THE MONEY ECONOMY

Could it be that the fiancial transactions and flows on the world’s stock markets do not reflect the real economy of goods and services?

I would have thought that such a condition was not possible. However, some think otherwise.

David Kaiser is a historian. He points to Karl Marx’s prescience about how capitalism has developed internationally, but to the failure of the proletarian revolution. It seems to me that this latter prediction was based in the philosophy of dialectical materialism, so I am not sure that the conclusion that Professor Kaiser draws about the implicit fit between capitalism and human nature works.

I am always interested in the explanations for the First World War, which seems to be one of the change points in human history. It was an industrial war in which murder was mass murder became inhuman. Assassination and terrorism continue today as the modus operandi of the conflict for power, domination and resistance. The critical thing, David Kaiser, observes was the competition for control of third world countries, otherwise called imperialism.

The powers that be allowed labor to organize and gain a greater share of the results of production and consumption, but that turned out to be advantageous. The problem for capitalism, since it lacks a collective ethic (with due acknowledgement to Adam Smith), individual players only see benefit in maximizing their individual return.

At moment, David Kaiser says, the economy is in a mess, with unemployment increasing and people dropping out of the employment market. He says:

Yet despite this, Wall Street has been in the midst of an extraordinary rally for months, and is threatening the 10,000 barrier again. Finance capital–as embodied in the big banks, also showing renewed profits, and Wall Street–suddenly seems to me to be more or less completely disconnected from the actual productive sectors of the economy, and from the life of ordinary Americans. This is a staggering and obviously very important development. The stock market began as a place where business firms could raise money they would repay in profits, but it now seems to be something very different, a speculative futures market which will go up as long as there is money to fuel it. And that money, of which there has been more than enough for the last six months or so, is not coming from any increase in economic activity. I am afraid, in fact, that it is coming from the enormous infusions of cash the Federal Reserve Board is putting into securities markets, and I read one article from the Wall Street Journal some time ago that suggested it was coming from the stimulus. The apparent lack of much connection between the fortunes of our financial giants and the American people strikes me as worthy of more investigation. It is not reassuring.

If we widened our field of vision we would also see that the number of people living on a planet is increasing, that the needs of the poor are not been met, and that the brutal casino capitalism of the winner take all mentality is concentrating wealth in the hands of the few, while the earth is being trashed. Dysfunctional, irrational economies will not survive. Nation states are institutions, similar to corporations, and their boundaries and interests are not necessarily consistent with the public good.

ELSEWHERE:

Somewhat back on topic, Gary at Public Opinion observes:

What’s pushing the stock market upward? Isn’t it corporate profits? However, those profits aren’t being powered by consumers who have suddenly found themselves with a lot more money in their pockets from increased work. The profits are coming from dramatic cost-cutting — if a firm cuts its costs enough, it can show a profit even if its sales are still flatlined.

How does it go, contradiction leads to synthesis, perhaps mediated by violence . . .

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