Issue 2 (2010) pp. 39-58 - Financial fault lines / Ben Hiller

Abstract

There are almost as many theories of the nature and causes of the global financial crisis as there are toxic assets burning holes in the balance sheets of large financial institutions. The problem with many of the theories is that they haven’t really explained a lot. As the late Peter Gowan noted, ‘Much of the mainstream debate on the causes of the crisis takes the form of an “accidents” theory’ (p. 62). The refrain of capitalism’s defenders has been that a generally good vehicle was crashed by the ‘contingent actions’ of reckless drivers. Whether it is the passing of the Garn-St Germain Depository Institutions Act in the early 1980s, the repeal of Glass-Steagall in 1999 or cavalier policies of the US Federal Reserve in the wake of the dot.com collapse, the prognosis is the same: the powers-that-be failed to adequately straightjacket the greed of financial traders. No doubt there is truth in this charge, but there is an ocean of systemic failure beneath the surface of human error. The Great Credit Crash , edited by Martijn Konings, brings together contributions that attempt to penetrate beneath this surface. Divided into three sections, eighteen essays cover the nature, geography and politics of the crisis. Much of the focus is on the structural and long-term problems that have afflicted the United States economy and the rest of the world. Many of the contributors identify contradictions in the ‘neoliberal growth model’ as being at the heart of the crisis. Originating in the stagflation of the 1970s and industrial decline of the 1980s, neoliberalism sought the construction of ‘new institutional mechanisms of control’ (Konings, p. 6) to shore up private capital in the face of a spate of economic crises in the heart of the world system. The tremendous growth of interest-bearing financial capital—as the financial sector overtook manufacturing to become the largest sector of the US economy—was the centrepiece, many argue, of an unstable and unsustainable regime of accumulation.