All Your Marbles Are Belong To Us

We’re all subprime now, so says the general consensus by economists while the Fed bails out Bear Stearns and provides corporate welfare to the tune of over $13 billion daily $28 billion in just three days.

How did this happen, I and David Leonhardt ask?

Steve Randy Waldman tries to explain it to us:

Alice, Bob, and Sue have ten marbles between them. Whenever one kid wants another kid to take over a chore, she promises a marble in exchange. Alice doesn’t like setting the table, so she promises Bob a marble if he will do it for her. Bob hates mowing the lawn, but Sue will do it for a marble. Sue doesn’t like broccoli, but if she says pretty please and promises a marble, Bob will eat it off her plate when Mom isn’t looking.

One day, the kids get together to brag about all the marbles they soon will have. It turns out that, between them, they are promised 40 marbles! Now that is pretty exciting. They’ve each promised to give away some marbles too, but they don’t think about that, they can keep their promises later, after they’ve had time to play with what’s coming. For now, each is eager to hold all the marbles they’ve been promised in their own hands, and to show off their collections to friends.

But then Alice, who is smart and foolish all at the same time, points out a curious fact. There are only 10 marbles! Sue says, “That cannot be. I have earned 20 marbles, and I have only promised to give away three! There must be 17 just for me.”

But there are still only 10 marbles.

Alice, Bob, and Sue need a good smack, not more marbles to play with.

I’ve been reviewing my notes on Giovanni Arrighi‘s Long Twentieth Century. The “long century” refers to phases of material expansion (MC) followed by financial rebirth and expansion (CM’); the two phases making up a systemic cycle of accumulation, Marx style (MCM’).

Four systemic cycles of accumulation occurred in the history of capitalism, according to Arrighi. The first was from the 1340s to 1630s in Genoa, the second from the 1560s to 1780s that was Dutch, third was from the 1740s to 1930s under Britain, and the last was led by the U.S. beginning from the 1870s (Arrighi 1994).

Within every long century, a “signal crisis” occurred when profit was no longer to be made by the simple valorization process of material accumulation (Arrighi 1994: 215). The signal crisis expressed a “turning point” and “crucial time of decision” where the “leading agency of systemic processes of accumulation begins to switch its capital in increasing quantities from trade and production to financial intermediation and speculation,” (Arrighi 1994: 215).

The signal crisis was a harbinger not only of the switch to financialization, but also a “preamble to a deepening of the crisis and to the eventual supersession of the still dominant regime of accumulation by a new one” (Arrighi 1994: 215). Each of the three prior overlapping regimes of accumulation – the Genoese, Dutch, British – had ended in financialization. The U.S. experienced its first signal crisis beginning in the 1970s (Arrighi 1994: 315).

Arrighi named the events, that led to the death of the dominant regime of accumulation, the “terminal crisis” which “[marked] the end of the long century that encompasses the rise, full expansion, and demise of that regime” (Arrighi 1994: 215).

I’m interested in the credit crisis in terms of the longue duree.

Forthcoming: posts returning to the topic of my inaugural one, Takes on Economic Crisis, incorporating Bernanke’s latest break with the monetarist tradition; using spatial fix and accumulation by dispossession to explain the wave of foreclosures and personal bankruptcies; explaining my obsession with the neocons and why it matters; and soldiering on in my one-person war against the Scientologists.

I’ve not been posting, but been stewing over the above.