This is basically because I feel I have nothing really to contribute to the debate, no interesting perspective. Norm says he can't help you either (although he continues to provide 20-20 moral clarity). So, here are some things that have helped me think about the crisis.
The absolute best thing I have read about it, from back in January, is "Cityphilia" by John Lanchester in the LRB. This is very well-written, and very clearly explains what has happened. John Barker, in Variant (text/pdf), is also very good, from a more hardcore political position, on the causes and the way the causes have been mis-described in the mainstream media. Interesting, but a lot harder work, and from even more hardcore political positions, are this long piece by D Hamerquist at 3-Way Fight and this from the IWCA. Michael Walzer, a far better writer, is good in this piece in Dissent. Among bloggers, Dave's Part has paid most attention to the crisis.
I have three things to add. First, most British commentators blame the credit crunch on the American sub-prime mortgage market. This in turn implies blame on either (or both of) the banks for profligate lending and the "delinquent" poorer householders who really oughtn't to be homeowners. The reality, however, is that people get mortgages on the assumption of a steady increase in their earnings over time, so that paying out the same amount month by month will get easier. In Bush's America, however, there has been a dramatic drop in wages, in both absolute and relative terms, for a huge proportion of citizens, and it is this that has made sub-prime mortgages problematic. (This is something that those Americans who are considering voting for McCain should think hard about.) Even more striking - as this graph shows - is the growing gap between wages and productivity.
Second, the financial crisis makes clearer the nature of neo-liberal globalisation. To quote an old blog post of mine: contemporary forms of economic inequality are driven by what Peter calls 'a specific model of global capitalism that was not based on free markets, as often stated, but on markets fixed and governed by powerful multi-lateral institutions, which were rapidly transforming societies and destroying communities'. The idea, the ideology, of the free market has been powerful in the long Thatcherite years we've been going through. This has seduced some leftists into imagining a world in which the nation-state is increasingly irrelevant. In fact, the financial crisis shows how dependent the corporations are on the nation-states, and on the multi-lateral institutions which the states anchor, not just to provide security for their "free" competition, but to bail them out when it goes wrong. Risks are socialised while gains are privatised.
Third, for me the crisis shows that Marxism remains a useful tool for understanding the world. I don't fully understand his theory of the falling rate of profit, which he took from Adam Smith and other classical economists, and I know that most mainstream economists and many Marxists no longer accept it. It is nicely summarised here:
firms are required to maximize profits; they have the opportunity of introducing capital-intensive technologies that lower costs, thereby increasing profits in the short run; competition with other profit-maximizing firms pushes prices down to the new cost of production; the rising capital-labor ratio in industry creates a falling rate of profit.For Marx, this was not a "law" but a tendency: there are countervailing tendencies which offset it, like increased rates of exploitation, the globalisation of capital and the shift of money out of industry into finance. The play of these tendencies is precisely what put us where we are today.
I'll leave the final word to Little Richardjohn, writing a couple of weeks ago:
One lesson of this week is that competitors do not co-operate even in their own survival. The truth is that, with the amount of sheer technological power and historical experience available, the social need for competition has shrivelled to almost nothing. The same power which could be used to provide a decent standard of free life for everyone has been used instead to fuel competition for its own sake. The result being the chaos of regular Depressions, constant wars, the manipulation of the food markets to create profit and starvation, and the sabotage of the climate.
The market-worshipping ideology fashionable until last week was still operating in the Steam Age. It was historically obsolete. A deliberate, perverse attempt to hold back the process of technology which tends to make the lives of more people more bearable and reduce the need for competition and war. The social formula which states that the more technology is available, the less brute labour and competition are necessary to maintain a civil society.
A certain ratio of competition to co-operation has always been needed, but with each labour-saving, information-sharing, pain-relieving advance, there is less need for human beings to fight each other for their survival. The required amount of conflict today must be down at spice level, from its heyday as a bulk staple in the stone age recipe. Never has more technology been available, but making it work for people is not profitable, while making it produce cheap Kalashnikovs, cosmetic surgery and sub-prime mortgages is very profitable - for a short time. But short term profit is now discovered to be a very dangerous thing, it makes planets uninhabitable, and if allowed to rampage, will mean there is no long term to worry about. Wall Street and the City of London will be under thirty foot of water. This week was another warning that if we insist on behaving like cavemen, we will probably end up being cavemen.
[Picture stolen from Matt Miller]