[PEN-L:4822] Re: credit & capital

[mmeeropo@xxxxxxxxxxxxxxxxxxxxx (Mike Meeropol)]

Jim Devine wrote:
>
> I agree Doug, but this allows me to clarify what I was saying.
>
> Pre-capitalist usury was not part of full-scale capitalism, but
> a fragmentary form of capitalism. The modern credit system is
> part of full-scale capitalism -- but this does not mean that
> it is always in harmony with the rest of the capitalist system.
> Like the state, credit and finance are "relatively autonomous."
> This last phrase is often used but hardly ever explained.  To
> mean it means that c & f are part of the system but can develop
> in ways that contradict the healthy workings of that system.
> The "health of the system" here measured using capitalist
> standards: a sustained high rate of profit, involving exploitation
> of wage-labor.
>
..

> Some financial crunches reflect events in the "real" economy,
> i.e., the production, circulation, and realization of the total
> product and the surplus-product.  But others occur because of
> the autonomous dynamics of C & F. C & F can get out of step
> with the "real" economy and come into contradiction with it.
> This is the kind of thing that happens in a speculative
> bubble.
>
> The latter autonomous dynamics can feed back and harm the
> "real" economy, as when the 1929 helped trigger the 1929-33
> slump.  But whether this happens or not depends on whether
> the "real" economy is stable or not. The government and the
> Fed shored up the economy so that the 1987 crash had little
> effect but to cut employment in the brokerage "industry."
>
> So, IMHO, even though finance can appear very important
> at any one time, in the end its importance depends on the
> situation of the "real" economy.
>
This raises the question as to how a breakage in a speculative bubble can
(or can not [?]) trigger a collapse in the "real" economy.  One might
conclude from the actions of the FED in 1987 that given sufficient
commitment to act as a lender of last resort --- even failures of major
banks or great write-downs in speculative values can be CONTAINED so as not
to contaminate the "real" economy.  This of course only permits the
debilitating long run growth of "financial fragility" to continue.

If we conclude that bursting financial bubbles cannot produce a prolonged
slump such as FOLLOWED 1929-1933 [IMHO, THAT has always been the interesting
question for me --- why no recovery AFTER 1933 --- this is where I support
the Baran/Sweezy/Steindl/Sylos-Labini "imperfect-competition stagnation"
thesis, btw.] ---- then are we to assume perhaps that the continued increase
in financial fragility will continue to debilitate national economies so
that recoveries will more and more look like this one --- little or no
income growth for 80% of the population!

All the best, Mike

--
Mike Meeropol
Economics Department
Cultures Past and Present Program
Western New England College
Springfield, Massachusetts
"Don't blame us, we voted for George McGovern!"
Unrepentent Leftist!!
mmeeropo@xxxxxxxx
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