The investor Warren Buffett recently put $230 million into the Chinese ‘Build Your Own Dreams’ car firm. Buffet has taken a ten percent share in that consortium. Two years ago, Buffett handed $37 billion over to Bill Gates’ charitable foundation.

On 13 December 2008, the US Senate failed to approve a fourteen billion dollar rescue plan to prop up General Motors, Chrysler and Ford. Six days later, the White House reluctantly decided to bail out America’s ailing motor industry, by providing $17.4 billion of emergency funds in order to avert a disastrous collapse of the American economy. Bush shored up the car giants in return for swingeing wage cuts among the workforce. Obama will have to pick up the tab, but in reality Warren Buffett’s behaviour signals the demise of the US car industry. The number of unsold cars are piling up. Some dealers are desperately selling two cars for the price of one. The American auto-industry can’t sell its old stock, and can’t promote a cheaper, more efficient one either.

The Bush bail-out helps ensure there will be no street riots in the USA this Christmas and New Year, and consumers can carry on shopping for now. Obama is going to have to pick up this economic bail-out tab as well as the mess in Iraq, Afghanistan, the Middle East, Iran and climate change.

Warren Buffett’s investment decisions are the writing on the wall.

Buffett learnt the art of investing from Ben Graham as a graduate student at Columbia Business School in the 1950s, and later working at Graham Newman investments. In a number of classic works, including The Intelligent Investor, Graham shared some of his investment wisdom. He rejects a prevalent but mistaken mind-set that equates price with value. On the contrary, Graham held that price is what you pay and value is what you get. the two things are rarely identical, but most people rarely notice any difference.

One of Graham’s creations is a characters who lives on Wall Street, ‘Mr Market’. He is your hypothetical business partner who is daily willing to buy your interest in a business, or sell you his at prevailing market prices. Mr Market is moody, prone to manic swings from joy to despair. Sometimes he offers prices way higher than value, sometimes he offers prices way lower. The more manically depressed he is, the greater the spread between price and value, and therefore the greater the investment opportunities he offers. Buffett reintroduced this character Mr Market, emphasizing how valuable Graham’s allegory for the overall market is for disciplined investment – even though Mr Market would be unrecognizable to modern finance theorists.

Another leading prudential legacy from Graham is his ‘margin-of-safety’ principle. This holds that one should not make an investment in a security unless there is a sufficient basis for believing that the price being paid is substantially lower than the value being delivered. Buffett followed the principle devotedly, noting that Graham had said that ‘if forced to distill the secret of sound investment in three words, they would be: margin of safety.’

Over forty years after first reading that, Buffett still thinks this is right. While modern finance theory enthusiasts cite market efficiency to deny there is a difference between price (what you pay) and value (what you get), Buffett and Graham regard it as all the difference in the world.

That difference also shows that the term ‘value investing’ is a redundancy. All true investment must be based on an assessment of the relationship between price and value. Strategies that do not employ this comparison of price and value do not amount to investing at all, but to speculation – the hope that price will rise, rather than the conviction that the price being paid is lower than the value being obtained. Many professionals make another common mistake, notes Buffett, by distinguishing between ‘growth investing’ and ‘value investing.’ Growth and value, Buffett says, are not distinct. ‘They are integrally linked since growth must be treated as a component of value.’

However, many bank chiefs, investors and politicians did not follow the wisdom of Buffett. They lent money to people who couldn’t pay it back: a sort of confetti money bonanza. They bankrolled firms that were mortally wounded. The lure of a fast buck attracted many moths to the capitalist flame. George Bush’s election campaign was helped by the Enron swindlers. The system is global and the links are numerous between all the component parts: banks, firms, industry and states. Crucially, to paraphrase Adorno: the component parts together are not only capital, but something foreign and opposed to it.

It is not by chance that Buffett has invested in the Chinese car industry, instead of the doomed American one. As Buffett knows, the US government cannot save the car industry. The repercussions globally will be immense, as the system collapses under the weight of its own internal contradictions.