Must-See Animation: The Crisis of Capitalism

Here is an incredibly entertaining and well-done explanation of the financial crisis from David Harvey, who offers a Marxist’s perspective.

A few thoughts on the video…

Harvey suggests that capitalism has lead to a growing divide between the haves and have-nots. He is correct that a surge in debt has resulted in a surge in lender profits, but takes a leap to suggest that capitalism itself has failed. Capitalism is a sport where everyone tries to succeed, but some cheat to do it. Harvey is blaming the sport, not the cheaters.

The American Dream has become buying it all today and paying for it tomorrow…with interest. Houses, cars, clothes, college education. The average household spends thousands on interest every year. No wonder the financiers are getting richer!

As we bought stuff, our neighbors, the Jones’s, decided they wanted more stuff too, meaning we had to get more stuff to keep up with them. Bankers happily lent money for all of this stuff-buying and pretty soon, our entire economy became really dependent on people borrowing money to buy more stuff.

To encourage stuff-buying, the government relaxes banking rules, allowing banks to lend far more than ever before and do so at very low rates.

Finally, in 2006, we reached our endgame: the point where people couldn’t afford the monthly interest payments to buy any more stuff. And the economy since has been unraveling. The government is trying to lower our interest rates, temporarily, to so we can borrow to keep buying more stuff, but times have changed. All of a sudden, it’s not cool to buy as much stuff anymore. Regardless of the interest rates, we just don’t want more debt.

So who is to blame?

The bankers? Us? Sure…to some degree.

The roots of this crisis are a combination of corporatism and political corruption. Specifically, the corruption to favor financial institutions over people, and to deny natural business cycles from turning downwards for the last 30 years to keep a electorate happy. Decades of denied small recessions have helped create the big one we’re in now.

Just as we shouldn’t quit baseball over the steroid scandal, we shouldn’t give up on capitalism. But we should clarify the rules so that the financiers no longer have an unfair advantage.