There have been a lot of discussions going on lately, saying that what happens now is the beginning of the end of capitalism. Those who are more optimistic (or pessimistic, depends which side you look at it) are already wondering what the new economic system will be like.
I don’t believe that what Europe is coming through is a crisis of capitalism in general. I think it is a crisis of “toxic” capitalism. Capitalism (either we like it or not) is an economic system and like all systems, it has some basic rules.
Some of them are:
A) to make profit through the exploitation of human labour.
B) the sense of economic risk
C) competition
Maybe there are a few others, which I’m too stupid to understand, but let’s just work with these 3.
These 3 rules combined are the definition of “healthy” capitalism. This term may sound a bit paradoxical to some of you, but let’s just use it for simplicity. What brought us to this crisis is the violation of these 3 rules.
“Toxic” capitalism is looking for easy and fast profit. Which means, to make profit without any human labour involved. Basically it’s gambling: instead of investing some money in a company –looking forward to making profit out of the human labour of the people working for it- I buy stocks of a company today, only to raise the price of the stock and sell tomorrow. This way I make easy money but I’m a problem to the other shareholders, but also to the company itself. This tactic is violating rule A. The same way that common people can invest some money in the stock market, investment banks invest huge amounts of money in countries, buying bonds etc. But what happens when, being an investment bank, I don’t invest in german bonds because the german economy is reliable (“healthy” capitalism), but instead I invest in Greece just because I can gamble and make money easier? Who are the shareholders who lose from my gambling? Simply the country’s citizens. And the company is Greece.
Then, there was this other method, investors putting money on several prospects. It goes like this: I buy some investment products, in US dollars. Then the US dollar is rising towards the Euro, I resell it to some other investor. So, I make some profit by selling it, but also by currency exchanging. This is making money out of thin air, but let’s says that there’s still a bit of risk in such a move. What if an investor puts money on 2 prospects, maybe even contradicted to each other? Among gamblers there is the term known as “house edge”. House edge means that whatever result there is in a game, the house always has a profit, even a small one. Now, back to investments, when I put some millions on one prospect, my move is mistaken as “honest” by the market. So, due to mass psychology, some people will always follow my move. But they can’t see the other few millions I put on the opposite prospect, so usually they end up losing their money. This is violating rule B.
Some of the American investment banks (that have been torturing Greece lately) own rating agencies. Rating agencies are the ones that every now and then give a rate to the investment products of countries (among other stuff).
A note here: American rating agencies have the right to rate EU-countries’ investment products, while European rating agencies are not recognized by the US. It’s as simple as “you need us, we don’t need you”.
So it’s more than obvious that American investment banks have the pie and eat it too, as far as EU economy goes. When a rating agency (which has an investment bank behind it) is downgrading e.g. greek investment products is as if the investment banks were saying they don’t want to lend Greece any money. This makes the rest of the investment market cautious, so no one wants to lend Greece and as a result loan interests rise. This is called “self-fulfilling prophecy”. To give a better picture on how real this is, right after Greece signed the aid agreement with the IMF, rating agencies downgraded greek investment products to "junk" category so the chairman of the European Central Bank (the equal to the Federal Reserve Bank in the US) said that the ECB will still buy greek bonds, despite the bad ratings. The ECB just confessed that rating agencies play their own game, and since we, as the EU, need to keep the Euro strong, we don’t care about their ratings. This is ridiculous: the same group of countries that have been asking the rating agencies their opinion on their investment products, now say that they just don’t care about their opinion. This is violating rule C. Because eventually, US investment products are not in fair competition to the EU-countries investment products, since the rating of EU-countries investment products are in the hands of their competitor! Some people say that capital doesn’t have nationality. I say, it shouldn’t, but it still does.
The Obama administration lately voted new laws concerning the freedom of banks to do certain moves, but only within the US. They can still do their gambling outside the US. In a sense, they'd better do so, for American economy to get over the recession. Obama only wanted to make sure that there will be no new collapse in the real estate or any other market in the US. These “toxic” tactics that made the Lehman Bros collapse and took with it so many other banks as a domino, also affect the psychology of the real market, unemployment etc. In other words Obama told the banks “do whatever you want, but not in our own yard”.
The conclusion is that this crisis concerns Europe, not just because “that’s life” but mostly because there was a concrete intention behind it all. (Of course there is a crisis of capitalism as a system, but in my opinion it has to do with environmental issues more than with anything else) One would say “but why do the investment banks do this to Greece instead of to Germany?” The answer is that in Greece they found more vulnerable ground. The rating agencies may be gambling with countries but they also need to be considered reliable. If they downgraded the german or the french investment products they would lose some of their reliability. So they are looking for someone who’s on the brink of the abyss anyways and then they start pushing. It’s obvious already: by the next day that Greece signed the aid agreement, the rating agencies have been attacking Portugal and Spain, as the 2 next weakest EU economies. Besides, by hitting the PIGS (Portugal, Italy, Greece, Spain) they are sure that Germany gets the message too.
What really happens now is an attack of the american economy against the EU economy. EU was in deep slumber, it’s decision making system is too slow, it hadn't forethought of means to protect itself against such an attack. What’s worse is that the EU still has some contradicted interests in its body. Maybe they trusted the Americans more than they should have.
The goal for the american economy is to step n the EU economy. Greece is the Trojan horse of the Americans, used by the IMF. It proved that the IMF wasn’t necessary, neither its money, nor its know-how. Greece is getting a 110 billion euros financial aid, of which only 30 billion come from the IMF. But as we’ve already seen in the article Introduction to the IMF, the point is not for the IMF to get its money back – they now this will never happen. The point is the exploitation of soon-to-become ex-public sector businesses, energy, natural resources. Greece will not collapse – as a country, I don’t know about the society – because they don’t want us to collapse. They are just proving us for once more that our collapse is in their hands and they wanted us to beg before they come to save us.
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