When I arrived for the first time to the land of the largest capitalist nation in the world, I was amazed by the power of capitalist productivity in the United States of America. As a young teenager, less than sixteen years old, I saw huge tractors and combines cultivating hundreds of acres and producing tons of corn and soybean grain, all operated by a single family. I saw the hands of a farmer hardened by the land he cultivated and softened by the money his land generated. I did not see then the invisible hands of the banks financing all that operation. I could not see any signs of failure then.

A year later, my education fate flew me to the other extreme. I arrived at the land of the largest socialist nation in the to spend the next six years studying while observing socialism in the Union of Soviet Socialist Republics (USSR). I recall how often I had to stand in line to buy a grocery product, only to be disappointed an hour later because the item I waited for is no longer available. That system would not last, my instincts told me. I recall having to buy a communist publication as a condition for buying a book of math or computer science. That system would not last for long, I felt it.

I recall having to step over people lying drunk in my morning journey to school and on my way back. I recall scores of students graduating from medical, law, and engineering schools without even attending classes; they were political activists or rich foreign students. I recall people having to go through surgery only to fulfill the quota plan for the surgeon at a given hospital. I recall the primitive radio monitor fixed on the wall of my dorm room, which must have been a two-way radio. Every time I disabled the radio, technicians would show up at my room to fix it; I never asked for the service. I knew that system could not last for long. My gut feelings, my instincts, and simple analysis turned out to be true only ten years after I graduated and left the Soviet Union. Socialism collapsed and the Soviet Union was dismantled by 1991.

The six years I spent in the Soviet Union gave me an experience of a lifetime. For one thing, I could not experience the life under socialism today even if I wanted to. Most importantly, I learned the principles of economy, political economy, and social structure of both socialism and capitalism. The teachings of Karl Marx, Vladimir Lenin, and Friedrich Engels were as important part of the curriculum as the subjects of math, physics, and engineering. The theory of historic materialism developed by Marx and later refined by Lenin suggested that capitalism would fade away only to give rise to socialism. That view was dead beaten in real world when socialism fell first. Marx’s theory of the “surplus value” was correct only in the sense that under capitalism the wealth tends to accumulate in the hands of the few. But the other part of the theory that the poorer classes of workers and farmers would revolt for their stolen rights of ownerships never materialized.

When I arrived at the land of capitalism for the second but longer period of time, I observed what I could not have observed during my first trip when I was a young boy. The farm I lived in during my first trip was no longer the same. It was confiscated by the bank which, few years earlier had financed its production, in exchange for the debts which my host family failed to pay. The hardworking farmer lost his land and the seed company he co-owned with his brothers. This system would not last, my instincts told me.

The same monster, the bank, swallowed the machine factory owned by one of my friends in the city of Milwaukee in Wisconsin. I recall how my friend traveled to my home country in attempt to set up a factory to help industrialize a developing country. I recall how the owner (my friend) was enthusiastic about helping people get jobs, supporting education, and how much he detested laying people off their jobs. Just like every other business under capitalism, his was also owned by the bank. Typically, businesses in capitalist countries are indebted to one or more banks. I still recall the words of an investing bank representative to the owner of a small technology company: “You cannot be in businesses without being in debt.” My machine factory owner friend lost his machine shop, the one that produces real products right here in the land of capitalism. It was making products and generating profit when it was confiscated by the bank. The banks for some time were going after the life insurance policy of my friend as a guarantee for their supposedly lost wealth! I knew then that this system would not last.

During my tenure at one of the largest corporations in the world (more than 160,000 employees at the time), I witnessed how scores of the best engineers and technicians were escorted out of the building under the auspices of layoff. The first round of layoffs which eliminated more than fifty thousand jobs was done at a time when the company was profitable and making lots of money. The layoffs were necessary to boost the stock prices of the company which have soared over the roof.

I admit that these are just stories, instincts, and guts feelings. So where are the signs of failure if there are any? After all, capitalism has gone through several rounds of recessions, depressions, downturns, low productivity, and corporate failures in the past. It has always emerged as strong or even stronger. Why is it different this time?

As explained earlier, faults or defects do not necessarily generate errors. And errors do not necessarily lead to failure. A fault generates an error only when certain conditions occur and trigger that fault. Only then an error occurs. An error is a deviation from the normal behavior of the system. If the error is observed, detected, isolated, and contained properly, then failure could be avoided. Just like in any physical system, the recovery from an error or a deviation from the normal behavior of the system is not automatic; a correct identification and isolation of the problems and a correct containment is absolute necessity to restore the system and to prevent failure.

The great depression of the 1929 was an erroneous behavior of the economy and the market at large. The stock market collapsed; many people lost their lands, farms, homes, and companies. It took several years of rebuilding the economy and a great war (World War II) to contain the erroneous behavior of the market and to resume a normal functioning of the system. The conditions which led to the depression (i.e., the erroneous behavior of the economy) were related to inflated stock values as reported by the Economist magazine on November 2, 1929: “There is warrant for hoping that the deflation of the exaggerated balloon of American stock values will be for the good of the world”134. It was reported that the prices of financial market increased during the period between 1925 and 1929 by 120%, while economic growth for the same period has not exceeded 17%. And when the market has collapsed, it lost over 93% of its value, which means that the market returned to its real normal value which was obviously much lower than what the stock market had indicated.

Another market error occurred in 1987 when the market collapsed again. Observers noted that the prices of financial market had inflated significantly compared with the real size of the economy, where the difference between the inflated values and the real ones was more than 200%. It took another war of large magnitude to contain the effects of this erroneous behavior. The Gulf War led by George Bush, the father, helped contain the problem and bring the economy back to its normal behavior.

In 1999, the economy generated another error when the so called “Internet bubble” was deflated and the market lost hundreds of billions of virtual dollars. The economy was heading to a steep dive. The containment procedure was invoked again: a lengthy war! This time the war did not succeed in containing the error or ending the crisis. On the contrary, the wars launched in the name of fighting terrorism against Afghanistan and Iraq fueled up the crisis and deepened the financial problems. By the time the year 2008 arrived, the crisis had reached a serious peak. A massive government intervention with more than $1.5 trillion in the United States alone was rushed to the aid of a failing economy. Scores of scholars rushed to declare an end of an era, the era of liberal capitalism.

Although the root causes of the current crisis are not significantly different from the previous ones, the conditions which led to the current crisis and the environment in which it functioned, as well as the containment procedures, are significantly different. Two major phenomena emerged as prominent signs of the most recent financial crisis, which have the capacity of collapsing the political economy of capitalism. The first is the creation of virtual economy parallel to the real economy. The second one is a massive government buyout of private banks, insurance companies, auto industry, real estate, and more. These two phenomena will be discussed in the next subsections.