Regarding the recent global financial crisis triggered by the U.S. subprime crisis, most explanations are still at the surface or nonessential level, and deal with such things as technical operations, the concept of governance, the mode of operation, the management system, etc. These explanations blame over-consumption, the real estate bubble, financial derivatives, over-innovation of financial products, a lack of financial regulations, neoliberalism, and so on. However, far less work has been done to determine the real cause of the crisis scientifically, in essence and at the system level, or to predict the course of the crisis and identify preventive measures, by applying the Marxist standard, viewpoint, and methodology.
According to Yu Haiqing, a Ph.D. from the Institute of Marxism of the CASS, some European and American communists have done deeper analyses of the cause of the crisis in relation to the fundamental structure of the capitalist system. In general, they believe that a profound systemic root cause for the crisis exists, that the crisis marks the bankruptcy of neoliberalism, and that the crisis is the inevitable result of the development of the inherent contradictions of capitalism.
The French Communist Party thinks that this crisis was not restricted to the financial or economic area. It also revealed a political crisis and a crisis in the capitalist mode of production (private ownership). Looking at it more deeply, the financial crisis is essentially a systemic crisis. The U.S. Communist Party thinks that the global financial development is not only the product of the neoliberal model of capital accumulation and governance, but also the result of weakness and contradictions in the U.S. capitalist system. The German Communist Party thinks that the crisis was not caused by the bankers’ mistakes or the state’s failure in banking supervision. The bankers just utilized a loophole in the system and caused over-speculation. Speculation is always an element of the capitalist economy, but in the monopoly capitalist stage, it has become a determining factor, existing in every aspect of economic and political life. The British Communist Party thinks that one should not attribute the economic and financial crisis simply to the “subprime” mortgage crisis. The Portuguese Communist Party thinks that capitalism has once again demonstrated its inherent nature and profound contradictions. The capitalist system does not resolve the problems that human society faces. Instead, it makes inequality, injustice, and poverty worse. The Greek Communist Party thinks that the crisis is capitalism’s inevitable economic fate. No governance policy can solve its inherent decay. The financial crisis not only demonstrates capitalism’s unavoidable cyclical crisis; it also proves it is inevitable for socialism to replace capitalism.
Marx started with commodities to analyze capitalism. He stated that the contradiction in the inherent duality of commodities (use value vs. exchange value) creates the possibility for recession and that the capitalist system’s private ownership makes recessions an inevitable reality. (Editor’s Note: Details of the author’s theoretical work are not included in this translation.)
The fact that the U.S. subprime crisis unstoppably proliferated to become a global economic crisis once again proves the truth of Marx’s theory of capitalist cyclical recession and the inevitable demise of the capitalist mode of production. This global crisis is the most significant historical event of the 21st century. The crisis is not only a severe financial crisis, but also a deep economic crisis, an ideological crisis, a social crisis, and a crisis of the capitalist system. It is an overall crisis for capitalism. This crisis will cause profound social change. This crisis tells us that, not only has a basic contradiction in capitalism not been resolved, but it also manifests in a new and more acute form. This crisis makes people rethink the shortcomings of the capitalist system and re-examine the hypocrisy and anti-scientific nature of the capitalist ideology. On the surface, this crisis appears to be a crisis for the neoliberal model, but, in essence, it is an ideological crisis for capitalism’s core values, universal values, human rights concepts, and the concept of democracy.
The U.S. financial crisis serves as a counter-example to prove the success of the socialist market economy with Chinese characteristics.
The essential difference between socialism and capitalism is the ownership of the means of production. The essential difference between the socialist market economy and capitalist market economy is also the ownership of the means of production. Capitalism’s private ownership means that the crises triggered by the duality contradiction in a commodity economy are inevitable. Under private ownership, capital pursues profits and thus incites greed. Greed can be temporarily controlled or tempered, but it cannot be controlled forever. Under public ownership, capital’s pursuit of profits can be adjusted or controlled. Our country’s socialist market economy is tied to the public ownership system. With effective measures, it can avoid or prevent the financial or economic crises triggered by the internal contradictions in a commodity economy.
For our country to respond to financial crises, we should not only mitigate their symptoms but also address the root causes. We must not only prevent them at the institutional level but also at the system level. In this crisis, many countries have invested a lot of effort into rescuing their economies, but it has not been very effective. This tells us that bailout measures can only treat the symptoms but not the root causes. They can soften but not solve the crises. Financial crises or recessions cannot be avoided if one only pays attention to prevention at the institutional level but not the system level.
The financial and economic crisis in the capitalist world proves the superiority of public ownership. However, when adopting a socialist market economy, we cannot let the market totally control the course of our economy. We need to strength macro-control and establish a macro-controlled market economy. A controlled market economy is the actual advantage of a socialist public ownership system.
In general, we need to take measures at three levels to prevent financial crises: First, at the system level, we should unswervingly adhere to the economic system of socialist public ownership and the political system of the people being the masters. Second, at the institutional level, we should unswervingly adhere to establishing and improving the socialist market economy and the related credit system. Third, in the area of control and regulation of the market, we should establish effective supervision, control, and preventive measures, especially in the financial industry and the industries where monopolies exist. Our government’s crisis prevention measures are stable, fast, and effective at the operational level, but we also need to do research and develop some comprehensive, strategic, and forward-thinking measures, as well as methods at the system level and the institutional level.
Endnotes:
[1] Qiushi Theory Online, “Understanding the Essence and Real Cause of the U.S. Financial Crisis Scientifically,” September 6, 2011.
http://www.qstheory.cn/jj/jjyj/201109/t20110906_108321.htm.