Updated 23 Sep: Commentary articles by elite figures in two major Indian publications (IE, ToI) asked the question on everybody’s mind. Is the US financial meltdown the end of capitalism? While nobody could possibly have an answer to that, discourse in the media is advancing two competing frames on the subject. The dominant frame of course has been “nationalisaton” (for e.g., AFP:2008), which has given rise to speculations about capitalism. Across the world, in TV shows, newspapers, blogs the question is being asked and debated over and over again. In an editorial Sep 22, Economic TImes stated:

A fund of roughly half a trillion dollars may be created to support a comprehensive effort to deal with troubled assets. This is clearly nationalisation of an order that would make any socialist regime look rightist! (Anon:2008a)

Against this context, two articles illuminate the competition to further the frame (IE)  or counter the frame (ToI). Either way you look at it, one cannot deny that the spectre of “nationalisation” has evoked a range of responses from commentators. Indian Express asks if the US government bailout of AIG is a cop out of capitalism. The commentary article by Nelson D. Schwartz (reproduced from NYT) begins with a rhetorical question: “Is the United States no longer the global beacon of unfettered, free-market capitalism?” and responds with the answer that it affects America’s future ability to promote market policies abroad. To buttress this point, the commentator cites a professor of economics from South Korea, who points at IMF’s double standards when the banks there collapsed:

“I understand why they do it,” he added. “But they’ve lost credibility in pushing for opening up overseas markets to foreign competition and liberalizing economies.”

Closer home, Swaminathan A. Aiyar asked a similar question: ‘Is America becoming socialist?’:

Leftists suspect the US takeovers aim to rescue rich shareholders. Not so. The government will acquire 79.9% of the shares of these companies at virtually zero cost, pushing down the share price close to zero. So, rich shareholders have been wiped out, and the bosses of all three corporations have been sacked.

This is not a rescue of the rich. It is a rescue of ordinary people who need mortgages and a functioning housing market, which would have collapsed had Fannie May and Freddie Mac gone bust. The takeover of AIG will save millions of insurance policy holders from losing their coverage and annuities. The takeovers aim to prevent financial panic from spreading and dragging down the whole economy, as happened in the Great Depression of the 1930s.

Aiyar’s commentary points at the distinction between nationalisation as in owning production vs welfare and argues that the US has always been the latter. He tries to normalise this action of the US government within sub-frames of a liberal welfare state and how this strengthen’s demoracies.

So we have here two opposing frames — one pointing at the long term impact of this financial and economic crisis on the image of capitalism (if not capitalism itself). Aiyar’s attempt, on the other hand is to explain this as a just move on the part of democratic governments. Business Standard (Anon:2008b), in its editorial ‘The emperor’s clothes’ supported the arguments contained in the IE piece:

If the US government were to practise what it and, by extension, the multilateral institutions over which it has significant influence, preach, such a measure would have been completely off the table….

The Washington line that bail-outs of errant financial institutions, even large ones, do more harm than good, which has been transmitted from Washington for so many years, rings hollow in the wake of the rescue of, first, Bear Stearns and now Fannie Mae and Freddie Mac in the US, not to forget Northern Rock in the UK, that other bastion of unfettered financial markets.

The editor of Business Standard, writing in his column “Weekend Ruminations” launched a strident critique of the US financial system:

The United States is supposed to have not just great markets and great enterprises, but also great regulators. The Federal Reserve and the Securities and Exchange Commission are respected and feared the world over. Those great markets also rely on institutional mechanisms, like the rating agencies – all of which are now American-owned. The amazing thing about this entire pack is that the financial crisis has shown all of them to be as naked as the emperor who strutted out in what he thought were his new clothes…

Someone said the other day that the worst is over. Don’t bet on it. All the assets owned by the firms that have gone bust (trillions of dollars worth) have to be sold, and it will be a fire sale at knocked down prices. That means enormous destruction of asset value, and someone has to feel the pain. AIG, for instance, has been given two years to sell down, so it is going to last a while. (Ninan:2008)

It is here that the injection of a some philosophy makes things really interesting. For a radical philosophical understanding of capitalism pick up Violence by Slavoj Zizek (perhaps the last of continental philosophers?). For an easy understanding of his ideas, watch Zizek! (documentary).

International Journal of Zizek Studies interviewed Zizek about his book Violence earlier in March this year. Here he talks about “capitalist violence” (10 min). He argues that often we focus on subjective violence (for e.g., violence that is subjected on one party by another) and do not focus on the objective violence that is in the system. People experience its effects (as in the current financial crisis) but cannot situate guilt because the violence is systemic and anonymous.

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Whatever be your political orientation, he make for compelling reading.

Also read about the media “imagination” of the meltdown for its readers here.

Reference

AFP (2008) ‘Nationalisation of US economy?’ The Straits TImes Sep 18 [Online] here

Aiyar, Swaminathan A.(2008) ‘Is America becoming socialist?’ Times of India, 21 Sep, [Online] Accessed 22 Sep here

Anon (2008a) ‘US bailout saves the day’ Economic Times, 22 Sep [Online] Accessed 22 Sep 2008 here

Anon (2008b) ‘The emperor’s new clothes’ Business Standard , Delhi, Sep 11, [Online] Accessed 22 Sep here

Ninan, T N (2008) ‘Naked’ Business Standard , Delhi, Sep 20, [Online] Accessed 23 Sep here

Schwartz, Nelson D.(2008) ‘Bailout, cop out?’ Indian Express Delhi, P 15 [Online] here