Long-time financial operator Henry Kaufman, a former senior executive at Salomon Brothers and now the president of his own firm, has written a comment in the Financial Times bewailing the transformation of capitalism.
“American capitalism is rapidly disappearing,” he writes. “Its demise has been under way for some time and the economic devastation wrought by the COVID-19 pandemic is the latest blow to our political economy.”
He maintains that capitalism is being replaced by statism, “a form of political economy in which the state exercises substantial centralised control over social and economic affairs.”
“In financial markets, concentration is even more glaring,” he notes. “Today, a shrinking number of financial conglomerates hold a tight grip on investment management and the underwriting and trading of securities. The enormous underlying conflicts of interest are tolerated by the authorities.”Kaufman’s assessment has clearly been influenced by the massive and open-ended intervention of the Federal Reserve into the financial markets in response to the coronavirus pandemic.
“It is buying not only government but also corporate bonds—including low-quality issues, mortgage obligations, municipal bonds and exchange traded funds,” he writes. He notes that since the start of the year, the Fed’s balance sheet has swollen by $3 trillion to reach $7 trillion, and that “financial markets have come to expect the Fed to intervene in response to any sharp decline in equity prices.”
As a prominent representative of the US financial aristocracy, Kaufman is motivated by two concerns: the fear that ever-widening social inequality in the US is fuelling an upsurge of social and class struggles, and that statism is undermining the central ideology of the US ruling class.
This transformation of capitalism into what he calls “statism” worries Kaufman because it reveals too clearly the real nature of social and economic relations and represents a “great departure from the vision of the founding fathers.”https://www.wsws.org/en/articles/2020/06/30/kauf-j30.html
