Thursday, 7 June 2018

Paul Mason's Post Capitalism - A Detailed Critique - Chapter 1 (1)

Chapter 1 – Neoliberalism Is Broken 

Conservative Social-Democracy and Financial Crises

Before looking at the contents of this chapter, on Neoliberalism, I want to just make a comment on terminology. Neoliberalism is a term widely used on the Left. It's a term I've never liked or accepted as particularly useful. It's often, as with the term neo-con, used mostly as a term of abuse, rather than analytical categorisation. Neoliberalism, as with Liberalism, implies the withdrawal of the state from economic and social life, but there has been no such withdrawal, and given the nature of large-scale, socialised global industrial capitalimperialism – nor could there be. 

Thatcher and Reagan, in the 1980's, presided over an increase in the size of the state, and an increase in its role in intervening in economic and social life. What they ushered in was a period during which the role of the state was not reduced, but during which the nature of the intervention was changed. Prior to then, the economic levers operated primarily via Keynesian demand management, based upon fiscal intervention, with monetary policy acting in support; from the 1980's, it was monetary policy that assumed the primary role, reflecting the triumph, ideologically of Hayek and Friedman over Keynes, which itself was symptomatic of a change in the dominance of different class fractions within the ruling class. 

For reasons I have set out previously, I believe that the social relations that arise upon large-scale, socialised capital, the requirement of that capital for long-term stability, which entails planning and regulation, increasingly at an international level, leads to the establishment of a social-democratic state and polity. Reactionary political parties and forces may try to restore some previous set of economic and social relations, based upon small private capitals, or even effectively peasant production, or in the opposite direction, revolutionary parties may advocate the need to go beyond the limitations of capitalism itself. But, the existing state, and the mainstream parties are confined within the ideology of social-democracy. It is only a question of whether they are conservative social-democrats or progressive social-democrats

What Paul, and most of the Left describes as Neoliberalism I define as conservative social-democracy. But, for the purposes of this critique, I will use the term Neoliberal

Paul begins the chapter by looking back to 2008, and the collapse of Lehman's. The proximate cause of the crisis, he says, was easy to see. Huge amounts of hidden debts, packaged up in Special Investment Vehicles (SIV's), and so on, along with actual criminality that flowed logically from it all, in order to hide the reality, as I've also discussed, and is depicted in the film, The Big Short. But, Paul is also right to say that if you want to understand the real cause of 2008, you need to go much further back. In fact, I would say you need to go back to the early 1980's. 

Paul says, 

“Ultimately, though, we were all flying blind, and that's because there is no model of a neoliberal economic crisis.” (p 4) 

I disagree. Firstly, I disagree that 2008 was primarily an economic crisis. Secondly, I disagree that there is no model for such a crisis. 2008 was a financial crisis not an economic crisis. It was no different, in that respect, to the financial crises of 1847 and 1857, analysed by Marx, and, as I've also described, it has similarities to the crash of 1962. Those financial crises occurred in periods of economic boom, which continued after the effects of the financial crash had dissipated. The crash of 2000, primarily in technology stocks, was similar, to the Railwaymania that resulted in a crash of share prices. In all these cases, the financial crisis amounts to the bursting of speculative bubbles, as a result of rising interest rates. 

Paul points to the fact that the crash wiped 13% off global production, and 20% of global trade, took global growth negative, and led to a depression phase, i.e. period for output to reach previous levels, longer than 1929-33 (p. 3). But, Marx points out that the 1847 financial crisis knocked 37% off UK production, as a result of the credit crunch, and because business owners who had diverted profits, and working-capital into speculation in railway and other shares, had to curtail their actual business activity, in order to obtain the cash to cover what today would be called their margin calls. Yet, as Marx points out, in relation to both the 1847 and 1857 financial crises, once the 1844 Bank Act was suspended, and liquidity was released, so as to end the credit crunch, the economic boom resumed. The question then is why – if it was – was 2008, and its aftermath different? 

I will look at that in Part 2.

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