalism. He claimed that our world would end up with socialism and that this would mark the end of history (since we’d have perfected our society). Now, I’m not really so sure socialism is the answer. However, the past few days have exemplified what Marx warns in his works: capitalism is failing.
Marx believed that capitalism was inherently flawed, so much so that it would lead to its own destruction. He explained this by claiming capitalism operates through a pattern of business cycles. These business cycles are exhibited by relative prosperity for a period of time, then a decline and recession – in other words, boom and bust. Marx maintained that each business cycle would be more and more devastating, until finally culminating in one disastrous collapse. This would then leave the world (or individual countries) ready for socialism as a replacement of the failed capitalistic system. With the recent failure of major investment banks, and the warnings from some modern economists that FDIC-protected banks and other companies/institutions are going to fail next, it appears that Marx might have the last laugh.
Business Cycle
We cannot afford to let our current recession turn into another depression. We must, as a country, find a way to overcome this financial crisis. And while I’m not saying we should throw in our hats and purchase Communist Manifestos for our school children, I think elements of socialism would be a beneficial addition to our economic practices. Even now we are not a perfectly capitalistic society: our markets are not free from government regulation and intervention. Adam Smith’s invisible hand has left the building, so to speak.
I argue that we should model our economy after those of Sweden, Denmark, and other European countries. These countries have a social democracy, in the sense that they democratically reform their economy so that there is more of a “welfare state,” or benefits provided by the government. Sure, citizens of these countries may pay more taxes, but they have the assurance that their taxes are being distributed more meaningfully and appropriately than Americans do. (Also, for everyone who hears “welfare state” and immediately has negative connotations, keep in mind that many of the stereotypes about welfare programs are unfounded).
So, while I run the risk of sounding like a radical leftist, I’m also just your average citizen, concerned with the uncertain state of our country’s future. I hope that if Obama is the next President, we can see some positive reforms on our economy, though I don’t expect him to single-handedly fix our economic and political institutions. I will say this: if McCain is elected, we are in for 4 to 8 years of the Republican party attempting to prevent the failure of capitalism by any means necessary – no matter how detrimental to our society. If that terrible nightmare becomes a reality, I’ll be the first to apply for a visa to Sweden.
Related links:
AIG bailout: Where does the financial crisis lead next?
U.S. Mortgage Bank Nationalization : Sign of Deepening Crisis
All Over the Board: Capitalism has failed. Period.
What are your thoughts on the burgeoning financial crisis? What should the United States do?
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