‘Bailouts’: Socialism (and Capitalism) on its head

John Lanchester, writing in the LRB has one of the finest writings from the left on the financial crisis (no, unlike the fall of ‘socialism’, it is a mere crisis, not the ‘End of History’!). Lanchester also ends with the general pessimism on the left regarding the lack of a left alternative despite the optimism generated by the vindication of its theoretical criticism of capitalism in general and the neo- liberal led globalization in particular.

Perhaps, Francis Fukuyama was right and it indeed is the end of history.

The invention which made it possible for the lending to become so reckless was securitisation: the process by which loans were added together and sold on to other institutions as packages of debt. This had the effect of making the initial lender indifferent to whether or not the loan could be repaid – he’d already sold the debt to someone else, so he didn’t need to care. These packages of debt were then sold on and resold in the form of horrendously complex and sophisticated financial instruments, and it is these which are the basis of the global jamming-up of capital markets.

So: a huge unregulated boom in which almost all the upside went directly into private hands, followed by a gigantic bust in which the losses were socialised. That is literally nobody’s idea of how the financial system is supposed to work. It is just as much an abomination to the free marketeer as it is to the social democrat or outright leftist. But the models and alternatives don’t seem to be forthcoming: there is an ideological and theoretical vacuum where the challenge from the left used to be. Capitalism no longer has a global antagonist, just at the moment when it has never needed one more – if only to clarify thinking and values, and to provide the chorus of jeering and Schadenfreude which at this moment is deeply appropriate. I would be providing it myself if I weren’t so frightened.

Unfortunately, we have no current model of where to go from here, apart from a more heavily regulated form of growth-based liberal capitalism. There will be more intrusive regulation, more proactive interference. There may even be (there should be) a new Bretton Woods to control the global flow of capital. That doesn’t seem enough, but in the absence of another set of ideas about how the world should work, it may turn out to be what we have to settle for.

Link via Chris Floyd, who himself has written eloquently on the subject.


Author: bhupinder singh

an occasional blogger

3 thoughts on “‘Bailouts’: Socialism (and Capitalism) on its head”

  1. Lucid with out much financial jargons…….. first the crash, then the bail out of 700 billion… but no one seems to have done anything wrong here… the goverment is blindly buying out the toxic assets, where as there should be some mechanism to punish the guilty. Somehow money making(banking and its derivatives), be it any spurious method, is the only profession where you can get away without being punished.
    Though no one is being punished right now for the massive bungling, i presume the third world should be very cautious in their approach from now on. From now onwards the west will pull their sleeves and will try to squeeze out the maximum from 3rd world for the losses they have incured.

    Now that Latin America is showing counter trends and china being a shrewd monolith, this time around India will be the way forward for western neo-liberalism. Things will be far too easy with the Nuclear deal in place.

  2. If this were the crisis of capitalism, then how would it be the end of history?
    However, it is true that some variety of state capitalism or social capitalism was presented as socialism in china and in so-called erstwhile ‘really existing socialist’ countries. And now probably the leadership of capitalism would be transferred to China.

    this crisis or any future crisis may not culminate into a collapse of the system, But it surely indicates towards an imminent mutation of the system (which we cannot predict now). So there seems no end of history.

  3. >this time around India will be the way forward for western neo-liberalism

    Possibly, clash, but where is the money going to come from? All that was anyway never solid, has melt into thin air!

    >If this were the crisis of capitalism, then how would it be the end of history?

    Of course, not. It would be the end of pre- history!

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