Because capitalism, mind you, doesn’t always lead to crisis. As the economist Andrew Kleiman has said, you cannot blame capitalism for crisis. That is as blaming plane crashes on gravity. I mean, gravity is always there, right? But planes do not always crash.
And as a matter of fact, in the post-war period, 1945 to 1973, the West didn’t see a single crisis. It was a time when profits went up at the same time as salaries went up. The working classes became consuming classes for the first time in big parts of the West, could buy a TV, could buy cars, could go on vacation and things like that.
Now, in 1973, what happened? The oil crisis. After the oil crisis, all of a sudden, profits went down all over the West.
Now, of course, bearing in mind that if you have a company the point is to make profit, what does a company do when they no longer can make profit? Well, one way is to go bankrupt. Another way is to cut costs.
So, companies all over the West started cutting costs, meaning the cost of labor, lowering salaries, which of course meant also attacking trade unions. You had to do that in order to be able to push down salaries, as much as they did.
They got political help in the beginning of the ’80s with Regan and Thatcher, who launched major attacks on trade unions all over Britain and America.
Another strategy when profits went down was financialization. Now, as you might remember, finance had been a very repressed part of the economy since the Great Depression. Of course, because in the Great Depression, in 1929, they saw what would happen if you had an unregulated financial sector.
It led to a big bubble that then crashed, and millions were unemployed. So, after the Great Depression, they installed regulation for finance. Right?
Now, in the beginning of the ’80s, investors were pushing for these regulations to be taken away, in order to – as you remember, the formula money – product – money – to shorten this formula and make money off of money.
So, just money – money; that is the finance sector.
So, also in Britain and in America, regulations were taken away. So, all of a sudden, banks could lend as much as they wanted, they could have as high interest rates as they wanted, they didn’t have to have a distinction between the money that people put in the bank to save and the money they use for speculation.
The so-called Glass-Steagall law was taken away as well. So, this led to financial explosion, and later on when new innovations came in finance, they were totally freed from regulation.
The third strategy was privatization. Now, this is very smart, if you think about it, for a capitalist because if your product is, like, chewing gum, in a crisis, maybe that’s not the first thing that people are going to buy. It doesn’t matter, like, if you make a new package, or if you put a green-tea taste, or ginger taste, or mix all these different things in your chewing gums.
If people don’t have money, that’s not the first thing they’re going to get. But if you look at the important things of life – what are these? Water, electricity, communications, health, school, education, things like that – The problem was you couldn’t make profit off of these because these used to be owned by the state.
Now, capitalists all over the West said, “Why don’t we try to get in there? Because of course, if there’s a crisis people will still want water, they’re still going to want education.”
So, all these sectors were privatized, from the ’80s and onwards, bit by bit. And I know that people here tend to think that Sweden is this kind of social democratic paradise, where everything is public and we all get money for free.
Let me tell you that we have actually gone further than most countries in deregulating and privatizing things. I mean, today in Sweden, you can buy a school – McDonald’s can buy a school, and take money off of the state, put a half of it in Cayman Islands and go bankrupt.
So, Sweden isn’t really what it used to be either. So, these three strategies, combined of course with the fact that China and Soviet Union later on were included in the whole capitalist world economy, have changed a lot of things.
Now, what happened was, in the U.S., they managed to put salaries so low that people in the U.S. now needed to have two, three jobs to survive. How then were they going to consume products? And that’s like every capitalist dilemma, because what you want is of course your workers should not earn that much, so you cut costs, but the workers of all the other companies should earn a lot, ideally, so they can buy your products.
Now, if all the companies succeed in pushing down wages, nobody is there to consume. So that was a problem.
But then, what came in? The loans. Remember the second strategy, financialization. So, loans came in, so now all these people in the U.S. working three jobs were told, “Well, you can just take loans! If you take loans, you can get a new house and so on. Don’t worry, the interest rate is very low.”
Nobody saw that it went up after two or three years. So, when all that got together, we had the breakdown that we had in 2008.
Normal people in the U.S. had one capitalist on each shoulder. One of them of course is the company owner that you work for, that’s, you know, taking off of your work every day. The other one was the bank.