Wednesday, 11 May 2011

Capitalism, Regular not Diet.

There is a sense in which capitalism is a utopian ideal, particularly in it's untrammeled free-market conception, ironically this is quite like the communist ideal of a classless society and in both cases it appears that the idea itself seems to have a power of its own. Not only is the notion of the free-market essentially a tool to argue for greater deregulation, mass-privatisation and large tax-cuts, the features of the concept itself are ideals: perfect competition, no barriers to entry and the absolute transparency necessary for perfect information - which would require a world without advertising. Theoretically these features are what is needed for market efficiency and the kind of equilibrium dreamt up by free-market fundamentalists everywhere. But supply and demand are not static, market forces are in a constant state of change and as a result we are always in disequilibrium - e.g. there will always be some unemployment in a market system.

Not only is the vision utopian, the necessary conditions are impossible to construct without massive state-intervention in the economy, a "Big Government" is the nightmare of the average free-marketeer, and that still assumes the conditions can be achieved and maintained. A limited state is desirable because state-interference in the economy, whether it be in the form of regulation or subsidy, can constrain and influence market forces. This is why it has been argued that neoliberalism is most compatible with a liberal domestic programme. Although it can be argued that capitalism does not tend towards racism, misogyny and homophobia, the system requires racism to defend itself and it's flaws. Populist rebellions are led against positive discrimination, abortion, political correctness, unions, multiculturalism and welfare to push through a right-wing economic programme. The people are deprived of organisation while the business community is left intact and fully organised.

However, it is reductive to merely focus on free-market capitalism, as this ideal does not exist, especially in the developed world where a pure capitalist system has never existed. The systematic violation of free-market principles has been the key to economic growth and development for centuries. Today it is the "secret" of the economic dynamism we can all see in China, capitalism with Asian values which is essentially capitalism without any semblance of democracy. The fundamentalists typically deride any statist deviation from laissez-faire theory as "socialist" or "social democratic". But that would presuppose a level of welfarism and nationalisation as part of the deviation. In the 19th Century it was common for the state to exert power for the benefit of business, while it did not provide welfare for the poor. In the US there is plenty of tax-dollars to provide welfare for rich white men, but not for the poor and the vulnerable. It might be more accurate to label this kind of economic system as state-capitalist or even corporatist. We ought to look at liberalism more closely at this point.

In economic liberalism social constraints are predicated on economic freedom, whereas in political liberalism individual freedom is derived from economic constraints. But the basic assumption of capitalism, whether social democratic or neoliberal, is that there can be endless economic growth in a world of limited resources. This is precisely the reason that the Right have been in denial about climate change. Not only does this secure the world-view, holds that infinite growth and finite resources are compatible, it appeals to the elites who believe that there could be greater oil reserves under the polar ice-caps and to get to it we should let the ice-caps melt. A suicidal logic of socialised costs and privatised profits, let the world slide towards oblivion for the sake of short-term profits and short-term tax breaks. The environmental costs of capitalism are huge and it may take another energy crisis for the governments around the world to take these costs seriously and move away from fossil fuels altogether. But I won't be holding my breathe, change comes from the grass-roots.

The same distinction between really existing capitalism and the "unknown ideal" of capitalism is often drawn by right-wing intellectuals who are on the defensive. This posits the failed system, really existing capitalism, as social democratic or even socialist in order to justify a call to return to free-market principles and ultimately the rejuvenation of the system as it is. When the Crash of 2008 came around, a result of a debt-driven boom, the recession that followed led to a shift to Keynesian economic policies, e.g. bailouts, as a way of resolving the crises. But this was just an transitional phase from the recession back to market liberalism is in the works in the form of a harsh austerity on an international scale. After landing in the safety-net, provided by the tax-payer, the banks will resume lending practices and further intensify such practices whilst delving into new areas. The opening up and exploitation of new markets also "opens up" new possibilities for future crises, that could be potentially more extensive and destructive than the last. At the same time the means by which another crisis could be averted are being undermined. Predictably the end result will be another crash.

Over the platform, of tax-cuts for the rich and spending cuts for the poor, the Right will often hoist up a banner of "freedom". Along with words like "justice" and "democracy", "freedom" is a hurray word which can easily be emptied of all meaning and used as a cover for policies that are practically the opposite. Freedom is a slogan that appeals to everyone, no one could oppose freedom and it appeals to the rugged individualist in all of us. In other words it's a public relations wet-dream of a slogan, the kind that can rally support for any policy no matter the content. Note the Conservative Party in the UK proposed "free schools" which would be schools set up by middle-class families and private companies at the expense of state-schools and free lunches for pupils. Free for the middle-classes and the ultra-rich. Similarly the free-market and free-enterprise are often used as banners for economic policy in the US. Newt Gingrich proudly cuts spending on welfare and public education in the name of the free-market, whilst funneling the billions saved into high-tech industry.

Capitalism is not only an economic system it is ideological and its politics are an extension of its economics. The rising standards of living and significant development of the last century are often posited as a defence of capitalism. For economists, theory is supported by the fact that it works and meets particular standards, e.g. it leads to greater economic growth, but this seems insufficient upon closer inspection.  It is joined at the hip with the falsity that the system is justified by the "failure" of all other alternatives. This is the rationale behind Thatcher's famous motto "There is no alternative." This is the pragmatic tendency which runs through economics and beneath the surface lurks utilitarianism. The pursuit of the greatest aggregate happiness enters as a justification for the vast inequalities produced by the system. Along these lines the justification for capitalism is the greatest happiness overall, which will be tipped by the ecstasy of the opulent minority against the class interests of the majority. The people are best off (e.g. happy) with as much individual freedom as possible and untrammeled capitalism leads to prosperity - "private vices reap public benefits".

We could go down this road to justify Fascism, as there was a great deal of economic growth and development in Nazi Germany. Hitler was the most popular leader in German history in the 1930s because the Nazi Party carried out a social revolution, the lives of working-people improved significantly. In fact the economic miracle under Hitler was driven by state-intervention in the economy on a huge scale. The major accomplishment of the Fascists was to play to the interests of the workers and the bosses, it was effectively done by buying-off socialism and liberal capitalism. This came in the form of social services, job creation, subsidies and protection for industry. It was also done through anti-Semitism, for the rich the Jew was a communist and for the poor the Jew was a banker. The concentration camps provided a slave labour force for manufacturing companies, as well as a traffic management system which could be designed by private companies like IBM. It worked and it could have lasted if Hitler had waited until 1942 to invade Poland. Do these facts justify Fascism?

Notice the defence of capitalism on pragmatic grounds also starts to fall apart once you take into account the fact that the system requires 3% compound growth, in order to avoid collapse, every year forever. We live in a world of finite resources and the system is a infinite growth paradigm. Even without taking into account environmental degradation, which also threatens delusions of growth ad infinitum. Today the economy needs new investment opportunities for over $1.5 trillion and in 20 years it will be for over $3 trillion. Not only do the opportunities for investment need to be there, the investments need to be profitable. The lack of profitable investments in industry for the last 30 years is partly what has led to the financialisation of the economy. Money is not poured into production anymore, instead capitalists invest in assets, stock and other ways in which they can make money out of money. It is not enough to tame the system with social democratic reforms, the time has come for something a lot more radical.

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