There Hasn’t Been an Economic Recovery After the 2008 Crisis: Now Capitalism Itself Is at Risk
There are signs the so-called economic recovery is heading for a re-evaluation of its ambitious pretense. At first glance, the stock market suggests otherwise—you might, with reason, be wondering which of the newly legalized herbal treats I have been inhaling. And you’d be right to entertain such qualms. After all, the Dow Jones speaks the clear language of numbers. The chart below leaves little room for doubt.
Chart courtesy of StockCharts.com
The Dow has risen from 6,620 points, the bottom of the 2008 financial crisis, to over 26,000 points on January 26, 2018. As the chart above shows, this is one of the sharpest recoveries in the history of the Dow index. Some investors have certainly increased their net worth in the past decade. But there’s something different and dangerous about the past decade’s market performance. As much as stocks have beaten all performance records on Wall Street, there has been no corresponding economic recovery.
By older standards, say before 1990, the media and Wall Street establishments might describe the recession that started in 2008 after the second-worst financial crash in history as entering its 10th year, as economist Richard Wolff suggests. Wolff charges that banks have been the ultimate winners and arbiters of capitalism over the past 50 years.
The Economy Is a Slave to Finance
Everything that individuals do to live in the modern world, from shelter to education, requires the intermediation of a bank. Student loans, mortgages, credit card applications, car loans, and countless other activities need you to visit or interact with a bank. (Source: “Wall Street Bankers’ Executive Bonuses Highlight Worsening Inequality,” The Real News, April 3, 2018.)
The problem is not that banks offer these services. Rather, it’s that the banks which triggered the 2008 financial crisis have been the only ones to really recover. After all, how else could Wall Street afford to pay the highest bonuses in a decade if they hadn’t? The banks secured almost a $1.0-trillion bailout—for their mistakes—and then caused a credit crunch, grinding the economy to a halt.
The 2008 financial crisis, preferably, should have triggered an examination of what capitalism itself means nowadays. The capitalism of Adam Smith was as much a utopian idea as Marx’s scientific communism about 75 years later. Both systems involve the achievement of a just society, even if they propose different routes to get there.
Yet, as Lehman Brothers collapsed and the misuse of finance created such toxic tools as “subprime mortgage-backed derivatives,” governments, academics, practitioners of finance, and citizens should have been asking the big questions about capitalism.