Tuesday, 13 September 2011

The Economy Of Analysis - Part 2

Some months ago I responded to an article by Jim Creegan, in relation to the Tea Party in the US, in the Weekly Worker. The article demonstrates the problem.
On the one hand, that crude economic determinist, and functionalist approach of much of the Left leads them to argue that Government policies are necessarily those that Capital requires of them. But, how then do you account for opposition to those policies by the other bourgeois parties? If as Jim argued, the Tea Partiers were arguing for the interests of US Capital, then whose interests were the rest of the Republicans, let alone Obama, and the Democrats representing???

And, the consequences of this can be seen now. For months, the CPGB, like most of the Left, have been arguing that the Liberal-Tory policies of austerity – and the same has been argued in relation to the austerity measures proposed in Europe – are purely dictated by the needs of Capital. But, as I pointed out in that letter, replying to Jim Creegan, this doesn't make sense. If Capital needed massive cuts in state spending, if it saw the opportunity to slash the size of the Welfare State, then why now? After Thatcher had defeated the British working-class, after the Miners Strike, and Reagan had accomplished a similar feat in the US, there was the best opportunity in a lifetime to have shrunk the size of the State, and its Welfare component.
But, in fact, that did not happen. In both the US and UK, under Thatcher and Reagan, the size of the State, including its welfare component rose. Its also interesting, given Engels analysis, that although Thatcher smashed the POWER of unions, by undermining the strength of rank and file organisation, and the potential for it to organise spontaneous action, she did not attempt – other than in specific cases such as GCHQ – to outlaw unions. In fact, what Thatcher accomplished, was to restore unions to the same kind of condition they were in prior to the 1960's. That is to enhance the power of the union bureaucracy so that it could fulfil its function as mediator between the bosses, and the workers.
When the “new realism” developed, it was alongside changes also within the production regime. The new Japanese Factories that came to Britain came along with the introduction of single union agreements, no strike clauses, and so on.

If Capital did not shrink the size of the State, and dismantle the Welfare State during the 1980's, and 90's, when it was in the worst prolonged crisis since the 1920's and 30's, then why would it need to do so now? Of course, if you work with the kind of catastrophist model, that much of the Left adopts, you will, as much of the current analysis does, argue that the current crisis is worse than that of the 1980's. But, that is itself nonsense. The data simply do not support such a view. (See: for example the data provided by the OECD). For most of the last 12 years, since the new Long Wave Boom commenced, there has been rapid economic growth throughout the global economy.
Although, some of that growth in the US, and Europe can be put down to loose monetary policies, it most certainly cannot all be put down to that. And, in China and other new dynamic economies, it accounts for very little of the economic growth that has occurred. In fact, when the Credit Crunch in 2008 created an economic crisis in the West, China and other such economies continued to grow at a rapid pace. Increasingly, China and other Asian economies are basing their economic development upon expanding their own domestic markets, and on trade within the region, although trade with the US and Europe, obviously continues to be important.

But, even were the view, that the crisis now is worse than in the 1980's, true then we are still left with the question why now? As I pointed out to Jim Creegan,

“This is the same ruling class, which only a year ago was demanding that the State grow to almost any size to bail-out the banks and other sections of Big Capital! If it wanted a small state 2008 was the perfect opportunity to have got one. But, has Jim forgotten that it was not Obama that stepped in to bail-out Big Capital, but Bush.
Nor was that growth of the State just a response to the Financial meltdown. The Libertarians and Ron Paul were decrying the Socialism of Bush way back in 2002, as the size of the State expanded along with the deficits.”

I've also referred elsewhere to the fact that the other bogeyman of the Tea Partiers – Health Reform – has also long been the cause of Big Capital, which has complained persistently about the huge burden it faced compared to its foreign competitors who benefited from socialised systems.
And it was not Obama who first responded to that by expanding the role of the State but Bush. In an article in 2005, in one of the US ruling class's theoretical journals, Fortune, Matt Miller wrote,

“But seen in this context, the prescription-drug bill last year was the first step in the Republican-led socialization of health spending. Companies have been clobbered funding retiree health plans. The GOP felt their pain, and presto, $750 billion over ten years moved from private to public budgets...

The bigger hurdle may be stereotypes. Business's sensible drive to get Uncle Sam to take on more of the health burden will run into the nihilistic (but potent) "big government" rhetoric of the GOP--plus the party's delusion that we can keep federal taxes at 17% to 18% of GDP as the boomers retire.
If Republican pols want to help Republican CEOs solve their biggest problems, this caricature of a political philosophy will have to give way to something more grown-up. Just as the Nixon-to-China theory of history says it will ultimately take a Democratic President to fix Social Security, it may take a Republican President to bless the socialization of health spending we need. ..Ask yourself: When we're on the cusp of decades of wrenching challenges from places like China and India, doesn't American business have enough to do without managing health care too?”

If these small state policies were designed to meet the needs of Capital, it also required an explanation of why many of the top theoreticians of Capital were opposing them. As I put it at the time,

“Additionally, there is hardly an ideologist of the Big bourgeoisie from Roubini to Soros who is not arguing that austerity is the wrong course at the present time.
And in a Forum hosted by the BBC last weekend Strauss-Kahn agreed with Joe Stiglitz that in those economies where fiscal stimulus was possible it should be employed. There is of course, a difference between Big Capital seeing the advantages of a Big State in providing economic and social stability, and of being a rational means of providing those commodities such as Education and Healthcare vital for the reproduction of Labour Power, and a desire for efficiency, and for avoiding debt where possible.”

In other words, the actions and policies of Governments and of States were being determined not by any “Capital Logic” per se, but by a dynamic and logic of their own. In a sense it is a reversal of the situation of the early 1970's. Then the onset of the new Long Wave downturn, was met by the kind of Keynesian fiscal response that had been used in every recession of the previous 25 years. But, that fiscal response failed to work, other than for short periods, and the consequence was rising inflation, that by the end of the 70's had turned to stagflation.
The reason it did not work, is as I have set out elsewhere 1929 And All That, precisely due to the conjuncture, the phase of the Long Wave cycle. In periods of upswing, pools of Surplus Value are available, the rate of profit is rising, new investment opportunities present themselves. So long as Capitalists see any downturn as temporary, then the kind of “animal spirits” that Keynes described, encourage investment to take place, when any stimulus creates an upturn in market conditions. It also means that workers see any setbacks as temporary, and so adjust their spending accordingly. But, in periods of Long Wave downturn such as the 1920's and 30's, or the 1970's and 80's, the opposite is true. The political consequences of this were also outlined by Trotsky in Flood Tide.

In the specific conditions of the late 1980's and 1990's, Capital in the West found that it could stimulate demand in its home markets, and thereby raise the rate of profit, better via Monetary stimulus, than by fiscal stimulus. Ideologically, it was symbolised by the victory of Monetarist Economics over Keynesian Economics, even though both represented the ideology of “Neo-Liberalism” i.e. the idea of promoting a free market, whilst all the time continuing huge State intervention at a macro-economic level, to back-stop the risks to Big Capital. What has been termed “Socialism For The Rich”.

Back To Part 1

Forward To Part 3

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