The Great Financial Crisis
Causes and Consequences
John Bellamy Foster & Fred Magdoff
Published by Monthly Review
2009, 160pp, ISBN 978-1-58367-184-9, Paperback
The bursting of the housing bubble and the ensuing financial debacle have left most people, including many economists and financial experts asking: Why did this happen? In their new book, Monthly Review editor John Bellamy Foster and long-time Monthly Review contributor, Fred Magdoff, explore the whole course of what is now known as 'the worst financial crisis since the Great Depression': from the debt explosion and housing bubble to the subprime debacle and federal bailout.
They argue that this latest financial crash, although greater than any since 1929, is itself a symptom of deeper problems connected to the stagnation of the “real” or productive economy of mature capitalism. Financial bubbles have become the chief means of countering stagnation, but these inevitably burst, bringing the underlying economic problems back to the surface. The only recourse of the system: new and bigger bubbles, leading, as they too pop, to still greater financial crises and worsening conditions of production — in what has now become a vicious cycle.
With this as their key, Foster and Magdoff are able to examine the complex interconnections associated with rising debt, weakening production and investment, stagnant wages, burgeoning unemployment, rapidly growing class inequality, spiraling global economic instability, and spreading militarism and imperialism. At the center of the story is the latest phase of capitalism, 'monopoly-finance capital', that has generated a giant casino economy and promotes enormously exorbitant, exploitative, and corrupt practices as well as violence abroad—all geared to finding and protecting profitable ways to invest the corporate capital surplus. Meanwhile, the real, pressing needs of most people in the society go unaddressed.
The only genuine way out of trap, Foster and Magdoff argue, is the promotion of those very measures — such as massively expanding socially useful public spending, improving the security of the working class, and democratizing ownership of productive property — that are invariably opposed by the current system of wealth and power.
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