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Institutions that contributed to economic and stock market performance includes financial institutions like central banks, insurance companies, education institutions and health care institutions. These institutions were able to contribute to strong economic and market performance because capitalist nations are distinguished by extended, alternating durations of relative stagnation and vigorous growth and the entire cycle might extend over sixty years , almost ten times the length of average business cycle. Accumulation is at the center of capitalist process and it includes reinvestment of profits by firms or capitalist as a portion of continuing attempt to expand their capital.
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The subsistence of social structure of accumulation accounts for extended durations of relative prosperity alternates with extended durations of relative stagnation in capitalist nations. Because institutions are naturally slow to transform, SSAs along with their constituent institutions create firm support from their beneficiaries and because social structures of accumulation are overdetermined by shifts in exogenous situations, by past contingency and by social processes and other institutions with which they work together.
These institutions also lead to collapse of economic and stock markets because every social structure of accumulation displayed a structure supported by all of elements which contribute to its over determination, and thus shifts in any of these elements led to undermining of SSA, and because every institution and subject to its individual internal contradictions, all social structures of accumulation were subject to progressive weakening and eventual collapse.
Underlying and precipitating factors that brought about financial crisis
When an SSA is created, powerful forces tend to be maintained for a long period of time but not forever. After the collapse of United states stock and the 2001 recession, job creation and corporate investment stayed comparatively low for a period of two years and this reflected three factors particularly geopolitical concerns, excessive investment that took place in information and telecommunications technology in 1990s and the vast care within corporate boardrooms as firms wanted to lessen debts and raise cash holdings after several companies failed in aftermath of stock market bubble which started to collapse in 2000. Though SSAs to be lasting, there is no precise duration for which it might be anticipated to last.
Immense changes shifts in exogenous situations will interrelate with interior contradictions to generate the collapse of a particular SSA sooner than may normally be anticipated. For instance the spread of low cost production particularly in China and other less developed nations generated a downward pressure on prices of material goods throughout the globe. Falling prices made difficult for indebted household and indebted firms to meet their fiscal obligations within an environment of falling prices. In addition, this weakened the capability of central banks to deal tackle inflation. This resulted to financial crisis because the banks raised interests to indebted firms and indebted households.
What happens in the aftermath of an SSA collapse
After an SSA collapses, a diverse set of social struggles intensify and these struggles usually interact with drive of capital so as to reestablish constructive conditions for accumulation, shifts in exogenous circumstances and conditions shaped by the historical contingency to develop anew SSA. There is no assurance that a fresh SSA will materialize from this procedure, but in countries where the capital power is practically strong, there will be a reestablishment of a new SSA. When a new SSA is created, it marks a new phase in development of capitalism in the concerned country. Therefore, capitalism overcomes the interior contradictions of the country by repetitively reinventing itself.
How happenings of the aftermath collapse of an SSA are reflected in current U.S. conditions
The collapse of United States, postwar SSAs was overdetermined by the internal contradictions within its constituent institutions, external shifts and interaction among the external conditions and constituent parts. Inflation discouraged long term investment and institutional supports for strong accumulation were undermined, a period of slothful economic growth was started. The stagflation of 1970s, nevertheless resulted to increased social struggle, involving class struggles and these struggles are experienced to date as capital wanted to reestablish favorable circumstances for accumulation.