David Harvey's The Limits to Capital makes for especially interesting reading, given that he argues (extrapolating from Marx) that contradictions in "the circulation of capital" lead inevitably to economic crises that get expressed in the credit system (which had evolved, in his view, to solve lower-order crises of "overaccumulation" -- aka "savings gluts"). He looks at bubble phenomena from a Marxist viewpoint -- bubbles form when capitalist accumulation necessarily fails to achieve balance; the crises that occur when they pop are tentative, temporary solutions to the contradictions inherent in capitalism. When the capability to reinvest in capital formation is constricted for lack of viable opportunities --- when profit can't go back into making more capital -- fictitious capital is created via the credit system. That yields a speculative frenzy (since the relation between opportunity and underlying economic capapcity has been severed) that is unsustainable. So then, inevitably, there must be devaluation, to re-create opportunity in the ashes.
Perhaps that is where our economy is now. Indeed, Eliot Spitzer writes in his Slate column that we have yet to see enough creative destruction:
Although everybody claims to love the market, nobody really likes the rough-and-tumble of competition that produces the essential "creative destruction" of capitalism. At bottom, this abhorrence of competition and change are the common theme that binds together the near death of the American car industry, the collapse of the credit market, the implosion of the housing market, the SEC's disastrous negligence, the Madoff Ponzi scheme, and the other economic catastrophes of recent months.He points to those tell-tale marks of capitalist decadence -- cronyism and rent-seeking -- and appears to be wishing for a real rain to wash the system clean. He concludes:
Both GM and the SEC need to see a change in market conditions as an opportunity—not a challenge to market share.... This is a unique opportunity for President Obama and the Congress to take two seemingly different entities and force them to play by the real rules of capitalism: compete and transform to produce better products.
It's the word force in that passage that strikes me as a bit ominous. That's probably because state repression of that sort plays a prominent role in Harvey's crisis theory. After differentiating between "periodic crashes" and "long-run problems that arise with the irreversible transformation of configurations in the circulation of capital, class formation, productive forces, institutions and so on," Harvey argues:
The latter, as Marx observed, are strongly affected by the increasing socialization of capital itself, first via the agency of the credit system and ultimately through socially necessary interventions on the part of the state. The character of periodic crashes is thereby also transformed. Instead of being the aggregate social effect of an essentially atomistic, individualized process, they become a social affair from the very outset. The state, via its policies, becomes responsible for creating what it hopes will be a 'controlled recession' that will have the long-run effect of putting accumulation back on track.Not to get all paranoid, but this sort of argument puts Rahm Emanuel's intention to never let a crisis go to waste in a much more sinister light. Harvey reminds readers of Lenin's view of the matter, that imperialist nations can always resort to war to solve crises; nothing works better for devaluation than some wanton wholesale destruction. That may go a ways toward explaining Bush's inexplicable foreign policy. Obama has promised to end one war; let's hope the deteriorating economy doesn't force us into another.
The options for the internal transformation of capitalism become increasingly limited, more and more confined to innovations within the state apparatus itself [think TARP, et. al.]. And once the limit of the state's capacity to manage the economy creatively is reached [think, the zero interest bound] the increasingly authoritarian use of state power -- over both capital and labor (though usually with far more devastating effects upon the latter) -- appears the only answer. Crises embrace the legal, institutional and political framework of capitalist society and their resolution increasingly depends upon the deployment of naked military and repressive power.