Saturday, 29 May 2010

The Return Of Illiterate Economics - Part 4 – Who Rules?

It was no accident, however, that the “social-democratic” consensus of the post-war boom – what was termed “Buttskillism” in Britain – was shattered in the 1980’s, represented most illustratively in the form of Thatcher and Reagan. The truth is that time and again when workers have been asked that question, “Who Rules?”, the workers have not been able to respond, “We Do!” In Marx’s words in his, “Critique of the Gotha Programme”, not only do the workers not rule, but they have not been prepared by the Marxists to be fit to rule. Partly, that is because they have been encouraged to see rule in terms of political power, at best in control of the State, at worst in control merely of Parliament. It is to see things upside down, as Marx says in his “Critique”, to see society as the creation of the State and not vice versa.

“The German Workers’ Party – at least if it adopts the Programme – shows that its socialist ideas are not even skin deep, in that, instead of treating existing society (and this holds good for any FUTURE one) as the basis of the existing state (or of the FUTURE state in the case of future society), it treats the state rather as an independent entity that possesses its own intellectual, ethical, and libertarian bases.”

No class can control the State unless it first rules in society, unless its method of production is on the rise and the ideas that flow from it are permeating the minds of all society. Simple rejection of the old, as a result of a crisis, is not enough.

Having begun that process, in part, in May ’68, by taking over the means of production, and establishing some limited workers control, the French workers settled for that old idea. And, when DeGaulle called an election, the question, “Who Rules?”, was answered. He did! The reality was that only a minority of workers had been actively involved. Instead of the occupations and workers control appearing as a new, rational, better way of organising society, they only had time to sow in the minds of society, of the majority of passive workers and middle classes, the notion of anarchy and disorder. They voted to end it. Even in Britain, in 1974, the question was almost settled in Heath’s favour. Had he offered the Liberals PR they would have supported him. As it was the workers only got Wilson/Callaghan and five years of pay control and spending cuts.

For so long as the workers failed to recognise the need to create their own property forms, upon which would develop new social relations, then they could only ever consider the answer in restricted terms that could never provide a real solution. And, having been forced to ask the question, as a result of the conditions imposed by the conjuncture, the question, having been answered in the affirmative for the bosses, the bosses then used the new conditions of the Long Wave downturn, to impose their terms on the workers. Keynesian policies in the late 60’s and during the 1970’s, alongside loose money, meant inefficient businesses, that should have gone bust, or been restructured, were able to struggle on with low rates of profit, by pushing up prices. The same policy, designed to stop unemployment rising, meant workers, where they were well organised, could push up wages. Indeed, Heath even introduced a sliding scale of wages, which lifted many workers wages more than they might otherwise have expected!

What characterised the economic policy of Thatcher and Reagan was not actually that they slashed the size of the State – neither did – but that they began by cutting back the Money Supply – a classically Misean policy. Thatcher was guided by the Misean, Frederick Hayek. Reagan was guided by the same policy under Paul Volcker at the Fed. Both combined that policy, which meant inefficient firms could not raise prices to cover higher wages, thereby forcing them to confront workers, and many went bust, with a refusal to intervene to save them, and with the use of the State to beat down workers attempts to defend themselves – the Air Traffic Controllers in the US, the Miners in Britain. Again, it is an illustration of how limiting that statist view is, that the best the workers could struggle for was a demand that the Capitalist State intervene to ensure that they could continue to be exploited by Capital! In reality, there was no hope even of achieving that pathetic ambition outside what would have been a near revolutionary situation. And despite what some London comrades might have thought at the time, as I recall hearing some of them say at one National Labour Briefing meeting I attended, those of us who lived in mining areas knew that 1984 certainly was not that.

And, whilst the Tories were prepared to use the State, to physically beat down workers, they were also prepared to see Welfare spending balloon as unemployment rose. In fact, quite early on, they introduced measures like that under which men coming up to 60 could get higher Unemployment Benefit if they agreed to sign to not seek further employment. Once they had beaten down the workers ability to compensate for rising prices, they abandoned Misean economics for Monetarism, and turned the money taps on so that big business could raise prices and profits. In a sense the policy adopted in the US and UK, in particular, from the mid 80’s onwards, was a kind of reverse Keynesianism. In a Long Wave boom, businesses see continued expansion as the norm and periodic cycles as just temporary. They are happy with the idea of these temporary blips being cut as short as possible by Government action, even in the knowledge that it will have to be paid back in higher taxes, because it means continuing demand for their products now until normal service is resumed. A bit more tax out of much bigger profits will be worth it. It represents a temporary transfer into workers pockets to keep up demand. What the US and UK effectively did from the mid 80’s was the opposite.

In the US, real wages are at the same level as 30 years ago. Real wages in Britain have been relatively stagnant too. Loose money enabled businesses to raise prices and profits, but it also encouraged workers to borrow on the back of a perceived increase in their wealth as house prices bubbled, and so did the Mutual Funds and Pensions an increasing number of workers had been persuaded to invest in. They financed their continued consumption out of this borrowing against rises in fictitious wealth. In reality, it was a transfer of wealth from workers to Capital.

It is impossible to understand Economics in normative terms; a reaction between two chemicals will always be the same. If you want to counteract an acid you use an alkali. But, Economics is a science of human behaviour, and human society is divided into classes with differing interests, and the interests of the dominant class – essentially to maximise profits – is achieved by different means at different phases of the Long Wave. As I have said before, unless you understand where you are within the Long Wave, its like trying to navigate without knowing where you are, and without a map or compass. By the same token, attempting to apply policy prescriptions as the Tories and others propose, based purely on dogma, and support for eternal prescriptions is simply economic illiteracy.

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