by Allan Armstrong
Neo-liberalism and neo-Keynesianism – two options for capitalism
In the face of the deepening economic crisis enveloping the US and world economy, Alan Greenspan, former Chair of the US Federal Reserve and prime architect of Republican neo-liberalism was summonsed to a Congressional hearing on October 23rd 2008. Asked to account for the failures of the ‘free market’ he shamefacedly admitted, “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”
Greenspan’s embarrassed admission highlighted the fact that unregulated ‘free market’ capitalism does not bring continued economic growth and prosperity in its wake. For every upturn, there is a downturn. Therefore, even before the final demise of the ailing Bush Presidency, his Republican administration, and the following Democrat President Obama, have been forced to adopt a programme of massive government bail-outs of failed companies, first banks, followed by key industries, such as Chrysler.Greenspan is not the first capitalist spokesmen to discover we live in a fundamentally crisis-ridden system. As the ‘Roaring Twenties’ gave way to the ‘Great Crash’ in 1929, an earlier Republican President, Henry Hoover and many business leaders were unable to accept that their economic system was off-course and heading for the rocks. However, as production plummeted and unemployment soared in the early 1930’s, a new economic guru, Maynard Keynes, tried to persuade reluctant bosses and politicians, brought-up on the sureties of the Gold Standard and the ‘Free Market’ that without government intervention their beloved capitalism was going to fail.
Keynesianism offered a political economy for a crisis-prone capitalism. A few capitalists might have leapt to their deaths out of top-storey windows, but many others became convinced enough that their system faced terminal crisis, to give their backing to the new Democrat President Roosevelt, and his Keynesian inspired New Deal.
Of course, just as the Republican Party majority in the 1930s did not accept that Keynesian state intervention was necessary if capitalism was to survive, neither has the infuriated Republican Right rump in the USA today. However, today’s political division, between the neo-liberal fundamentalists and the neo-Keynesian pragmatists, should not disguise the fact that capitalism, in both its upswing and downswing phases, represents a single unified system. Neo-liberalism and neo-Keynesianism represent two alternative capitalist strategies, one more suited to ‘boom’, the other to ‘bust’.
Crisis has not been part of the experience of the ‘masters of the universe’ in recent years. After a prolonged period of boom, grudging acceptance of state intervention in their businesses is very much a reluctant second choice. However, despite the partisan attachment of particular politicians and economists to Freidmanite ‘free markets’. most business leaders’ deep-seated survival instincts soon kicked in, when the economic crisis enveloped them in the wake of the ‘Credit Crunch’. A reluctant second choice, or neo-Keynesian state interventionism, is still a better bet than the prospect of economic and social oblivion.
Left and Right united on what constitutes capitalism and socialism
However, it is not only the neo-liberal Right which has been wrong-footed in the wake of the current economic crisis. Many socialists, particularly from Left Social Democratic, orthodox and dissident (e.g Trotskyist) Communist traditions, share a common understanding with the neo-liberal Right of what constitutes capitalism – ‘free markets’ – and what constitutes socialism – nationalised property. The difference lies in that neo-liberals put a + sign against free markets and a – sign against nationalised property, whereas these socialists reverse this particular assessment.
Therefore, after two decades of workers, their families and communities facing the woeful consequences of successive deregulations and privatizations, many socialists have been quick to acclaim the new state promoted interventions in the economy. “We are all socialists now”. Criticisms have largely been confined to calls for more state nationalizations and direct government control, rather than the current half-hearted government measures, which still leave the new nationalized concerns in the hands of failed bankers and their friends.
Furthermore, such views have much deeper roots. After the impact of the Great Depression and the Second World War, Keynesianism eventually became economic orthodoxy amongst the leading western powers. Even Republican President Nixon could declare in 1971, “We are all Keynesians now”. Government intervention in the national economy, and the provision of welfare measures, were then accepted by all but the most marginal Right-wing ‘free marketeers’.
There was opposition to Keynesianism on the Left, but this was focused on the limited scope of its government interventions, compared to the wholesale nationalization founded in the ‘Communist Bloc’. Nevertheless, the existing British national economy and the growing state economic ‘achievements’ were seen as the basis for the more thoroughgoing statist measures. These were advocated by the official Communists, in a British Road to Socialism, and by the Trotskyist Militant with its support for the nationalization of the top 200 British companies.
Many socialists still look back to these post-war decades with some nostalgia. The Welfare State provided from the ‘cradle to the grave’, trade unions had some real influence, and the Labour Party still talked in class terms and had at least a nominal commitment to ‘Clause 4 socialism’. Today, battered by two and a half decades of neo-liberal assaults, and chastened by the collapse of their USSR-inspired statist economic alternative in 1989, these sentimental socialists are to be found earnestly hoping that the current economic crisis will permit a return of the ‘old days’. They think that the current greater acceptance of neo-Keynesian measures could provide new possibilities for socialists to be heard once again. The latest Left campaign, backed not surprisingly by the CPB and the Socialist Party, No2EU/Yes to Democracy (No to the nasty European capitalist conspiracy/Yes to 1975 independent Labour Britain) is a good example of Left nostalgia and national Keynesian revivalism.
Of course, many socialists have been quick to highlight the very limited scope of current government interventions. They have thrown their hands up in horror at New Labour’s recycling of failed bankers, who have returned to the trough, fattening their bellies once more on bonuses, only now provided directly at public expense. A completely unrepentent Lord Mandelson has made it quite clear that he sees his main job as restoring the economic standing of the crooks responsible for the current crisis. He wants to ensure that New Labour continues to be at the beck and call of the rich and powerful.
What would full-blooded Keynesianism and nationalization bring about in practice?
But just what would it mean for the working class today if a future Left government did take full control of the economy? We can get some idea by looking at the much more extensive Keynesian-inspired interventions taken in the 1930’s, including the New Deal in the USA. Despite large increases in government spending, economic regulation and innovative state backed projects (e.g. the Tennessee Valley Authority), which did provide some boosts to the economy, there were still continued downturns in the ‘30’s and a further much deeper one was anticipated for 1939-40. Only the Second World War, with its massive destruction of capital in Europe and the Far East, prevented this. It was this war, not Keynesianism, which brought about economic recovery, but at what a cost.
Today, the prospects for a full neo-Keynesian recovery are even slimmer. Since the 1980’s, more sophisticated, and even more fraudulent financial products and policies have allowed finance capital to preside over a considerably longer boom (up until 2008) in the US and Western Europe, compared to that of the ‘Roaring Twenties’. The only problem is, since this recent and longer credit-induced boom was not based on any commensurate expansion of real wealth, so the consequent economic necessity for a ‘clear-out’ of unprofitable capital is even greater, before any real recovery can take place.
Any government adopting more full-blooded national neo-Keynesian measures would soon be involved in competitive ‘beggar-thy-neighbour’ policies to maintain its economy’s position in a shrinking world market. Thus, if any national state took over the running of particular industries, it would soon be forced into imposing austerity measures on their workforces – unemployment, short-time working, wage and pension cuts and the undermining of working conditions. The massive attack on Chrysler workers’ jobs, pay and conditions, under Obama’s new regime, is a warning of what nationalization under capitalism can mean.
There is the additional problem that whereas, in the 1930s, the collapse of the Gold Standard, the guaranteed currency exchange rates, and the remaining ‘free trade’ policies, together brought about a decline in international trade with shrinking markets, at least most national industries were made up of largely integrated enterprises, making useable completed products. Of course, they were still largely dependent on imported raw materials, so competition for these limited resources still contributed to in inbuilt tendency to war, which broke out in 1939.
However, since the mid-1970s, the major corporations have pushed for the globalization of production to break the power of the militant workers in places like Paris, London, Turin and Detroit. Major car companies, for example, ended integrated production so that components could be produced in many different countries, with more than one source of supply. Effective strikes became much harder to organise. As a consequence, in today’s situation, the nationalization of most companies would not necessarily provide the opportunity to make a useful finished product. Instead of producing cars, you might end up only with clutch linings, windscreen wiper blades and tyres! Therefore, any commitment to a nationally-based ‘socialist’ economy would have an even greater inbuilt tendency to war, to try to overcome the limitations of such fragmented production.
A vision to inspire rooted in the reality of our living labour
So, what does all this mean for socialist or communists today? We should be using the opportunity of the current crisis to point out that this is as good as it gets under capitalism. Neo-Keynesianism only leads to further dead-ends for our class. Any economic recoveries will be short. They will be followed by deeper recessions. Furthermore, the shallow recoveries will all be made at our expense, with ever more calls for cutbacks and greater austerity. Moves to national protectionism (or further entrenched EU protectionism) will be accompanied by ever shriller anti-immigrant calls, racism, homophobia and attacks on women’s rights. Far Right thinking and personnel will become increasingly accepted into the mainstream (as can already seen in Berlusconi’s Italy). The current curtailment of democratic and civil rights will be accelerated. The endemic wars on imperialism’s periphery will move closer to its centres.
That capital, which today’s corporate executives need to write-off or destroy, in order to restore their profits, is the product of our labour. They use our living labour to create their ‘dead labour’. This is stored up in plant, machinery and raw materials. Our living labour also provides the surplus value they convert into the profits to undertake further rounds of production. Thus, the product of our living labour is constantly being used against us. In this manner, the capitalist appropriators and controllers of our labour appear to be the initiators of all production in society, a factor that enables them to claim much of their political power too.
As long as our living labour is used to produce their dead labour, or capital, we remain wage slaves. Wage slavery is the real essence of capitalism. Capital rules us in the daily grind at work, by constantly trying to limit our needs to their socially-necessary minimum, and then by throwing us on the scrapheap when no longer required. Thus the controllers of capital constantly restrict and blight our lives.
Furthermore, when deep-seated economic crises, like the present one arise, the competing controllers of capital have only one ultimate get-out – war. Then they demand sacrifices of an altogether different order, hoping they will be the ones to emerge as the victors presiding over the next ‘recovery’. The First World War cost 15 million lives, the Second World War cost 55 million. Rosa Luxemburg’s prediction of barbarism turned out to be very well founded, if socialists fail to completely uproot capitalism. Today, Istvan Meszaros has written that the choice lies between, “Socialism, or barbarism if we are lucky”!
Whilst we remain wage slaves, unable to think beyond merely better terms of exploitation, higher wages and better conditions, then our potential power remains crippled. Marx was quite clear in his opposition to the limited trade union demand, “A fair day’s pay for a fair day’s work”, insisting on the necessity of “The abolition of the wages system”. As the only truly economically creative body in society, we have the power to use the ongoing crisis, not as an opportunity to cheer on and push the neo-Keynesians further, but to begin to explain the pressing need for a new social order. We need to point out that our living labour is indeed the real creative force in the economy. Only if this power is organized directly, through new forms of associated labour, can we move beyond ever-deepening and potentially catastrophic crises, which continued capitalist imperialism has in store for us.
Furthermore, our living labour doesn’t just have the capacity to take full responsibility for economic production in the future, it also provides the basis for our independent class organization in the here and now. Today, New Labour represents one wing of the UK Business Party. Under ’social partnership’, trade union leaders offer a cheap personnel management service for the employers. However, trying to revive ‘Old Labour’, either from within (e.g. Socialist Appeal and the Labour Representation Committee), or by starting all over again (e.g. Campaign for a New Workers Party), or trying to capture the ‘commanding heights’ of the union bureaucracy (Broad Leftism) can only lead us back to the failures of the late 1970’s and early 1980’s.
The pages of The Commune provide the opportunity to debate our internationalist alternative, integrating our economic, political and cultural challenges to their crisis-torn order. We need to further develop revolutionary democratic methods of debate and organization. ‘Another world is possible’, but call it International Socialism, World Communism, or the Global Commune, the vision informing all our activity should be the abolition of wage slavery and the creation of a world based on the principle of ‘From each according to their ability and to each according to their needs”, where, “the free development of each is the condition of the free development of all”.
One thought on “beyond props for capital”
Marx had rightly questioned the capitalist’s objective to grab most of the surplus value created by the worker. But he stopped there without probing further whether workers can have full share of their surplus values by retaining that value with them permanently. Capitalism’s shortcomings and internal contradictions were very well known to all capitalist economists including Keynes. They never claimed the capitalism as an eternal economic order. That is why Keynesian economics was called a ‘stop-gap’ economics. Keynes himself was sure that abundance of goods and services would be unavoidable due to technological progress taking shape. Abundance would be eliminating capitalism itself. J. Pen of Denmark had said that abandunce would destroy the western industrial civilisation and culture thereof will be vanished.
Marx’s socialism could not become scientific because it lacked “free competition” among all participants of the market economy, and workers not retaining full surplus value created by them. As a result the Marxian socialism could not be eternal. Now what the working class should look forward to create a new economic system which could give them the rights to retain full surplus values created by them with own hardwork. This will avoid the employee-slavery totally. They need not look for or beg for jobs of the capitalists.
This has been theorised by an Indian economist Dr. M G Bokare (Vice Chancellor of an Indian university), who was a Marxist for over three decades. He did see the collapse of Marxian economics due to the absence of ‘free competition’ and also for sharing the surplus value with exploiters i.e. capitalists. He was also equally sure about the collapse of capitalism.
Price theory and free market competition are the most important elements of any socialistic economic system offering equal rights for all human beings. . He has therefore theorised a new economics called Hindu Economics which is based on Hindu’s holy Vedic books. He had presented in 1993 this new economics for the first time in the world history for discussion and to be challenged its theoretical validity by any economist of the world. This new economic order will have the following :
1. Full employment. Any one can start one’s own production activity as self-employed. His family becomes a unit of production giving participation to all his family members, including handicapped and old persons.
2.No poverty since every one will be given means of production for one’s own living by the state. (zero rate of interest on loans, technical knowledge sharing, infrastructure support and free competition system with oversight of state to ensure no one takes coercive position as regards quantity and price of products).
3. State-owned finance system with zero rate of interest on deposits and loans. It is like Islamic interest-free economics.
4. Socially necessary monopolies will be run by the state. This includes for example railways, telecommunications, power generation and supply, food security, banks, transport at low rates etc. They however will have full transparency as regards cost of production of each product and service. This will put pressure on private enterprises to compete on these costs and quality. This will lower the prices of all products as a trend over time. This elimintaes inflation and stgaflation permanently. Also over time direct taxes can also be eliminated through deficit finance route.
5. This will be an economy with abandunce as against the present day economy of scarcity.
5. This can work in any democratic economy of the world. This will be fully eco-friendly economy. Global warming, pollution and such other bad effects flowing from capitalism would not scare the people across the globe.
One may call it working people’s socialism or proprietory capitalism.
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