Amerikan financial leaders were taken by surprise with the recent financial meltdown in Amerika and around the world. Even those who predicted the credit crisis did not expect the far reaching consequences. In fact on October 23, former Federal Reserve Chair Alan Greenspan told congress he was "shocked" at the situation and admitted that capitalism was not working as well as he thought it would. Greenspan went so far as to say he was "partially wrong" to think the free market could regulate itself. Greenspan was the chair of the Federal Reserve for over 18 years.
In reality the capitalists know perfectly well that the free market does not work. The regulation of financial markets (or any government regulation) contradicts the fundamental principals of free market capitalism, but they are happy to regulate when it works in their financial interests. Some people are complaining that the government is introducing "socialist" practices with this regulation. But the capitalist government of Amerika knows very well what it's doing - it is preserving capitalism, not promoting socialism. The inevitable crises of capitalism expose weaknesses in the system. To preserve that system, the capitalists need to shore up the economy. If that requires regulation, they will have no problem doing it.
Marx taught us a couple musts of a capitalist economy: capital must circulate and capital must accumulate. These two musts conflict with each other. Accumulation led to imperialism and the limits that imperialism put on circulation led to the crises of the 1930s in the capitalist world.
John Keynes represented the path to saving capitalism during the Great Depression. A path that John McCain and Joe the plumber would call socialism today, but a path that was developed by Keynes and implemented by the Roosevelt administration that was explicitly in opposition to socialism, which existed at the time in the Soviet Union.
Marx did predict this crisis - not directly because he could not know our specific conditions today. But to the extent that he correctly predicted that capitalism will always face crises, Marx was once again right about capitalism. In basic terms, Marx said that capitalism is not rational and so the capitalists are going to overproduce as a part of competition because they can not know the exact size of the market, nor can they rationally apportion that market to the producers.
Lenin expanded on Marx's theories explaining that imperialism is the highest stage of capitalism. One of the definitive characteristics of imperialism described by Lenin was the rise of finance capital. Like all capital, finance capital could not just sit still. So markets were created that didn't actually sell material goods but sold money itself or promises of money in various forms. Not only was this the haven for the imperialists with ever-concentrating capital, but increasingly, the oppressor nation became involved in these markets as ways of getting their share of global super-profits, while helping the imperialists manage these massive economic games.
In the 1930s, there was anti-capitalist pressure from a socialist Soviet Union that was expanding its economy at record rates while the capitalist world crumbled. Meanwhile fascism exerted its own pressures on the future of capitalism in Europe unleashing unbridled violence to advance their own economic prosperity. In response, the idea that government was responsible for a nation's economic welfare and had the right to interfere in economics became prominent among the bourgeoisie for the first time.
The success of the New Deal was built on shattered post-WWII Europe and Japan, which the united $tates could use as an outlet for its own expanding production. Without these consumer nations, an army of people ready to work at home and new access to labor and resources of dozens of former European colonies, the New Deal policies would not have succeeded as they did in bringing a thriving u$-led capitalism to life.
Compared to the New Deal days, the u$ economy may be too top heavy this time. With most amerikans working in finance, law enforcement, state bureaucracies, advertisement/sales and other service industries, we have a country of parasites. There is no surplus value and little surplus population to fall back on. And we'll probably see a fascist revolution in this country before we see large numbers of amerikans taking up public works jobs that they currently force on Mexicans and other oppressed peoples.
Today the united $tates is no longer a rising economy, it is at the top and it is top heavy. With the former socialist countries having been incorporated back into the capitalist economy in the later decades of the 20th century, there are no new markets to break into. And with a large population that does not produce close to enough to sustain itself, being cut off from Third World labor and resources would be disastrous for the u$ economy.
While Keynes held that government intervention was necessary to keep a capitalist economy expanding, he did not recognize the limits on capitalist expansion recognized by Marx and Lenin. These limits make it harder and harder for capitalism to recover with time as accumulation becomes more extreme. Without imperialist war and massive loss of life, this accumulation remained a barrier to recovering from the Great Depression.
The Keynesians, increasingly the majority of capitalists during this economic crisis, say that the only way to stop the irrational banks is regulation - capitalism can not regulate itself because of the drive for profit, and the lack of information about competitors. We must distinguish this system of capitalism from socialism, which is characterized by nationalization of industry and finance, but more importantly, is controlled by a dictatorship of the proletariat working in the interests of the vast majority of the people. Any nationalization done under capitalism is controlled by a dictatorship of the bourgeoisie working in the interests of the few. In China, after Mao died, the bourgeoisie took power and began running the government for the profit of a few. They left industries nationalized and this fooled some people into thinking China was still socialist. But as the recent actions of the Amerikan government demonstrate, nationalization is not synonymous with socialism.
Although we should not confuse capitalist regulation with socialism, it is interesting to note that there are reports of a big upsurge in sales of Karl Marx's book Capital, as well as visits to his grave as people around the world seek an explanation for the financial crisis. While capitalism is making big profits for the imperialists and their labor aristocrats, those people benefiting have little interest in questioning the system. But in a time of crises some people are apparently inspired to think a little harder about what capitalism means. We don't anticipate this leading to a global upsurge in support for communism. Even with the current economic crisis, the workers in imperialist countries are still benefiting from the exploitation of the Third World. And so their economic interests are still tied up with capitalism.
True to the interests of the Amerikan citizens, what is considered progressive radio in the u$ can't stop crying about mortgages, car payments and kids having to go to community college. They completely ignore that most people in the world have never owned a car, a house or had a chance to get a college education. Joe the plumber, McCain's example of anti-Obama working people in Amerika, did a press event where he announced he was scared of Obama trying to take the country to socialism. Joe the plumber is in the richest 3.89% globally, that's why he's scared of wealth redistribution. When things get really bad, Joe the plumber is going to be fighting for national socialism so that at least he doesn't have to share with other nations.
For those labor aristocrats who want a more rational economic system, we encourage them to study communism. But we won't lie to them and tell them that fighting for communism is fighting for their economic interests. This will just foster reactionary nationalism, or fascism. And it is times of economic crisis when we need to be most wary of fascist upsurges in countries where the workers are benefiting from the exploitation of oppressed nations.
In general, times of capitalist crisis are times of opportunity for the international proletariat. While it is clear that it will take a lot more than the latest crisis to move the imperialist country citizens into the ranks of the proletariat and form a mass base for revolution, the revolutionary movements in Third World countries can take advantage of imperialist weaknesses. The relative strength of imperialism at this point in time may pull it through, but certainly the current crisis may allow our comrades in the Third World to gain some ground in the fight for liberation. The imperialists are doing what they can to shore up smaller countries hit hardest by economic collapse by providing IMF loans (Iceland, Hungary, Ukraine). But these loans are provided strategically and will not prevent the suffering and exploitation of Third World people, which existed before this economic crisis and will continue after it until the people rise up and put an end to this system of imperialism.
Notes: See MIM Theory 1 and 10 for further elaboration on why the Amerikan citizens are part of the labor aristocracy and not the proletariat.