Which Crisis?

Xxxx Xxxxx Xxxxxx xxxxxxxx at xxxxxxxxxxx.xxx
Tue Aug 15 10:18:00 MDT 2000

Folks, sorry for cross posting. I will be grateful to see your comments if
possible. If you find this out of context, I apologize in advance..

Clifford, thanks for the response. I have read the Keynesian and Marxist views
on financial crisis. Some of them have been very useful in helping to clarify
what I mean by financial instability, especially Kindleberger's account of the
each phase of crisis (Manias, panics, crashes). However, I am dealing with the
*historical* aspect of the question at the  moment.

My questions were rather specific, although I intended to formulate them in
general terms.

More specifically:

1) Was the closing of the gold standard (devaluation of Dollar by Nixon and
transition to floating exchange rates)  a response or an outcome of 1971
currency crisis? Was 1971 crisis a product of Bretton woods system (as Helleiner
puts "when the finance was the servant") or an outcome of the inherent
contradictions of Keynesianism-- a capitalist attempt to control speculative
capital, which then bounced back as a crisis by real class contradictions in
production relations)

2) It seems to me that the 1971-74 crisis that was followed by oil shocks,
declining output and slow economic growth was more severe than the Asian crisis
if we think the overall effect on western capitalism (US).

So far, I have received two contrasting positions on the severity of each
financial crisis (70s versus 90s)

Gert told me that 1971-74 crisis was more severe. The reason for this is that
increase in petroleum prices hit the economies of the "West" deeply. With the
declining of GDP growth rates and capital expenditures, the West entered a
period of recession till 80s.

I can add to Gert that 1971 currently crisis was a rather a "panic" instead of a
severe crisis. It turned out to be more severe as 1974 petroleum shocks hit.
According to Verluysen (_The Political Economy of International Finance_),  the
response to crisis in the 70s was followed by a centralization of bank capital
in the form of "syndicates" that attempted to accommodate capitalism by  larger
loans. This lead to the formation of "consortium banks" when, for example,
"Lloyds Bank International Ltd formed a syndicate of 500 banks from almost every
quarter of the globe for a loan to the Federal Republic of Mexico". He further
says " During that decade, "syndicated lending has successfully weathered  the
breakdown of the  international monetary system of fixed parities, the 1974
banking crisis and the 1974-75 world recession".

Clifford, you are telling me that "the Asian financial crisis shook the system
to its roots". Do you mean that It has the similar comparable effects on the
West as the 1970 crisis ? It seems Third World countries were hit more severely
by the Asian crisis, although its effects were felt globally.  Since I am
dealing with their effects on *US finance capitalism* comparatively (which has
become a neo-liberal global strategy), I am trying to figure out how the hell US
finance capitalists handled the crisis in the 90s. There is a lot of literature
on the 70s, but not enough literature on 98 that covers the issue of "capitalist
response" in depth. Most of the literature deals with political responses,
apologetic IMF views, and regulation school, etc..

I know these are completely empirical questions, and depend on how we measure
severity ("business panic") under each historical circumstances, which is what I
am doing. That is why I asked "what do we mean by business response"?. In each
period, we see that the ability of capitalism to postpone its own contradictions
on the surface depends on a particular configuration of class relations (In Van
Der Pijl's Gramscian terms), organic "structure of capital", if you will, to
handle the crisis.

thanks to all,

Clifford Poirot wrote:

> A few thoughts below:
> > -----Original Message-----
> > From: Xxxx Xxxxx Xxxxxx [SMTP:xxxxxxxx at xxxxxxx.xxx]
> > Sent: Wednesday, August 09, 2000 7:56 PM
> > To:   ipe at csf.colorado.edu
> > Subject:      Which Crisis?
> >
> >
> > Hello folks!
> >
> > I know that hot summer is a hectic time for discussion. With the hope of
> > stimulating a debate on a topic, I want to ask a couple of questions to
> > the list. I appreciate if you can help me clarify my mind regarding the
> > following.
> >
> > 1) Which crisis do you think had a more devastating effect on the
> > interests of the American finance community and global capitalism in
> > general? 1971-74 ( 71 currency crisis followed by a recession in 74) or
> > 1997-98 Asian financial crisis?
>         [Clifford Poirot]
>         The Asian financial crisis shook the system to its roots. The
> 1971-74 crisis was IMO, not all that severe. The real "crisis" came later
> with the oil price shocks and slowdown in growth.
> >  Why?  Under which crisis do you think business panic was more severe and
> > response faster?  Under which crisis do you think the finance capitalists
> > (US bankers) were more organized in responding to the sudden slumps
> > occurring in off shore markets?
>         [Clifford Poirot]
>         I am not sure of this but as I understand it,the 1971-1974 crisis
> was essentially resolved by closing the gold window and adopting floating
> rates.
> > 2) Does the growing interdependency of financial markets minimize or
> > exacerbate the costs of financial crisis? Are financial markets more
> > *global* in the 1990s?
>         [Clifford Poirot]
>         There is a lot of work on the impact of globalization on
> instability. Mainstream "New" Keynesians have commented on this a lot-and of
> course, Post-Keynesians and Marxists have done a lot of work on financial
> instability as well.
> > 3) Following the deregulation of financial markets as part of the
> > neo-liberal strategy led by the US finance capital, do you think that
> > financial markets are more uncertain in 1990s compared to 1970s?
>         [Clifford Poirot]
>         Financial markets are more uncertain in the 1990's. Markets are more
> volatile, money moves faster. A good summary of the globalization debate and
> empirical evidence is provided by Held,, McGraw, Goldblatt and Perraton in
> "Global Transformations".
> >
> >
> >
> > thanks,
> >
> > --
> >
> > Xxxx Xxxxx Xxxxxx
> > PhD Student
> > Department of Political Science
> > SUNY at Albany
> > Nelson A. Rockefeller College
> > 135 Western Ave.; Milne 102
> > Albany, NY 12222
> >


Xxxx Xxxxx Xxxxxx
PhD Student
Department of Political Science
SUNY at Albany
Nelson A. Rockefeller College
135 Western Ave.; Milne 102
Albany, NY 12222

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