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Zombie Capitalism Excerpt

Zombie Capitalism Excerpt

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Published by: haymarketbooks on Nov 02, 2010
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chapter six
The Great Slump
An unprecedented crisis
The deepest slump capitalism had ever known followed by themost sustained boom, interspersed with the bloodiest war inhuman history. Such was the course of capitalism in the middle 50years of the twentieth century.The epicentre of the slump was the United States, which hademerged from the First World War as the greatest economicpower, with 50 percent of global industrial production, overtak-ing both victorious Britain and defeated Germany. The onset isoften identified with the Wall Street Crash of 29 October 1929,when the New York stock exchange fell by almost a third. But“business was already in trouble before the crash”, with autooutput down by a third in September compared with March1929.
Over the next three years US industrial production fell byabout half, and the slump spread across the Atlantic to Europe,where there were already incipient signs of crisis. German indus-trial production also fell about half and, with a slight delay,French fell by nearly 30 percent. Only Britain saw a smaller fall—of about 20 percent—but that was because its heavy industrieswere already in a depressed condition.By 1932 a third of the workforce in the US and Germany wereunemployed and a fifth in Britain. Those hit were not only manualworkers as in previous crises, but white collar employees whothought of themselves as belonging to the middle class. Hundredsof local banks went bust in the US and some giant banks in Europecollapsed spectacularly, destroying people’s savings and aggravat-ing the general sense of disaster. Hitting all industrial countries atonce, the crisis destroyed the demand for the output of agriculturalcountries, driving down the prices farmers received and creatingvast pools of misery. No region of the globe avoided at least some
decline in output,
and world trade fell to a third of its 1929 level.
By comparison, both world output and world trade had grownduring the previous “Great Depression” of the 1870s and 1880s.
The 1920s boom
The ideological shock of the crisis was increased by the way capi-talism had seemed to have recovered in the preceding years fromthe destruction of the First World War. Industrial output in the UShad doubled from 1914 to 1929, with the emergence of a host of new industries that began to revolutionise patterns of consump-tion—radio, rayon, chemicals, aviation, refrigeration, and thereplacement of horse-borne by motorised transport. The boom inthe US had a beneficial impact in Europe. Germany, racked by civilwar in 1919-20 and then unparalleled inflation in 1923, had thenseen industrial output grow 40 percent above its 1914 level. InFrance industrial production had doubled. The press had dis-played an unbounded optimism about capitalism, proclaiming a“new era” of endless prosperity. Mainstream economists had beenjust as confident. Alvin Hansen wrote that the “childhood dis-eases” of capitalism’s youth were “being mitigated”, whileAmerica’s most eminent neoclassical economist, Irving Fisher, hadstated on the eve of the Wall Street Crash that “stock prices havereached what looks like a permanently high plateau”,
contin-ued to exude optimism for some months after, while in Britain John Maynard Keynes had assured his students, “There will be nofurther crash in our lifetime”.
Social democrat Marxists joined inthe chorus, with Hilferding’s theory of “organised capitalism”, asa system in which the anarchy of the market and the trend towardscrisis had disappeared.
Suddenly they were all proved wrong.The initial reaction of mainstream politicians and their fellowtravellers in the economics profession was to assume that they onlyhad to wait a short time and the slump would begin to correct itself.“Recovery is just around the corner,” as US president HerbertHoover assured people. But recovery did not come in 1930, 1931or 1932. And the economic orthodoxy which had been so confidentin its praise of the wonders of capitalism so recently could not ex-plain why—and it still cannot explain why today.There have been attempts at explanation. The most commonamong the most orthodox at the time was that articulated by the
Capitalism in the 20th Century

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