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Socialist Party of Great Britain - Capitalism In Crisis - Dismay of The Economist.

As the credit crunch has worsened and turned rapidly into a full-blown depression, the so-called experts at THE ECONOMIST are stumbling round in a fog of incomprehension and dismay.

Around the end of 2008, they hopefully launched a book, THE WORLD IN 2009, marketed as “the latest edition of THE ECONOMIST’s annual bestseller”. Highlights of this “bestseller” apparently include “ The world economy in 2009 :an incisive, specific prediction on what comes after the credit crunch”. But since no-one knows just when the credit crunch or depression is likely to bottom out, this “specific prediction” can only be pure fantasy and make-believe. It is unlikely to have predicted specifically how many workers will be unemployed by the end of 2009. Will it be 2 million or 3 million? Or which firms will have filed for bankruptcy by then. Who knows!

THE ECONOMIST is also somewhat short-sighted. In an article, History lesson (22 March 2008), readers learn a bit about the banking crises of the 1980s and 1990s, but absolutely zilch about anything which happened earlier – e.g. the role of the US banks in helping to trigger the Wall Street crash after the 1929 boom. As Anthony Sampson wrote of the major American banks:

All these powerful banks – Morgan’s, Citibank, Chase and the future Bank of America – had grown up to become major financial operators in the boom of 1929. All of them had used their deposits to finance shaky investments, and juggled with speculative shares through their interlocked companies

In today’s ‘credit crunch’ / crisis / depression, Sampson would have recognised many of the features of the 1929 Crash and the Great Depression. In the US, there had been a speculative boom in the 1920s, when punters were encouraged to buy stocks and shares with borrowed money, speculating on a continuing rise in stock market prices.

Likewise in recent years, with private equity firms with their leveraged buy-outs and takeovers, again using borrowed money, and the fierce competition between building societies, banks, credit card companies, and even stores and supermarkets, all lending indiscriminately and speculating on the housing market’s continued rise: British and other banks were sooner or later going to be riding for a fall.

Sampson noted a comment by one of his banking contacts:

No-one who went through those times,” one veteran banker reminded me, “can feel altogether confident when people today say that the world’s banking system is fundamentally sound.”op cit., Chap. 3

But with the benefit of the 20/20 vision of hindsight, THE ECONOMIST thinks it can see exactly what went wrong and why, for instance in an article on What went wrong (22 March 2008):

Modern finance has promised miracles, seduced the brilliant and the greedy – and wrought destruction. Alan Greenspan, formerly chairman of the Federal Reserve, said in 2005 that “increasingly complex financial instruments have contributed to the development of a far more flexible, efficient, and hence resilient financial system than the one that existed just a quarter-century ago.” Tell that to Bear Stearns, Wall Street’s fifth largest investment bank, the most spectacular corporate casualty so far of the credit crash.

Of course, at that stage, the ‘credit crunch’ crisis was still only a toddler. Worse, far worse, was to follow. Did the pundits of THE ECONOMIST warn their readers and subscribers in advance that the financial system was skating on thin ice? Did they heck! There were warnings galore about the evils of inflation or the dire danger of workers being paid too much, and even occasional warnings about certain crooks in businesses like Enron – warnings which typically came after the said crooks were already being exposed, but not before, when its predictions might have been of some use.

And yet THE ECONOMIST, which regularly attacks Karl Marx and routinely describes as ‘Communism’ or Socialism’ the most vile dictatorships and one-party states, prints in every issue its ridiculous claim to:

... take part in “a severe contest between intelligence, which presses forward, and an unworthy, timid ignorance obstructing our progress.”

Some ‘intelligence’!

In a recent issue, THE ECONOMIST headlined an article about Venezuela: Socialism with cheap oil. Ignorant about Socialism, and determined to keep its readers ignorant on the subject, it commented on Hugo Chavez’s farcical claim that his “21st century socialism” was untouched by the economic crisis (3 January 2009). Yet it let the cat out of the bag when it noted that Chavez’s ‘socialism’ amounted only to nationalisation:

... there are compensation payments, totalling several billion dollars, that Mr Chavez is committed to paying out after a nationalisation spree he embarked on in 2007. This has included state takeovers of the cement industry, a large Spanish-owned bank, a big steelworks and parts of the heavy-oil processing facilities formerly owned by Exxon Mobil and ConocoPhillips. The next target is a gold mine.

State ownership of industries or banks, a.k.a. nationalisation, is not Socialism. As long as the workers are working as wage-slaves, so long there is still capitalism and exploitation. And THE ECONOMIST’s readers can sleep easy in their beds, with only a frisson of fear.

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