Noam Chomsky on the Financial Crisis of 2008
Article published: Monday, December 8th 2008
The basis for this crisis is predictable and it was in fact predicted. It is built into financial liberalization that there will be frequent and deep crises.
In fact, since financial liberalization was instituted about thirty five years ago, there has been a trend of increasing regularity of crises and deeper crises, and the reasons are intrinsic and understood. They have to do fundamentally with well understood inefficiencies of markets … Crises become more frequent and also rise in scale as the scope and range of financial transactions increases.
Of course, all this is increased still further by the fanaticism of the market fundamentalists who dismantled the regulatory apparatus and permitted the creation of exotic and opaque financial instruments. It is a kind of irrational fundamentalism because it is clear that weakening regulatory mechanisms in a market system has a built-in risk of disastrous crisis.
The financial corporations can and did make tremendous short term profits from pursuing extremely risky actions, including especially deregulation, which harm the general economy, but don’t harm them, at least in the short term that guides planning.
We should be clear about the fact that capitalism [won’t] end [from this crisis] because it never started. The system we live in should be called state capitalism, not just capitalism …There is a lot of agony now about socialization of the economy, but that is a bad joke. The advanced economy, high technology and so forth, has always relied extensively on the dynamic state sector of the economy. That’s true of computers, the internet, aircraft, biotechnology, just about everywhere you look … So what you have is a system of socialization of cost and risk and privatization of profit. And that’s not just in the financial system. It is the whole advanced economy.
The proposals that are being made to rescue the economy, which are major and severe, nonetheless do not change the structure of the underlying basic institutions. There is no threat to state capitalism. Its core institutions will remain basically unchanged and even unshaken. They may rearrange themselves in various ways with some conglomerates taking over others and some even being semi-nationalized in a weak sense, without infringing much on private monopolization of decision making.
Nonetheless, I think the prospects [for positive change] are much better than they have been. Power is still incredibly concentrated, but there are changes with the international economy becoming more diverse and complex. The South is becoming more independent. But if you look at the US, even with all the damage Bush has done, it is still the biggest homogeneous economy, with the largest internal market, the strongest and technologically most advanced military force, with annual expenses comparable to the rest of the world combined, and an archipelago of military bases throughout the world. These are sources of continuity even though the neoliberal order is eroding both within the US and Europe and internationally, as there is more and more opposition to it. So there are opportunities for real change, but how far they will go depends on people, what we are willing to undertake.
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