September 21, 2008 § Leave a comment
When not working on a mountainous pile of grant applications and, more rarely, my dissertation, I have been closely following the rollercoaster that has been the global financial system of late. It is, by most accounts, the worst spasm of capital contraction since the Great Depression, and although drastic measures are being taken by the world’s governments, the economy is by no means out of the woods yet.
Once again, I find myself wishing that I was better versed in basic economics as I struggle to understand the workings of mortgage-backed securities, derivatives, and other shadowy entities, although I am cheered by the fact that most financial analysts don’t seem to have a firm grasp on them either. Still, there are a few things that I do understand, one of which is that the world as we’ve known it for the last thirty-odd years may soon work very differently.
Much as the full effects of the stock market crash of 1929 were not felt until several years later, the consequences of this implosion will take time to unfold. At base, we have restructured our economies so that they are disproportionately based on consumption rather than production, which in turn has been based on the ready availability of cheap credit. This is as true of housing, technology, education, and leisure as it is of global finance, and the sudden scarcity of credit is bound to affect them all.
Moreover, the shift to consumption was accompanied by the privatization of areas of economic activity that had previously been administered, in whole or in part, by the state. In Canada, the shift can be seen most clearly in the area of post-secondary education, in which a greater and greater share of the responsibility for the cost of this “service” has been taken from government and placed on the shoulders of individual “consumers,” largely in the form of personal debt. It can also be seen in the real estate market, which inflated the cost of housing to historic and untenable highs before driving the entire financial system to the brink of collapse.
Over the years, I’ve written a lot about these subjects, albeit from a local and unabashedly personal perspective. It is, after all, is the way that most of us experience the workings of capital, and therefore how we are best able to understand it. But each small story has been part of a much larger narrative of transformation called neoliberalism, which is now weathering its first major crisis. That things will change because of it is certain; what is not immediately clear is how. And I will confess that I am not, at this moment, optimistic.