§232 Economy and Peter EnglundSeptember 30, 2008
Since Peter Englund is blogging in Swedish, I felt compelled to translate his latest blog post and the comments to English (yes, the first comment is mine). I think this issue is important enough to be read by the global community (even if I maybe don’t have as many readers as he has, mine are more globally spread – just see the flag counter).
Peter Englund is a historian, and one of the people on the Swedish Academy (You know, the ones who decide who gets the Nobel Price). The blog post is here:
Here’s a link to who Peter Englund is
Here’s the translation. I’m using Google translate to give me the basics, and modify from that. I appologize for anything I might have missed and for all gramattical errors I’ve spotted and not fixed.
Tuesday, 30 September 2008
As historian, one should beware of forecasting, just because one’s occupation is about the opposite: looking back at safe distances. But sometimes I can’t resist, despite the fact that there is a danger I’ll make a fool out of myself.
I think that what we are witnessing these days, with a steadily growing financial crisis, is a Major Historic Event, probably the most radical we have seen on this side of the fall of the Berlin wall in 1989. Far more than, say, Sept. 11, although not as visual, and emotionally gripping. The case of the World Trade Center was randomness, a sudden and bizarre coincidence, an external interference, made up in a cave in the Torabora mountains.
This however is a crisis that stems from the dominant world system itself, from its geographic, economic and ideological epicenter, USA. And the consequences will likely be huge, and we will all experience them. (How much have most of us been affected of Osama bin Laden? Nothing. Except perhaps the loss of one or another bottle of cream, confiscated by a serious looking airport controller.)
Not that it means the end of capitalism. It is a system that through the years has shown an amazing adaptability.
However, it is likely the end of the accelerated hyper-capitalism that was created in the early 80s, and whose ideological credo consisted of an almost religious belief in deregulation the ability of the free market to solve virtually every economic and social problems. New, comprehensive and – not least – para-governmental regulations is to be expected.
It probably also means the end of the era – started 1989 – when the USA has ruled autocratically as the world’s only superpower. Such a position is based ultimately on economic strength, and it is through this crisis properly gouged. The U.S. has already lived beyond its means, so much that the adventure in Iraq was paid by foreign donors loans. When the U.S. politicians gets out of their tactical and ideological deadlock and actually vote through a new economic crisis plan, it will also be financed by foreign loans.
How was it now, that Chinese curse: “May you live in interesting times”.
Posted in Memory & History, Political |
On the other hand, you have, as a historian a better ability to see things in a perspective that many of us may not know as well. To compare with the past and draw conclusions about the present and future. It was primarily that which drew me to your three essay collections. I thought this was very interesting. I’d love to hear how you look at the links people make between now and 1929? It was the Great Depression that led to Keynes’ economic theories that stated that the free market can not solve everything, and that governments actually have the responsibility to counter inflation and unemployment. On the other hand, history rarely repeats itself that exact, but it usually comes up with new unexpected “twists” that surprise all.
Just don’t get too historic in your views on the present. History includes countless times and places you “could” have lived in, which means that the present looks very “small” in that perspective. If you have read “War and Remembrance”, that was how Aaron Jastrow saw it, as a historian, until he suddenly discovered that he was on the train to Auschwitz …
of thatdudeyouknow Tuesday, 30 September 2008 at 10:33
I think (for once) that you are wrong. The crisis is serious for the closest mourners. I would not want to be a broker on Wall Street right now. But it is not so crucial. The S & L crisis cost U.S. taxpayers more money. The 70’s industrial support idiocy cost more jobs in Sweden and the United States. The dotcom boom took more money from more small scale money savers.
This crisis shows that you can not have a half capitalist system in which profits can be super huge, but the losses are covered by the State. I hope we won’t see more of atrange blends like Fannie Mae and Freddie Mac.
Note how many (regulated) banks have problems, and how few (much less regulated) hedge funds don’t have problems. The latter has reasonable incentive structures that give great advantage, but also great disadvantage, so they have taken the risks more seriously. Also note how useless the Sarbanes-Oxley legislation is, that in no way predicted or smoothened the problems we see now.
The capitalism has developed so well that it is easier than ever for companies to obtain credit and loans by means other than the big banks. Consequently, the big banks’ crisis won’t hit businesses as hard as they would had this happened 30 years ago, or when it actually happened 80 years ago.
The fact that the media is making this issue bigger, and the analysises are horribly bad is something else. Let me quote the preamble to the DN’s main editorial today: “Yesterday’s sharp finance worries shows that the uncertainty is still high in the market, despite the deal on the U.S. rescue package.”
Anyone who takes anything seriously in that newspaper needs to blame himself. I understand that the editorial has to write on speculation, but it is embarrassingly bad not to snatch this, and the analysis is also completely wrong. Yesterday’s strong concern showed just that the market (quite correctly, as usual) was not at all sure that the rescue package would get through.
by Micke Tuesday, 30 September 2008 at 10:45
Interesting observation Peter, and whether you are right will prove itself. When I read I remembered a long blog post on the hollow U.S. dollars economy, which was published this spring, written by Rick Falkvinge, Pirate party. Whatever one thinks of this party and Falk Vinge himself, it is interesting reading, I think.
by Andreas Tuesday, 30 September 2008 at 11:27
OK, I do not think this crash may get more space in future history books than September 11. We will see when the time comes.
The most interesting lesson so far, I think it is, the economists managed to put their eggs in so many baskets that they no longer know where the rotten apple is (to mix metaphors).
By the way: “May you live in interesting times” is a good curse, but it’s not Chinese(http://www.faktoider.nu/interesting.html). Just like the jumping brokers from 1929 is a myth, which I think I first read in your book.
by Peter Olausson Tuesday, 30 September 2008 at 12:18
I think you are right. Many say “It’s about psychology”, but many seem to forget that U.S. dollars are dollars – economic values are subject to the laws. I am also thinking about phenomena in the philosophy known as the “Prisoner dilemma” if several individuals can and are allowed to prioritize themselves and suck out a social construction, it will collapse sooner or later. Certainly, I think there is still chance to reverse, but no one will be able to do what is required. If we are lucky something better will come out of this.
One strategic rule is to listen to such thinkers and commentators who do not have their own dogs in the race. In most cases, the ones who are now trying to calm us down, have their own interests at stake when it comes to making sure the system will operate soundly.
I remember a story I read from you Peter Englund, that from a historical perspective discussed how a population never know at which point their fate is doomed, when a society’s decay begins. Is this such a critical point?
by JM Tuesday, 30 September 2008 at 12:18
As an expert in political science, who I am, one must be careful about predictions, but it is funny that your forecast is almost on the spot identical to mine. The only difference is that I see Sept. 11 as the start of the dissolution of the United States as a superpower. So it is more like the start of a continuous process rather than a single event.
by Lars Karlsson Tuesday, 30 September 2008 at 12:28
9 / 11 is, of course, as pointed out in many contexts, an ideal from the popular fantasy standpoint. It is visual, an “in your face”, scary, expressive image or series of images, something already, the French sociologist Gustave le Bon discovered in the late 1800s in his book on mass psychology.
le Bon stressed the fact that what speaks to the masses imagination must present itself in a form that is a surprising and very clear picture. The picture should be free from any unnecessary explanations or be accompanied by only a few strange or mysterious facts: a great victory, a great miracle, a great offense or a great hope.
Le Bon pointed out that something as an epidemic of the flu, who some years before le Bon wrote his book had caused five thousand people’s death in Paris alone, was shown to have a minimal effect on the popular imagined, the image creation. This is according to him due to the fact that the epidemic is not embodied in any visual image, but could only be seen in the form of the statistical information was given every week. It is not difficult to imagine the current financial crisis in those terms, at least in the initial stage.
However, I am not so sure that the claim about bin Laden’s low impact on the Western world is entirely correct. Hasn’t the control society taken a giant step forward since 9 / 11?
by Sven-Erik Klinkmann Tuesday, 30 September 2008 at 2:34
We will see what this crisis leads to, in political terms. We may possibly see a series of half-hearted compromises that in the worst case may worsen the crisis.
The problem with the keynsianism (wasn’t Dag Hammarsköld and Gunnar Myrdahl on the same track as Keynes, but a little earlier?) Is the practical application. The idea is of course, simplified said, that the state is spending more money than it generates during recessions in order to maintain consumption and economic activity. This is financed by generating more than you spend during the good times. At the same time one softens the problems that leads to structure problems and inflation.
The difficulty is identifying the right moment to change policy. Recession policy should be deployed just when the economic boom has passed the peak. And the tightening should begin when recession’s worst stage starts to be over. Economists tend to error here, and they usually have difficulties to get politicians to understand when the moment comes. Consequently, the timing goes wrong and the result is that the fiscal policies that is meant to help the situation rather worsens it.
It is this difficulty which eventually made government after government to abandon the keynsianism and began to get closer to free market forces instead. Now the world economy in again at a dead end. We will see if the world and mainly, U.S. politicians, will take the right measures in time. It doesn’t look hopeful.
by Sune Portin Tuesday, 30 September 2008 at 3:25
When I took the power after almost having lost it before I got it, I realized the importance of stability by sacrificing some of the wealth I had earlier squandered …. Yes, you can start a blog like that, but it struck me that it could be that way. The wonders of the Power in the microscope appears to be completely different with the historical opportunity to look back in time but never ahead. And here we are now. No one’s debt is the other’s but cumulatively it definitelly is. So, sure, the financial instruments have been used, and the old has been hidden in the new. Covered by new and new debpt. But the poor and indebted remains so since the richer remains richer and richer … … …
of Hadrian Imperator Tuesday, 30 September 2008 at 3:38
Sven-Erik! le Bons observations are very interesting, and quite accurate, I think. As for the control society, you have obviously right, unfortunately: all those measures will remain LONG after the bin Laden has disappeared and the hysteria that caused them has been forgotten. What I meant was the immediate effects.
by peter Englund Tuesday, 30 September 2008 at 4:03