In an editorial for International Relations, Rick Wolff, UMass Amherst economics professor emeritus, discusses the significance of nation state in capitalism’s cycle. Capitalsit commentators initially rejected the notion of nation state, favoring globalization as a means to greater prosperity and wealth. However, because of the nature of capitalism’s instability, the nation state has become overwhelmingly important as a means to transfer debt.
Capitalism and the Useful Nation State
Rick Wolff
March 9, 2010In the US, the nation state undertook to move toxic debts off private balance sheets and onto the national balance sheet. Across much of the world, there have been similar nationalizations of unsustainable debt and of private losses from financial speculations and other corporate failures.
Undertaking state debt to pay for nationalizing private debt and undertaking still more state debt to bailout failed capitalists in other ways has demonstrated again the usefulness of the nation state. More than that, by drastically deepening nation states’ budget deficits, it becomes clear who is being positioned to bear most of the costs of today’s capitalist meltdown. The masses of tax-payers and the same masses as beneficiaries of state-provided services and payments are everywhere being told to “tighten their belts.”
UMass Amherst economics professor, Nancy Folbre, argues in her NY Times Economix blog that a massive default by “underwater” homeowners would actively reshape policies on home buying and lending. Folbre claims that it would “decisively increase the bargaining power of indebted homeowners, force changes in current federal policy and state regulation, and give individual debtors far more leverage in negotiating with creditors.” However, Folbre points out that most homeowners who are underwater won’t simply “mail their keys to the bankers” because they already love the neighborhood they live in, don’t want to disrupt the flow of their personal lives and feel a moral obligation to their financial commitments.