Reconceiving Change in the Age of Parasitic Capitalism
By C.J. Polychroniou
We live in critical times. That much is admitted by almost everyone - economic analysts, political commentators and investors alike. But we also live in dangerous times, and this is something that far fewer members of the chattering classes are willing to admit. Aside from the increasing number of potentially explosive hotspots across the world (Ukraine, Syria, Libya, Gaza, Iraq, Nigeria, the China Sea), the Western neoliberal order of the past 35 years is pushing advanced liberal societies to a breaking point, with the global financial crisis of 2008 representing so far the deadliest twist in the evolution of an otherwise highly irrational and ultimately predatory socioeconomic order in which the main objective is to make the rich even richer at the expense of the rest of the members of society.
If governments continue to be proxies of finance capital and aspiring political leaders, cheerleaders for their financial backers, another catastrophic economic scenario is not really as farfetched as some might like to think. Many governments, industries and households are under debt bondage, with the result that societies are being drained of valuable resources to support and sustain the financialization of the economy.
On the basis of what criteria was the international investment community lending such huge sums of money to a national economy that was highly uncompetitive, maintained huge debt-to-GDP ratios, faced deep-seated structural economic problems and was notorious for its corrupt political culture?
Sure, there was a mood prevailing not long ago - especially in the United States - that everyone could strike it rich simply by borrowing or making highly speculative investments, but this in itself becomes a serious problem when financial scams and economic policy making join hands to dictate the rules of the game and the structure and operation of any given economic environment. In the 17th century, people used their life savings to purchase tulip bulbs in the belief that they would become rich overnight; more recently, individuals, households, industries, localities and even governments, took part in various mysterious financial schemes and instruments with the aim of a better future, but instead wound up bankrupt simply because the financial system had been structured to operate in this manner.
Wealth creation through heavy borrowing (by consumers and homeowners urged to take on more debt in order to maintain their living standards in an age of stagnant wages) and excessive debt leverage (which ended up destroying even great companies) was the way to go - even though the officials involved knew the game was rigged. But in a way, the financial institutions themselves were vulnerable to the very system they had created. Greece, for example, was able to borrow over $500 billion prior to being shut out of international markets in early 2010, and private lenders ended up with a substantial haircut on the Greek sovereign debt they held. German, French, Swiss and American banks would have lost billions, and some of them would have definitely collapsed,
if Greece hadn't been bailed out in 2010, and then again in 2012, by the European Union (EU) and the International Monetary Fund (IMF) - the twin monsters of global neoliberalism. By putting the country and its people under a state of peonage, the EU and IMF ensured that the banks would get back the money they had so imprudently lent to Greece in the years leading to the explosion of the Greek debt crisis.
So the question needs to be asked: On the basis of what criteria was the international investment community lending such huge sums of money to a national economy that was highly uncompetitive, maintained huge debt-to-GDP ratios, faced deep-seated structural economic problems and was notorious for its corrupt political culture?
Perhaps on the idea that, in the age of the financialization of the economy, governments would be compelled to bail out major financial institutions and banks at taxpayers' expense if trouble arose? This is certainly what happened in the United States in 2008 and in many other peripheral nations of the eurozone (Ireland, Portugal, Spain) following the collapse of Greece. The public sector stepped in and bailed out collapsing banks and financial institutions while passing on the cost of the bailout programs to average citizens. In turn, austerity policies went into effect in order to reduce the deficits and the debt ratios caused by the bailouts of the private financial sector, causing a major economic slowdown and inflicting huge pain on great segments of the population, especially on the less disadvantaged ones such as the working poor and the lower-middle classes.
Under financial stress, many governments are forced to implement decisions that lack democratic legitimacy and work against the interests of the working populations, setting the stage for the emergence of highly dangerous political currents.