I came across an article in the Sydney Morning Herald the other day, in which Rodney Adler, the former director of H.I.H, wades in to the current debate about the viability of capitalism:
http://business.smh.com.au/business/capitalism-not-dead-rodney-adler-20090311-8ux3.html.
Now, I think the ‘integrity’ of the opinion he expresses needs to be taken with a grain of salt; I don’t think he is any real position to talk about the hard working industrialist building up his empire over an extended period of time, when it seems he was quite happy to dip into company profits to support his lifestyle. Nonethless, he makes to points I think are worth noting. Firstly, he reiterates the commonly held opinion, that it was excessive borrowing,( i.e., essentially, I think, the new financial instruments involved in the subprime crisis), that lead to the current state of affairs. Secondly, he talks about the aversion to risk held by those who were/are held responsible; the executives resposible for administering these instruments had little stake in the outcomes those instruments produced- it wasn’t their money. But, would that have really made any difference? My reason for asking this stems from hearing Bill Clinton give an elegant summation of the reasons for the current crisis. Stated briefly, (and grossly simpliefied)- after the dot com crash, the mood of the market was still optimistic, and there was still plenty of cash floating round. The housing market in the US had been fairly flat for a number of years, and the excess money floating around had to invested somewhere. The intitial stimulation led to a snowball effect, and investing in property (not just residential) became the hot ticket to success. You only need to look at the amount of construction in the Sydney CBD between 2001 and 2007 to see evidence trend spreading globally. Unfortutately, property portfolios, both residential and commercial started to perform below expectations, companies and individuals began to default on their debts, and, voila, you have a crisis.
The point I’d like to make here, is that money has to do something- it has to go somewhere- even when its sitting in a bank, its really being lent, spent, reborrowed etc. This goes straight to Marx’s point about the fundamental inversion of the Capital/Money inversion. Money’s role in ‘realising’ or producing things, like houses, or computer software, seems secondary to its function in simply increasing itself. More on this in the next few posts.
