Global Credit Crunch or Another Irrepressible Conflict?

By Dominick L. Auci

Photo: Global Credit Crunch or Another Irrepressible Conflict?

Global Credit Crunch or Another Irrepressible Conflict?

Despite coordinated and dramatic cuts in interest rates, massive cash infusions and even nationalization of banks, the world's credit remains crunched and its financial infrastructure keeps crumbling. Entire nations, like Iceland, teeter on the brink of insolvency. Deserted by their old friends, they are forced to seek new ones. The very idea of European unity now seems a bit naive, and New World Order is suddenly and frighteningly unstable.

Many in the United States have found new relevance in Franklin Delano Roosevelt's inspiring speeches following the crash of 1929, which ushered in the era that Americans call "The Great Depression". This is a term without meaning to most Russians. Russia was barely touched by the upheavals in the West. "Why should Russians have all the fun of remaking a world?" asked Stuart Chase in his book, A New Deal, published in 1932. Like other progressives, Chase was deceived by Soviet propaganda extolling the benefits of government planning. Things are a bit different today. Russia's stock markets have endured their most brutal shellacking since the bad old days of the 1990s. Suspended trading recently caped a three-month slide which more than halved the RTS index. Congratulations to Russia! Today, she is integrated into the global economy!

It is natural to look towards the past for guidance on how best to deal with the present and predict what may happen in the future. But in my opinion, the differences are more illuminating than are the similarities between what is happening today and what happened during the1930s. Back then, the world was a much bigger place. There was no Internet and no means by which capital could flow between countries at the speed of light. It was relatively simple for Roosevelt, the American Government, and indeed any strong government, to make new rules and regulations. Capital was easily pinned down and couldn't run away. The Internet has changed all that and in my view, this fact makes Abraham Lincoln and Tsar Alexander II more relevant to the current crisis than FDR.

By Lincoln's first term, two largely separate civilizations had developed on the American continent, one North and the other South of the so-called Mason Dixon line. The weak national government in Washington was unable to deal with the crisis. Most Americans understood that the issue of human slavery divided them, but Lincoln towered over his peers in comprehending the root cause of the conflict and the governing dynamic that made it, in William Seward's famous words "irrepressible": namely, the upside-down relationship that had evolved in the Old South between labor and capital. Labor creates capital, and when capital grows so large and powerful that it becomes the master of labor, a Frankenstein monster is created.

The issue is not simply moral, but also practical. As the world has seen in several iterations over the last few millennium, such a system is economically inefficient and politically unstable. Alexander II, Russia's Lincoln, understood this also when he freed the surfs a few years before Lincoln signed the Emancipation Proclamation. What would have been the course of Russian and world history had Alexander II survived that fateful day in March of 1881, is a subject of intense and interesting speculation. In the event, most of his reforms were undone, the Union won the Civil War, and Russia and America went on to very different, but deeply intertwined destinies.

Today, the names have changed. Stroganov, Volkonsky, Hairston and Aiken have given way to Buffet, Gates, Deripask and Abramovich. But the basic problem seems strikingly similar. Capital has once again gained a stranglehold over labor and governments are unable or unwilling to right the situation. In my view, this makes today more similar to 1860 than 1930.

The polite term "credit crunch" masks a much more dire situation and gives the cover of economics to what is essentially a colossal political problem. Whether it was called Imperialism, Feudalism, Monarchy or Fascism, history shows that the domination of labor by capital is inefficient, unnatural and cannot long endure. Whether the outcome will resemble April 1865, March 1917, or something entirely different, sooner or later, the situation will be righted and something new will be created. But in my opinion, this time, the scale of the thing will be global and careful students of Russian and American history will have a special vantage point from which to understand events as they unfold and for conjecture on what's likely to happen next.

Dominick L. Auci, Ph.D.
Escondido, California.