Marx, The Capitalist Economy, And The Government
How does the capitalist system accumulate and expand after the latest recession in 2008? (3 points).
2008 marks the end of a business cycle, and we are in a new business cycle today since 2009. The recovery period after the 2008 recession led to expansion. Since the latest recession in 2008 the capitalist system accumulates and expands by buying firms that went out of business. JP Morgan acquired Bear Stearns in 2008. As a result of this investment JP Morgan expanded. Companies that went under during the crash were bailed out and taken over by companies. Such acquisitions resulted in massive growth of the powerful companies. Marx’s theory of moral hazard is incredibly relevant here, some firms and companies were too big to fail. The capitalist would survive and grow bigger and there would be a dense market concentration. Another measure taken to accumulate and expand in the capitalist system after the 2008 recession is government intervention, expanded on next.
What was the role of the US government in that process? In other words, what were some of the policies implemented by the US government that supported the capitalists’ process of accumulation since 2008? (2 points)
Karl Marx business cycle explains the systematic operation and attests to the cure of capitalist economy decay being government intervention and rising above class interests (Heilbroner, 1998, p. 17). The role of the US government in the process was mainly buying out banks so that they remain operational and drastically lowering interest rates.
The Federal Reserve lowered interest rates to encourage economic activity. In doing so, loans were so cheap…it cost very little to borrow money. Borrowing costs were essentially nothing, which stimulated economic activity as more people were able to take out loans. Companies were expanding rather quickly at the opportunity to borrow money with little costs entailed. The competition was mitigated due to the crash, large companies were able to accumulate, invest, and expand. Additionally, the Federal Government was also buying securities in large amounts so that they money supply in the market would increase. This stimulated inflation, which can be another facilitator of growth. Lastly, firms that survived the crisis in 2008 could acquire cheap capital, which was usually auctioned off by banks that took the property. The deregulation of governing savings and loan institutions were policies implemented by the US government to support the capitalists’ process of accumulation after 2008.
Does this role reflect the political economy view of the government? Please explain your answer. (2 points)
Yes, the role above reflects the political economy view of the government. There was a great degree of government intervention in the economy around the recession in 2008. Political economy views the government as being intertwined with the workings of the economy, and so when the economy is set off equilibrium the government does need to intervene. As we can see from the financial crisis, the government was incredibly involved in bailing out banks and other companies as well as pouring money into the economy to stimulate it. Note: This is a research question. You are asked to conduct some research on the US economy’s recovery and expansion since 2008. Please feel free to draw on materials that you have learned in our class, and in other classes.
