Paul Mason's Postcapitalism - A Detailed Critique - Chapter 1 (4)

CHAPTER 1 – NEOLIBERALISM IS BROKEN

The Roots of 2008

The roots of the 2008 crash, as I set out in my 2014 book, Marx and Engels' Theories of Crisis, were laid in the 1980's. Progressive social democracy had hit the buffers. For reasons I'll come to in reviewing the respective chapter on the long wave, the productivity gains derived in the post-war cycle came to an end, the basis of social-democracy, to raise living standards, on the basis of that rising productivity, came to an end with it. Capital, in the developed economies, saw the potential for higher profits in selected developing economies in Asia, and relocated, creating a new international division of labour. At the same time, capital sought to replace what had become high-cost labour-power with technology. It created a new Innovation Cycle that created the new technologies of the microchip, mobile telephony, the Internet and so on that Paul rightly says continued to mushroom even after 2008 (p 7/8). 

But, as technology replaced labour in the 1980's/90's, in addition to the shift of production to Asia, it also cheapened constant capital, both in terms of the type and quantity of the capital required, and in terms of the cost of producing it. Together with a rising mass of profit, as wages fell, and the rate of surplus value rose, it meant the annual rate of profit rose sharply, and with relatively stagnant growth, it meant the supply of money-capital, from realised profits, exceeded the demand, pushing interest rates ever lower. It meant workers could be encouraged to borrow without limit, so as to maintain their consumption, even as their wages fell, and it meant that vast amounts could be gambled away, in the purchase of various assets, creating the bubbles that burst at regular intervals after 1987, only to be reflated once more, using even more central bank liquidity, leading up to the 2008 crash. 

I had actually theorised this development back in the early 1980's, in documents written for the then Workers Socialist League. I posted them back in 2009. The subsequent consequences of that, in terms of a bifurcation of the global economy, and of global imbalances, I have also described, and which is also briefly set out by Paul (p 8). 

For the reasons I've set out earlier, and in numerous posts since 2010, I have never accepted the theories about “secular stagnation”, “long depression” and so on. I didn't, in 2010, myself recognise just to what extent the owners of fictitious capital, and their representatives would go to hold back real capital accumulation, and economic growth, so as to reflate their paper wealth, but it is now clear to me that the economic growth we are now witnessing is despite the measures that have been taken not because of them. The policy of QE never was intended to reflate the economy by first reflating asset prices. The two things are mutually exclusive goals, and the real intention of reflating the latter, whilst suppressing the former is shown by the simultaneous implementation of austerity. 

It's one of those slings and arrows of outrageous fortune, when writing about financial markets, that whatever you say today is likely to be contradicted by events tomorrow. But, economic fundamentals are not the same as the vagaries of financial markets. In the end, the economic realities impose themselves also on financial markets, via the movement of profits and the rate of interest, but not immediately and mechanically, because these markets are driven by psychology, and as Keynes said, the markets can remain irrational longer than any individual can remain solvent. So, it's unfortunate that, writing this book in 2015, Paul seems to have fallen foul of some of the errors he also describes in others. Were he writing the book today, just a couple of years later, I would hope that the current synchronised growth, in 90% of the world's economies, back to the levels seen in the early 2000's, would lead him to dismiss the ideas about a system that “never regains its dynamism. Ever.” (p 9), more clearly. 

Paul sets out the issues I have described above, on page 9, where he lists four aspects of neoliberalism that enabled it to flourish, but are now destroying it. They are Fiat Money, Financialisation, Global Imbalances and Information Technology. He deals with them in separate sections, and as I have already covered most of this ground, I can skip through most of them. I will address that in Part 5.

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