Financial Crisis and the Question of Scale

Photograph by Nathaniel St. Clair

Toward Sustainable, Local Systems of Money and Credit

Judging by the actions of the economic authorities themselves, there seems to be no way out of the present economic malaise that is acceptable to the vested interests, but to restart the financialization process, i.e., the shift in the center of gravity of the economy from production to finance—meaning further financial bubbles.

– John Bellamy Foster and Robert W. McChesney, The Endless Crisis

It resulted in the abdication of economic and financial policy to an unelected elite and their eventual capture by Wall Street and the forces of speculation and financialization unleashed by unanchored central bank money and credit.

– David Stockman, “The End Game of Bubble Finance: Political Revolt”

The endless, cyclical crises that define global monopoly capitalism are caused in large part by a runaway process of financialization. The global economy is now captured by this process, the real economy of production—and, with it, the people—subordinate to it. Foster and McChesney are two of today’s most well-known academic Marxists. David Stockman is a former Republican Congressman and Director of the Office of Management and Budget under Ronald Reagan. But they share an incisive critical posture toward an economic system that is fundamentally undemocratic, consolidating wealth in the hands of an elite financial minority. Both ostensible sides have noticed this unlikely coincidence of belief. It is remarkable that many conservative and right-libertarian commentators have ended up sharing, perhaps quite unwittingly, the fundamental assessments of Marxian economists, namely, “that financialization is capital’s primary recourse today in countering a basically stagnant economy.”[1] Even, perhaps especially hard-core “free-market capitalists” (if you will forgive the oxymoron[2]) have noticed the problem. As economist Carmen Elena Dorobăț observes, “an overarching effect of expansionary monetary policies on international trade is the promotion of a certain business climate in global markets, one in which entrepreneurs believe they can thrive only with large amounts of debt and state support.”[3] This overlap points to the fact that our current left and right teams have lost a key element of the social-political-economic plot, wasting attention and effort on a number of largely futile internecine battles while an ever-smaller group controls or owns more and more—both in terms of dollar value and prerogative powers over our daily lives. The few people who have noticed and had the temerity to point it out have been smeared as heretics, traitors, and conspiracy theorists as power elites across the legacy media, in government, and at the top of the corporate pyramid try desperately to avert our attention from what is, their efforts notwithstanding, increasingly obvious. The perpetuation of state monopoly capitalism is made possible precisely by the absorption of the values that constitute the system—that is, by the fact that American elites have genuinely accepted those values as their own, albeit to varying degrees. Those socially positioned at or closer to the pyramid’s tip have more invested in the idea that a vampire economy in a permanent crisis state represents something good and just.

The concentrations and crises of monopoly capitalism create the conditions for new extremes. PricewaterhouseCoopers predicts that asset management firms will control more than $145 trillion by 2025, up from about $85 trillion in 2016. Economic and political inequality are interdependent.[4] Banks and asset management firms have captured the federal government, both materially and psychologically, using the state as capitalists always have to live totally outside of the competitive market system they cynically espouse. Too often it escapes the champions of capitalism that the point of their system is to consolidate market power in the hands of a small ruling class—and that this has nothing whatsoever to do with notional free markets and individual rights. Indeed, it requires an extraordinary amount of state intervention and upward wealth redistribution to financiers and wealth managers. During the global financial crisis, for example, the Federal Reserve System bought $1.25 trillion ($1,250,000,000,000) in mortgage-backed securities, in addition to hundreds of millions of both federal government agency debt and Treasury securities. It was still more aggressive in its response to the Covid-19 lockdowns. The government spent about $4.2 trillion to brace an economic system rocked by a brutal combination of ill-considered, authoritarian policies that aggravated already-extreme inequalities of wealth, race, and gender.

This capture results inevitably from the acquisition of, in Leopold Kohr’s words, “uncontrollable critical size.” In his book The Breakdown of Nations, Kohr presented an “integrated theory of size,” arguing that the question of institutional size and scale was of ultimate importance. Bigness creates wide inequalities of wealth and political power, allowing for atrocities—committed “under the cloak of its darkening multitudes”—that would be impossible “at the more translucent lesser densities.” Endless financial crises stand as testimony for Kohr’s theory, the state and the corporate financial bodies that use it having attained the “critical quantity of power.” Institutional opacity and unaccountability grow with institutional size, creating the conditions necessary for the extremes of unaccountability and brazen collusion that characterize each successive financial crisis. Far more attention should be paid to size not as a critical factor, but the critical factor in understanding and describing the metacrisis of hyper-financialized capitalism. Even the complexity and riskiness of the financial instruments would be manageable at the appropriate scale; indeed, the social connections and transparency created by appropriate bioregional scale are the factors that place the proper limits upon complexity and risk profile.

Financial institutions of globe-spanning scale are trusted just as a matter of course—more accurately perhaps, trusted because we seem to have no choice but to trust them. But there are other choices available to us, among them, the money and credit theories and experiments of anarchists, localists, and decentralists. Mutualists like Josiah Warren, Pierre-Joseph Proudhon, and Col. William B. Greene believed that the credit system should be owned democratically and locally. They regarded accountability as intimately connected with active community support of and participation in the mutual credit system. Much more recently, localist trailblazer Robert Swann argued that “the most pressing need” in the move toward “a local and regional self-reliant economy” is the money and credit question. Swann is in good company: Benjamin Tucker had also made it the pivot point of his unique anarchist approach. All of these forward-thinkers, informed by the crises ongoing when they are writing, tell us that in the financial stage of capitalism, we absolutely must regain control of the money and credit systems that now rule the world. They teach us the label-defying lesson that if we’re going to be ruled by money, we deserve a say from the guiding principles right down to the nuts and bolts. Local control is the best way to accomplish this because the scale is comprehensible to our tribal (here, in the sense of human social groups gene, not the world’s indigenous peoples).

When we get up close to our friends and neighbors, we find the heresies against the dominant ideology—in fact, the hatred of hustle culture has grown so strong that experts and mainstream opinion-peddlers have openly damned it as a mental health disaster. So we invite ourselves to see if there are other areas in which the ruling class narratives fall short of their promises. There is a muscle we need to develop as human beings, a trenchant approach to modernity and its ideological fixations—among them, the capitalist market (and capital generally) and the increasingly totalizing state (particularly the ascending nation-state). A critical interrogation of many of the most sacrosanct modern institutions gives us new tools with which to understand our observations of the present moment. Orthodox economic ideas practically require the disastrous outcomes we observe by making limitless growth, or the simulacra thereof, the ultimate requirement. The contradiction inheres in the fact that genuine growth, meaning an economy centered on human wellbeing and fulfillment, is not possible in a social system so stratified and unjust. “The creditors required a rising value-appreciation of their assets and crisis became the key gadget for them to capture political power.”[5] Is this insight Marxist? Libertarian? It is not clear that these answers have much practical importance, at least on the diagnostic question. Regarding the path forward, it will require an investment, but only to the extent that we are divesting from corrupt and undemocratic institutions. Participating in a local credit or currency network is a way to enrich your community life. But it is also prudent; it stabilizes vulnerable communities against the waves of capitalism’s contradictions. It is not supposed to be totally selfless; for his past, the Buddha suggested that we avoid extremes of both self-indulgence and self-mortification. Such investments must be treated as examples of what they are: mutual aid and solidarity. Labels and ideologies notwithstanding, do not let yourself believe that anything can change unless we trust our neighbors more than we trust the small list of banks and investment firms that own the world.


[1] John Bellamy Foster and Robert W. McChesney, The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China (Monthly Review Press 2012), page 30.

[2] The ahistorical notion that capitalism is the result merely of competition and free exchange has been considered in detail by writers such as Henry Meulen, Benjamin Tucker, J.K. Ingalls, and many other individualist anarchists.

[3] Carmen Elena Dorobăț, Mises Wire, “Misesian Insight: Cantillon Effects and Financialization.” Accessed on March 19, 2023.

[4] George Woodcock, The Anarchist Reader, Fontana Paperbacks 1977.

[5] Turan Subasat, “The crisis in context,” The Great Financial Meltdown: Systemic, Conjunctural or Policy Created? (Edward Elgar Publishing 2016), page 13.

David S. D’Amato is an attorney, businessman, and independent researcher. He is a Policy Advisor to the Future of Freedom Foundation and a regular opinion contributor to The Hill. His writing has appeared in Forbes, Newsweek, Investor’s Business Daily, RealClearPolitics, The Washington Examiner, and many other publications, both popular and scholarly. His work has been cited by the ACLU and Human Rights Watch, among others.