A History of Boom and Bust

By Keith Flett. From LSHG Newsletter No. 33, Autumn 2008

BBC2’s Newsnight recently ran a series of clips of Gordon Brown’s famous mantra that under New Labour there would be no return to ‘Boom and Bust’ in the economy. It was a hostage to fortune. You don’t need to be a Marxist to understand that the capitalist economy is built precisely on this mechanism. It might be added that if the idea was to manage the economy to try to avoid recession then it was particularly silly to outsource the control of the Bank of England as Brown did in 1997.
You can take your pick of views on how bad the crisis of capitalism in the UK and across the world is likely to get, but there is no doubt both that there is a crisis and that we have been here before.
As usual you would struggle to grasp the historical angle from the mainstream media. A good starting point for understanding how capitalist crashes occur, assuming of course you are already familiar with Marx’s Capital is JK Galbraith’s book on the 1929 Wall Street Crash published in 1954, which looked at how the stock market became divorced from economic reality in a speculative boom. Something else also largely absent from the discussion so far and certainly from the Government’s pronouncements is what might be done to address the impact of the crisis around job cuts, loss of homes etc. There is a head of steam around a windfall energy tax and calls for investment in council housing and both are building blocks for a left-wing response to the credit crunch.
Again however we can look to history to find one possible answer in Roosevelt’s New Deal. The New Deal ran from 1932/3 to 1938 and it is not something that the left would want to replicate in detail today. It has been argued, for example by Howard Zinn, that far from dealing with underlying issues of capitalist crisis it simply did enough to prop the system up.
The point is that Roosevelt recognised, partially at first, but more consistently following pressure from reformers and the left that a massive Government response was needed to deal with the impact of the 1929 crisis. He took measures to control the US banking system and used strident rhetoric to attack speculators. He alsoinstigated programmes of public works and investment, as well as a minimum wage and maximum working week. It might be argued that given the scale of the crisis these measures were quite moderate and Roosevelt was not a supporter of Keynes’s idea that massive public investment is needed to deal with the slump.
But reaction from above was not the only feature of the New Deal period. Starting in 1934 there was an explosion of militancy from below as first strikes and then a wave of sit-downs, where workplaces were occupied to protect jobs and wages, rocked the system from below. It was this that led to the formation of the US Union federation the CIO. Whether state action, public investment or workers’ action from below, none of these strategies is in itself a revolutionary one that offers a way to get rid of the system that is at the root of the ‘boom and bust’ cycle.
But the left’s answer to the misery that recession causes can’t simply be that getting rid of capitalism is the answer, although it clearly is. A transitional politics going back to the debates in the Comintern in the early 1920s is needed. And you won’t read that in the media either.
Keith Flett
A version of this article first appeared in the Morning Star on 18th September 2008