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The War of Wealth

As the United States struggles to recover from the Crash of 2008 and the subsequent Great Recession, we should remember that while sub-prime mortgages and credit default swaps may be new, the inherent instability of markets and the "irrational exuberance" of investors are not.

In the 19th century the U.S. had five market crashes and depres­sions (then called panics)."The War of Wealth," a play based on the Panic of 1893, paled in comparison to the real Panic, which led to overproduction, deflation of the currency, a sharp decline in the prices of farm goods, a reduction of investment in railroads, a great expansion of debt, and a European depression that led creditors to demand payment in hard currency. In the U.S., widespread bank­ruptcies, an 18% unemployment rate, labor conflict and a farmers' uprising afflicted the nation. These problems led to increasing calls for the government to play a more active role in regulating the giant corporations that came to dominate American business by the end of the 19th century.

The War of WealthHomeowners facing foreclosure protest at Countrywide Financial Corporation, Boston, 2007.

By the time the depression ended in 1897, capitalists like J.P. Mor­gan, John D. Rockefeller and Andrew Carnegie had taken advantage of the many business failures to consolidate and concentrate their control over banking, oil and steel. Market crashes, like the Great Crash of 1929 and the Crash of 2008, lay bare underlying weaknesses of the economic system, including gross inequality of wealth, over-leveraged banks, lack of regulation and irresponsible lending. What made 20th century depressions more severe was that most Americans lived in cit­ies and could no longer feed themselves when times were bad.

Although capitalism has the resilience to recover from these panics and depressions, the costs in deprivation and suffering are high, as can be seen in skyrocketing unemployment and home foreclosure. In 2010 alone, nearly three million homes (or 1 in 45) went into foreclosure.