The enigma of capital

The enigma of capital and the crises of capitalism. David Harvey.

Edição de 2010.

Pág. 28. Excesso de poupança; ineficiência privada.

There has been a serious underlying problem, particularly since the crisis of 1973—82, about how to absorb greater and greater amounts of capital surplus in the production of goods and services. During these past years, monetary authorities such as the International Monetary Fund have frequently commented that ‘the world is awash with surplus liquidity’, that is, there is an increasing mass of money looking for something profitable to engage in. Back in the crisis of the 1970s vast surpluses of dollars piled up in the Gulf States as a result of the hike in Oil prices. These were then recycled into the global economy via the New York investment banks which lent big time to developing countries, setting the stage for the developing world debt crisis of the 1980s. Less and less of the surplus capital has been absorbed in production (in spite of everything that has happened in China) because global profit margins began to fall after a brief revival in the 1980s.

(…). Some state-run enterprises are indeed ineficient, but some are not. Travel the French train network and compare it to the pathetically privatised US and British systems. And nothing could possibly be more ineficient and profligate than the privately insured health care system in the United States (Medicare, the state-run segment, has far lower overhead costs).

Pág. 118. Resumo sintético do que foi a crise de 2008 em diante. Excesso de poupança financeira e depressão nos rendimentos do trabalho.

A synoptic view of the current crisis would say: while the epicentre lies in the technologies and organisational forms of the credit system and the state-finance nexus, the underlying problem is excessive capitalist empowerment vis-à-vis labour and consequent wage repression, leading to problems of effective demand papered over by a credit-fuelled consumerism of excess in one part of the world and a too rapid expansion of production in new product lines in another.

Pág. 142. Rolo das prefeituras alemães com Wall Street.

Like many other municipalities around the world, Berlin was having problems financing its public transport system during the 1990s. The increasingly neoliberal central government was reluctant to provide support. Financial advisers came up with a neat way to help out. Lease the transport equipment long term to investors in the United States and then lease it back. The investors in the United States, who received tax credits on depreciation of foreign investment, shared their tax break with the Berlin transit authority (who received around $90 million in the late 1990s). In effect US taxpayers were subsidising German municipal governments, many of which struck similar deals on everything from water supply and sewage systems to convention centres. When the US tax authorities figured out the scam they moved to close the loophole after 2004. But the contracts, complicated and written in English, stayed in force. The contract specified that the value ofthe leased assets had to be insured with a highly rated insurer. Berlin was eventually persuaded by the US investment bank JP Morgan to insure through a collateralised debt obligation (CDO) backed by many financial institutions deemed highly credit-worthy, including Lehman Brothers, AIG and the Icelandic banks. When all of these crashed in September 2008, and the CDO went toxic, Berlin had to either find another highly rated insurer (by then impossible) or deposit its own monies as collateral. It was liable for $200 million or more. Many other German municipalities found themselves in the same predicament (Leipzig was particularly hard hit because that city had leased almost everything it had). But it was very dificult, as one German municipal oficial noted, not to be lured into such a scheme when so many other municipalities were gloating at their good fortune back in the 1990s.