History provides us that perspective. The following description of the famous economic panic that followed the collapse of the speculative bubble that surrounded railway expansion in Britain in the mid-nineteenth century presents an illustrative example.
The economist writing here looked back at this famous economic collapse and drew some serious conclusions. The parallels between then and now are striking, even if "then" was over 150 years ago (emphases added):
The years 1843-5 were years of industrial and commercial prosperity, a necessary sequel to the almost uninterrupted industrial depression of 1837-42. As is always the case, prosperity very rapidly encouraged speculation. Speculation regularly occurs in periods when overproduction is already in full swing. It provides overproduction with temporary market outlets, while for this very reason precipitating the outbreak of the crisis and increasing its force. The crisis itself first breaks out in the area of speculation; only later does it hit production. What appears to the superficial observer to be the cause of the crisis is not overproduction but excess speculation, but this is itself only a symptom of overproduction. The subsequent disruption of production does not appear as a consequence of its own previous exuberance but merely as a setback caused by the collapse of speculation....Perhaps, if you read all the way through, you would have guessed the economist in question was Karl Marx, writing in November 1850 for the Neue Rheinische Zeitung Revue. His analysis of how the boom and bust cycles of capitalism persist was worked out a long time ago now. But, of course, "Marxism" is relegated to the dustbin of history by the triumphant U.S. rulers, who believed that the fall of the Soviet Union meant the eclipse of Marxist socialism.
In the years of prosperity from 1843 to 1845, speculation was concentrated principally in railways, where it was based upon a real demand, in corn, as a result of the price rise of 1845 and the potato blight, in cotton, following the bad crop of 1846, and in the East Indian and Chinese trade, where it followed hard on the heels of the opening up of the Chinese market by England.
The extension of the English railway system had already begun in 1844 but did not get fully under way until 1845, In this year alone the number of bills presented for the formation of railway companies amounted to 1,035. In February 1846, even after countless of these projects had been abandoned, the money to be deposited with the government for the remainder still amounted to the enormous sum of 514 million and even in 1847 the total amount of the payments called up in England was over £42 million of which over £36 million was for English railways, and £5 1/2 million for foreign ones. The heyday of this speculation was the summer and autumn of 1845. Stock prices rose continuously, and the speculators' profits soon sucked all social classes into the whirlpool. Dukes and earls competed with merchants and manufacturers for the lucrative honour of sitting on the boards of directors of the various companies; members of the House of Commons, the legal profession and the clergy were also represented in large numbers. Anyone who had saved a penny, anyone who had the least credit at his disposal, speculated in railway stocks. The number of railway journals rose from three to twenty. The large daily papers often each earned £14,000 per week from railway advertisements and prospectuses. Not enough engineers could be found, and they were paid enormous salaries. Printers, lithographers, bookbinders, paper-merchants and others, who were mobilized to produce prospectuses, plans, maps, etc; furnishing manufacturers who fitted out the mushrooming offices of the countless railway boards and provisional committees — all were paid splendid sums. On the basis of the actual extension of the English and continental railway system and the speculation which accompanied it, there gradually arose in this period a superstructure of fraud reminiscent of the time of Law and the South Sea Company. Hundreds of companies were promoted without the least chance of success, companies whose promoters themselves never intended any real execution of the schemes, companies whose sole reason for existence was the directors' consumption of the funds deposited and the fraudulent profits obtained from the sale of stocks.
In October 1848 a reaction ensued, soon becoming a total panic. Even before February 1848, when deposits had to be paid to the government, the most unsound projects had gone bankrupt. la April 1846 the setback had already begun to affect the continental stock markets; in Paris, Hamburg, Frankfurt and Amsterdam there were compulsory sales at considerably reduced prices, which resulted in the bankruptcy of bankers and brokers. The railway crisis lasted into the autumn of 1848, prolonged by the successive bankruptcies of less unsound schemes as they were gradually affected by the general pressure and as demands for payment were made. This crisis was also aggravated by developments in other areas of speculation, and in commerce and industry; the prices of the older, better-established stocks were gradually forced down, until in October 1848 they reached their lowest level.
But no great thinker or scientist has to worry that their ideas will be lost. The earth revolves around the sun, and gravity affects all celestial bodies, no matter how much the Roman Catholic Church had condemned Galileo. The anti-evolutionists can pillory Darwin, but evolution continues nevertheless, every day, as the continuing crisis over evolving bacteria and the problem of finding new antibiotics to combat them makes clear.
And capitalist cycles of overproduction, speculation, and economic recession/depression continue no matter how much free market ideologues produce diatribes (with a twinkle in their eye) over the demise of Marxism, denouncing either its error, or its lack of contemporary relevance.
Yet today, the failure of the capitalist system looms as a mighty sword of Damocles above the heads of billions, living as we do in a very interlocked world of economic ties. We depend on each other now more than ever. Yet antiquated systems, whether they are based on religious doctrines or Harvard Business School economic models, threaten the survival of us all.
Even more, these antiquated national systems form the basis of an international organization of nation states existing in competition with each other. The ruling class fetishizes competition as something good, until the irrationality of individuals -- or at another level, of individual nation states -- seeking gain at the expense of others degenerates into economic collapse, evoking the nightmare of the war of all against all, producing, perhaps, a third and devastating world war.
The defeat of the bailout plan in Congress early this week saw a temporary alliance of free market ideologues, eschewing state intervention (falsely) as "socialism", and a nascent populist or leftist opposition opposing a giveaway to the richest speculators and capitalists who got us in this position in the first place.
Neither group has yet grasped what was widely known only a generation or so ago: capitalism is doomed to create these cycles, and with it untold suffering. The effort to create socialist states and an alliance of same in the world met with horrendous defeat in the 20th century, victim of unremitting attack by the non-socialist world, and of its own internal weaknesses and irrationalities (e.g., trying to believe socialism could be created in a single country, irrespective of the rest of the world's organization or economy, which was the program of Stalinism).
Oh disbelieving reader, ask yourself this: if Marx could accurately predict the kind of scenario we are seeing today over a century ago, perhaps there is far more of value in Marxist analysis than you thought. Today, it is a scary thing still to be called a "communist," just as it was in Marx's time. The epithet persists as a form of unconscious recognition that something terrible is amiss in our world. It is not like being called someone who believes in the divination of the future by means of examining animal entrails; it is not an object of humorous ridicule. It is something to be feared. There is force, yet, in the word. That's because it represents something repressed. It represents the eruption into modern consciousness of a necessary truth. And the time has come to grab that truth again and wrest it into the world as a tool against the exploiters.