Capitalism at crossroads

The Wall Street Journal summed up the last two weeks as 'the week that changed American capitalism'.

It started with the American government's bail out of Fannie Mae and Freddie Mac; both are state-owned mortgage banks, essentially, only that their deposits are not from ordinary citizens, but governments and large corporations etc. Then, people began to worry about Lehman Brothers, the 185 year old Wall Street veteran. Soon it's share price was worth close to nothing, and at the end, the American government let it go to bankrupcy.

We have since run out of adjectives to describe what followed Lehmans. Merrill Lynch, the 3rd largest investment bank in the world, was sold to Bank of America. AIG, the giant insurer, effectively became part of the US government. Then the US government announced they were looking at nationalising all mortgages in the US. Then yesterday, the last remaining investment banks on Wall Street, Goldman Sachs and Morgan Stanley, agreed to be become banks and be supervised by the Federal Reserve.

All this may sound remote to the observer. The easiest way to understand all this is to quote Karl Marx: 'What the bourgeoisie, therefore, produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable.' What the last two weeks have done was to prove to accuracy of the first half of this quote; had the American government not stepped in, we would now be looking at waves of corporate default, and millions of people - around the world - made jobless. This is not doomsday scaremongering - just read this.

Will the second part of the quote be proven right, too? Not so soon, I presume. After all, it took a quarter of a century (since the great retreat of the governments in the 1980's) for the first part to be given due weight. The extent to which the ex-establishment rises to the fore will determine our society for the next quarter of a century. Watch this space.