Socialism For The Rich

One of the anchors, for CNBC's US Squawk Box programme, that covers the opeing of the US Stock Markets, Mark Haynes, frequently refers disdainfully to French socialism. The fact that Productivity per man hour in France is higher than even in the US's most productive state, California, is just one of those facts which the upholders of Free Mrket Capitalism in the US, such as Haynes, care not to know about, or when their attention is brought to it, to believe. Of course, what they refer to in France, or Europe in general, as socialism is nothing of the kind. It is nothing more than state intervention by the Capitalist state, an intervention, which is rather more open than that of the US Capitalist State. That is until last week.

Of course, all the bullshit about Neo-Liberalism was just that. The Imperialist/Capitalist leopard had not changed its spots no matter how much those on the Right, or their dupes within sections of the left might have tried to convince us that this was the case. The fact is that the Capitalist State has intervened more into the economy over the last 30 years than it has done before in its history. Indeed, the extent of that intervention in pumping trillions of Dollars, Pounds, and Yen into the world economy over that period in order to ameliorate the consequences of the Long Wave decline, and to smooth the transition of the world economy into one in which the locus of economic activity has moved steadily Eastwards, is the cause of the current Credit Crunch, which is the necessary corrollary of that previous excess. But, what Neo-Liberalism was about was giving the impression that something had changed that the days of overt State intervention, of welfarism in its most developed form had ended. Western Capitalism needed that impression in order to further impress on workers that they were on their own as individuals, that the State would not step in to prevent mass unemployment and so on, and thereby to press wages and conditions ever lower in ordr that the gap between Western wages and conditions and eastern wages and conditions could the more easily be reduced. And more, in an era of globalisation in which the US strode the wrold like a collossus, the return to the original ideas of Capitalism in its progressive, dynamic phase - on paper at least - the ideas, of Freedom, Democracy and so on, provided the cover under which the US and its allies could fulfill their dreams of global expansion, drawing wider regions of the globe within their orbit and control, and establishing outposts and quiescent regimes in regions of strategic importance in the new rush for resources and markets. Now intervention in Kosovo, Iraq, Afghanistan and so on was nothing to do with imperialist expansion you see, but solely for the purpose of extending democracy and Liberty. It was a very powerful and enticing vision, even sections of the left like the AWL were suckered into it.

But, the dialectic reasserted itself with a vengeance last week. I had suggested it was coming some weeks ago when I warned that a severe financial crisis appeared to be about to break. I suggested last week that the consequences of that crisis would be that the US Governmetn would be forced to intervene in a way that was unprecedented not just to save Capitalismn in the short term, but more importantly to save the ideology that stands on the back of the Capitalist system. Within days that forecast proved correct beyond what I could have imagined. I only hope that thousands of French viewers of CNBC have e-mailed Mark Haynes to welcome him to the socialist club, as Haynes along with all the other financial pundits in the US have had to admit that the State had to act to save Capitalism. They are left like Haynes last week confused and left with the only relevant question as Haynes put it "Why is it that in such situations its the little guy who ends up picking up the tab?"

Why indeed? For a Marxist the answer to that question is obvious. The State is the state of a ruling social class, in this case the Capitalist class. Whatever, the illusions of Liberals or those on the left such as the AWL, that State acts in the interests of that ruling class. Its actions are not motivated by some moral or other concerns. For the last 30 years the State has not intevened by taking over companies etc. because it was not in the interests of Capitalism for it to do so. Rather it intervned on behald of the Capitalist class through monetary policy. Now, as the consequence of that is the Credit Crunch, and the potential collapse of the fianncial system which stands at the heart of modern capitalism it is forced to go back to the methods of overt state capitalism.

The latest nationalisations - this time of the mortgage debt on the books of US based fianncial institutions - is reckoned to amount to some $700 billion. Added to the other bailout packages already committed the total is now calculated to be around $2 trillion. This is an enormnous sum. Already last week the US Government was running out of money, even before this latest splurge. It was forced to line up new credit from European and other states. It will inevitably mean the issuance of an even more massive amount of money tokens into the US economy and thereby into the world economy. That is on top of the hundreds of billions of dollars of liquidity that the US, Britian, Europe, Japan and other central banks pumped into the system last week. In the short term the dollar as risen on the back of the fact that tghe State has acted to prevent - for now - the collapse of the US financial system, but the commitment to such a vast expansion of the money supply implied by the atet developements means that in the not too distant future, the dollar is likely to suffer a severe fall if not collapse. Already, last week Gold - real money - rose $80 an ounce in one session alone, the biggest rise ever, equivalent to 10%. Oil too has begun to rise again.

The fact is that the current package - unprecedented as it is - is unlikely to resolve the problem. The fact is that all the State has agreed to do is to take mortgage debt off the books of these institutions - including in its commoditised form as CD's and other derivatives. But, morgtage debt comprsis only one part of the problem. Many of the people who have prime mortgages also have huge amnounts of other debt; credit card debt, overdrafts, debt to sub-prime lenders and loan sharks. Just look in Britain. Even now you see on TV and hear on radion adverts from these sub-prime lenders offering to clear your debts, by some new debt-busting - in reality debt increasing - loan, fronted by people like Carol Vorderman. You see the prudnetial and other companies encouraging older people to give up the security they have in their home, and to take out some equity-release scam. All of this debt is provided on the back of money-market funds, funds now charging igh rates of interest, and to the very people who are unlikely to be able to pay it back. When this avalanche of debt begins to slide the present Credit Crunch will look like a temporary glitch.

Its likely that in order to deal with this problem the Capitalist State in the West will have to reort to methods of the past. For one thing a huge rise in inflation. But, already some signs of the future course of events can be seen. As I suggested some time ago there would be winners as well as losers. The winners would be those, such as the Sovereign Wealth Funds, which had huge amounts of Capital to invest, whereas the losers would be those that had built up a massive amount of leveraged debt. We have seen Barclays snap up Lehman Brothers, or atleast the most profitable bits, Bank of America has taken over Merrill-Lynch, HBOS has been snapped up by Lloyds, whilst Middle eastern and Chinese SWF's have taken large stakes in US banks when their share prices were decimated. Only the latest package prevented Goldman-Sach, Washingtomn Mutual and other huge US institutions being swallowed up.

But, this demonstrates the point. It is typical of the way Capitalism works. Out of this chaos there will be some very, very big winners. Even now, trillions of dollars remains in cash in the hands of investors waiting for the ultimate climactic sell-off - not to mention the trillions sitting on the Balance DSheets of non-financial corporations around the globe - ready to seize huge amounts of Capital on the cheap. The world's greatest financial meltdown yet to come could spell the end of Capitalism as we know it, could spark World War III in a despearate attempt to secure markets and sources of cheap raw materials, or it could spark the greatest investment boom and period of economic growth the world has ever seen. For now, I still favour the latter scenario as most likely.

I beleive its most likely because apart from all of the froth that the furore over the financial crisis represents we still see a world economy whose fundamental are robust. In the last quarter the US economy grew at more than 3%. That is likely toreverse sharply in the curent quarter. Growth in Europe has slowed sharply too, and in Britain and Japan. But China continues to grow at over 10%, as do many other devloping and dynamic economies. Inflation in China has slowed tremendously on the back of a rising RMB, and that has allowed the Chinese State to cut interest rates, as well as introducing a stimulus package - in an economy already growing at 10%! But, even in periods of the Long Boom like the present one there can be serious recessions.

Having said all that Mark Haynes need not worry. This state intervention is not socialism. If it is then it is socialism for the rich. It demonstrates once again the unMarxist nature of the demands of some on the left for the Capitalist State to introduce nationalisation pretending to the working class that such nationalisation represents some form of "socialisation". It is of course nothing of the kind and could not possibly amount to "socialisation" unless that State belonged to "society". It doesn't it belongs to the capitalist class, nationalisation does not amount to "socialisation", it amounts to nothing more than "State Capitalisation". Marxists should oppose it and expose it to the workers for the fraud that it is. Let the Capitalists go bust, and instead of the workers paying for tehir rescue let the workers take over their assets for themselves and run them for themselves as Co-operatives as Marx and Engels suggested.

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This is probably the last blog for a while. For the next 5 weeks I'm going to be in the midst of the Spanish countryside with no internet connection.