Is Marx now right? (1)
We know that the Tories attack on the state is a cover for an attack our social institutions that provide collective support for the working class. We know that they are doing this to make us pay for the bankers’ crisis. Moreover we know that even representatives of the ruling class and the bankers’ banker the Bank of England know that their crisis is so deep that even their free markets are rigged and are considered to be a cesspit. We also know that New Labour supported this cesspit and is struggling to find alternative economic and financial policies. This much as a left we agree on.
But is this an adequate description of the current crisis? Does it provide enough analysis to develop alternative left polices for Labour in government? We know it provides the source of great anger and unity but does it provide enough understanding to act as a guide to us as socialists to know how to fight back effectively in our everyday lives whatever our daily activities and positions we hold?
Is it possible for us to go beyond our current ‘frame’ of collective knowledge and agree on the reality that seeks to dominate us; thus connect our agitation and actions in a way that not only effectively challenges this reality, but also acts as a bridge to a humane, democratic and socialist society?
There are different approaches to understanding the reality of our predicament. As the capitalist economic system is currently experiencing arguably its worst international crisis ever, it makes some sense to start with that and see where we can go.
Gross Domestic Product (GDP) is central to economic and social considerations. When we say that capitalism is in a crisis one main indicator is falling or stagnant GDP. In the UK it is measured quarterly so when in July this year press statements referred to a decrease of 0.7 % of GDP they were saying that in April – June 2012 economic growth as measured by GDP was 0.7% lower than the first quarter January – March 2012. Consequently most of the debates about economic policy are couched in terms of how growth can be achieved again: through the ‘supply side’ – cutting wages, costs and boosting profits; or through the ‘demand side’ increasing employment through investment and boosting real wages and incomes. In a wider social context GDP and its relevance is also important, as growth is linked to climate change and debates about whether it is possible to have no or slower growth or to have growth that does not harm the planet.
So what are the causes of the current crisis of capitalism? Does Marx have renewed relevance? And what are the implications for Labour Party policy?
Larry Elliott is the Guardian’s economics editor and is one of the most accessible and prolific writers on economics around. He is a good starting point as he presents the range of possible causes of the current crises with clarity and an open minded honesty; being critical without shutting down the debate. He also well represents and presents the dilemma that current economic theory finds itself in, starting from a position that there is a basic strength in the complex world of markets. He describes this as the ‘muddling through’ explanation such as in this piece written 9 months ago:
‘History would suggest that Sir Mervyn King, Ben Bernanke and Jean-Claude Trichet are right to be cautiously optimistic. Over the past 250 years, industrial capitalism has displayed a remarkable ability to regenerate itself.’
In this piece then goes on to explore the hurdles that still stand in the way of getting to this nirvana. More recently he has suggested that these hurdles may be even structurally greater and that contrary to the markets muddling through, Karl Marx may have been right about the tendency of rates of profit to fall under capitalism and for money to move in directions that are not beneficial to either the economy or society. However, when it comes to policy Larry’s Keynesianism – albeit a left version – gets the better of him and we are back to the need for the state to pump prime optimistic spirits back into investors and the economy to get the market working again and growth (GDP) on the up.
Larry Elliott’s articles referred to are worth reading in full as this little overview does not do justice to the depth and acuity of his writing. Nearly all of his writing contains real insight and he has contributed significantly to the wider issues of climate change and the green economy. The point though is made, that Keynesian ‘demand side’ economic management by the state to kick start growth, retains a strong hold on the centre left critique of the ‘supply side’ cuts and austerity policies of the Tory and other neo-liberals. It is a hold that currently dominates Labour Party thinking as represented by Ed Balls.
Keynes ideas of achieving growth and avoiding recession through the use of public spending have, historically, a great appeal to the Labour Party. They offered a lifeline in the 1930’s when the working class were first seen to be defeated following the 1926 general strike and the failure of the 1929 – 31 Labour government to come up with any ideas to solve the economic crisis without reducing public spending. The Party split over the issue and Ramsay Macdonald the first Labour PM and many Labour MPs left to form the National government with the Tories. It was a lifeline that appeared to work until the 1970s enabling full employment to remain a legitimate policy aim and unpinning the post war anti communist social democratic settlement.
For the Labour Party it was and remains a convenient way of avoiding or suppressing issues of class and inequality. Issues of ‘post capitalism’, the ‘end of class’, ‘relative deprivation’ and the ‘corporate society’ are not new and are well documented in the 1965 critique of these interpretations produced by the New Left review called ‘Towards Socialism’ as well as Ralph Miliband in his book ‘Parliamentary Socialism’. I can remember Barbara Castle spelling out the problem at a Labour conference in the late 1960’s using the famous analogy of the expanding cake. If using Keynes demand management it was possible to continually expand the total wealth through GDP growth – making the available cake bigger - then the slice that went to the working class could also grow at roughly the same or slightly greater pace thus avoiding the awkward class and structural issue of unequal shares. Basically giving the impression of the having your cake and eating it! It is this comfort zone that remains so electorally attractive to the Party enabling a ‘being sensible’ appeal to possible Tory voters.
Ed Miliband in some speeches has recognised however, that it may no longer be sufficient to just stimulate the existing markets. There are issues of the balance of the economy between finance and manufacturing as well as good and bad capitalist practices. The social and economic structures that markets operate within, such as regulation and perhaps even the ownership and control of investment, may need to be addressed. For Labour the mere hint of this will start to open Pandora’s box: once there is a recognition that markets may not work as well as the theory it allow the idea of Marx to start to creep back onto the stage. The cake analogy starts to crumble – I know, I know! – and the issue of class, fairness and inequality press to be addressed. This is especially becomes the case as the neo-liberal politics of ‘austerity’ of making the working class pay for the bankers’ crisis has already raised of the issue of 1% against the 99% through the occupy movement. Even proletarianisation – expanding the working class through the reduction of ‘middle class’ benefits - has been recognised through Miliband’s equally awkward phrase, the ‘squeezed middle’.
The structural problems facing capitalism are more deeply seated than have yet to be acknowledged by leaders of the UK Labour Party. Scandal over the fixing of the Libor inter-bank interests rates which looks increasingly likely to result in criminal charges, is more than symbolic cesspit of the current situation. Here, at the very heart of the market system, the distribution of money in the City of London, is a systematic failure of anything like a free market to work: it is a fix by deeply self interested people. It ripples out to further challenge and deepens the ideological crisis of free market neo-liberalism that has been dominant since the early 1970’s.
Milton Friedman and his Chicago boys greatly influenced by Keynes nemesis Friedrich Hayek argued the ‘supply side’ case: that market will work if they are free of distortions, one of the biggest of which is state spending and the public sector. As Naomi Klein documents in her book The Shock Doctrine large corporations, the rich and parties that wanted to break away from the post war social democratic settlement, brutally used these ideas to re-gain control over labour costs and the working class – Thatcher among them - and, until recently, were the new economic ‘common sense’ against that of Keynes. Scandals like the Libor one, also hit at the heart of this ideological framework: self regulated ‘free’ markets end up being rigged to the benefit of those who have the power to access them. Since the start of the 2007 financial crisis the rapidly accumulating evidence on how the neo-liberal theoretical narrative is itself bankrupt has given confidence to writers to mount an effective critique. For me John Cassidy in his book How Markets Fail provides one of the best that is written from non-Marxist perspective. The double economic and ideological crisis has also bought to the critical fore radical Keynesian ideas such as those of Hyman Minsky who sought to demonstrate how financial crisis are an integral and destructive part of how capitalism works.
What these writers also suggest is that time has moved on and simply turning the clock back to a Keynesian alternative may not be possible. We are where we are in a historical process: since the time of his writing capitalism is more integrated globally, has penetrated more areas, corporations have undermined the role of the state where they have not captured them outright and markets are rigged and corrupted. Trying to stimulate the economy through quantitative easing (printing money) has just resulted in banks stuffing their coffers and in the UK we are experiencing an investment strike with UK corporations sitting on £754bn alone. If the comfort zone of Keynesianism is unlikely to be easily repeated what are the options for the left? We will have a look at the extent that a more radical Keynesian and a distinctive Marxist perspective may provide some answers next week.