Washington Babylon — May 4, 2009, 10:44 am

The Financial Crisis, the IMF and Karl Marx

The Atlantic has a good piece in its current issue called “The Quiet Coup: How bankers took power, and how they’re impeding recovery”, written by a former IMF official named Simon Johnson. He describes the U.S. as potentially an emerging banana republic, saying, “[E]lite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.”

Johnson lays out how hedge funds and investment banks “were the big beneficiaries of the twin housing and equity-market bubbles of this decade,” and says that the latest bailout plan, “which is likely to provide cheap loans to hedge funds and others so that they can buy distressed bank assets at relatively high prices—has been heavily influenced by the financial sector, and Treasury has made no secret of that”:

As Neel Kashkari, a senior Treasury official under both Henry Paulson and Tim Geithner (and a Goldman alum) told Congress in March, “We had received inbound unsolicited proposals from people in the private sector saying, ‘We have capital on the sidelines; we want to go after [distressed bank] assets.’” And the plan lets them do just that: “By marrying government capital—taxpayer capital—with private-sector capital and providing financing, you can enable those investors to then go after those assets at a price that makes sense for the investors and at a price that makes sense for the banks.” Kashkari didn’t mention anything about what makes sense for the third group involved: the taxpayers.

Fixing the economic crisis is complicated by the fact that the “political balance of power that gives the financial sector a veto over public policy, even as that sector loses popular support.”

It’s a good read from beginning to end, but it’s interesting to note that until not too long ago, such analysis — that political and economic elites wielded state power on behalf of their own privileged interests — would have been dismissed as crude conspiracy-mongering. It’s also worth noting that in many ways, Johnson was scooped about 160 years ago by Marx (who is newly fashionable these days)and Engels in The Communist Manifesto:

The modern bourgeoisie is itself the product of a long course of development, of a series of revolutions in the modes of production and of exchange. Each step in the development of the bourgeoisie was accompanied by a corresponding political advance of that class…The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.”

Not perfect, perhaps, but far more astute than most of the analysis we’ve been getting in the media for the past few years.

Share
Single Page

More from Ken Silverstein:

From the November 2013 issue

Dirty South

The foul legacy of Louisiana oil

Perspective October 23, 2013, 8:00 am

On Brining and Dining

How pro-oil Louisiana politicians have shaped American environmental policy

Postcard October 16, 2013, 8:00 am

The Most Cajun Place on Earth

A trip to one of the properties at issue in Louisiana’s oil-pollution lawsuits 

Get access to 164 years of
Harper’s for only $39.99

United States Canada

CATEGORIES

THE CURRENT ISSUE

March 2015

A Sage in Harlem

= Subscribers only.
Sign in here.
Subscribe here.

The Man Stopped

= Subscribers only.
Sign in here.
Subscribe here.

The Spy Who Fired Me

= Subscribers only.
Sign in here.
Subscribe here.

Giving Up the Ghost

= Subscribers only.
Sign in here.
Subscribe here.

Invisible and Insidious

= Subscribers only.
Sign in here.
Subscribe here.

view Table Content

FEATURED ON HARPERS.ORG

[Browsings]
William Powell published The Anarchist Cookbook in 1971. He spent the next four decades fighting to take it out of print.
“The book has hovered like an awkward question on the rim of my consciousness for years.”
© JP Laffont/Sygma/Corbis
Article
The Fourth Branch·

= Subscribers only.
Sign in here.
Subscribe here.

“Both the United States and the Soviet Union saw student politics as a proxy battleground for their rivalry.”
Photograph © Gerald R. Brimacombe/The LIFE Images Collection/Getty Images
Article
Giving Up the Ghost·

= Subscribers only.
Sign in here.
Subscribe here.

“Stories about past lives help explain this life — they promise a root structure beneath the inexplicable soil of what we see and live and know, what we offer one another.”
Illustration by Steven Dana
Article
The Spy Who Fired Me·

= Subscribers only.
Sign in here.
Subscribe here.

“In industry after industry, this data collection is part of an expensive, high-tech effort to squeeze every last drop of productivity from corporate workforces.”
Illustration by John Ritter
Article
Invisible and Insidious·

= Subscribers only.
Sign in here.
Subscribe here.

“Wherever we are, radiation finds and damages us, at best imperceptibly.”
Photograph © 2011 Massimo Mastrorillo and Donald Weber/VII

Number of U.S. congressional districts in which trade with China has produced more jobs than it has cost:

Young bilingual children who learned one language first are likelier than monolingual children and bilingual children who learned languages simultaneously to say that a dog adopted by owls will hoot.

An Oklahoma legislative committee voted to defund Advanced Placement U.S. History courses, accusing the curriculum of portraying the United States as “a nation of oppressors and exploiters.”

Subscribe to the Weekly Review newsletter. Don’t worry, we won’t sell your email address!

HARPER’S FINEST

Driving Mr. Albert

By

He could be one of a million beach-bound, black-socked Florida retirees, not the man who, by some odd happenstance of life, possesses the brain of Albert Einstein — literally cut it out of the dead scientist's head.

Subscribe Today