CHAPTER 1 – NEOLIBERALISM IS BROKEN
The Imbalanced World
Paul argues that Neoliberalism, in some countries, is only possible, because other countries don't practice it. What he means is that the US, UK, et al can only borrow to consume because China et al, produce and sell rather than consuming, and so are able to save. This is wrong. Marx showed, in Capital II, what is wrong with this idea. The argument that Paul presents is essentially mercantilist. Instead of considering two countries, consider two companies, A and B. A produces commodities, and B produces gold, which is also the money commodity. A and B both produce a surplus product/surplus value. B needs to buy commodities for its workers and capitalists to consume, and to replace those used in mining, and refining the gold. It buys these from A, and A thereby acquires gold to an equal value of the commodities it supplies. B has thereby reproduced its means of production, and means of consumption (constant and variable capital). But, it also produces a surplus, and it exchanges some of this surplus with A, thereby providing the commodities capitalist B needs to consume (or to enable accumulation). B capitalists retain the rest of their surplus as a gold hoard. A capitalists also produce a surplus. They consume some of it to meet their consumption needs (or accumulate), and exchange the rest with B, as described above, so that they too now have a portion of their surplus value in the form of a hoard of gold/money.
To the extent that such trade facilitates a division of labour, rise in productivity, rise in the rate of surplus value, and capital accumulation, it benefits both parties. There is no reason that such an imbalance had to arise, or that its removal represents a fundamental problem. On the contrary. Ultimately, the problem will be for China, if the US defaults, just as it will be for Germany, if the Eurozone falls apart, and just as it was for Lehman's et al, when all of those subprime mortgages went belly up.
It was the twin deficits crisis, in the 1980's, sparked by Reagan's Voodoo Economics, that led to the 1987 stock market crash. I left out the 1987 crash, earlier, precisely because it was different to 1847 and 1857, and 2000 and 2008. Those crashes came in the early periods of economic boom, when the expansion caused interest rates to rise. 1987 came at the end of a period of crisis, and start of a period of stagnation, when interest rates had already peaked. It was that which spooked Greenspan and Co., and led to them embarking on their 30 year programme of keeping those asset prices inflated.
Trump is applying the same Voodoo Economics, and blowing up this Twin Deficits Crisis 2.0. At the same time, he is disrupting global capital with his economic nationalism, and inane tweets. He is doing so in conditions opposite to those of 1987. In other words, global growth is rising, global interest rates are rising sharply from their near zero levels, and so creating the conditions for a never seen before collapse in asset prices. Just as the long wave cycle produced a thirty year secular down trend in interest rates, and rise in asset prices, so now the conditions are set for a thirty year move in the opposite direction.
Paul is right to note that the world is made up of “classes, religions and nations” (p 22), and he could have included other important interest groups, such as nation state bureaucracies, and so on, as I've done in considering relations in the EU, and elsewhere. These various cleavages mean that the implication of policy prescriptions affect different sections of society differently.
The dominant sections of the ruling class – which is not at all the same thing as the majority of the ruling-class, which consists of the millions of small capitalists – did not want Brexit, nor Trump, but they have got them, as the inevitable consequence of the Neoliberal policies adopted over the last thirty odd years. The same is true of the rise of the right-wing nationalists in Hunagry and Poland etc. Back in 2015, I wrote that Syriza could not bend; if it did the consequence would be its demise, and the rise of Golden Dawn. Well Syriza did bend, then it split, and now it is facing electoral defeat. Fortunately, as the EU economy recovers, and action by the ECB, via QE, along with the effective writing off of Greek debt, means that Greek bonds today trade at not much higher yields than UK Gilts, its not Golden Dawn waiting to take over the government, but the same old conservatives that created the problem in the first place.
A look across Europe can present a depressing picture, with Brexit, the support for Le Pen, Wilders, Orban and their ilk. But, a look beneath the surface shows that Le Pen did not win; Macron provoked a large active abstention, and his Blairite policies are provoking a response from French workers. Large numbers of Polish workers are returning home, as the economy grows, and the reality will increasingly bring those workers into conflict with the government. In the same way that Brexit provoked a response in Britain, and Trump's election has prompted a response, and growth of activism, at the base of the Democrats, so too such a reaction is likely across Europe. This is not the 1930's, nor the 1980's; it is more like the 1950's, or early 1960's, and the underlying uptrend of the long wave will manifest itself in a similar way.
The Info-Tech Revolution
Paul says,
“The one positive factor to set against all the negatives outlined so far is the tech revolution, which was produced by Neoliberalism and has stormed ahead in defiance of the economic crisis.” (p 23)
To be honest, I think this is back to front. The Tech Revolution precedes Neoliberalism. As with all long wave cycles, the drive for technological innovation arises during the crisis phase, as capital seeks to address high wages, and labour shortages that provoke repeated crises. That is the case from around 1974 onwards. The innovation peak, in terms of this drive, and the development of new base technologies – not the roll out of those technologies – came around 1985. It is the development of the microchip, of the development of things like computer typesetting, desktop printing, photocopiers, and so on, which destroyed many bastions of skilled workers power.
In the mid-1980's, I was self-employed as an IT consultant, at a time when the kind of machines my father had worked on as an engineer were being converted to computer controlled machines, running off punch cards. A comrade of mine, at the time, who was a technical author with ICL, came with me to the Which Computer Show, at the NEC, where I was impressed by some of the CAD/CAM machines being demonstrated. “That's nothing,” he told me, even back then, “I'm working on programmes that will actually produce the programmes that control the machines.”
It was this technical revolution that meant that labour was undermined, workers struggles doomed, so long as they remained merely distributional struggles, at the industrial level, and which created the conditions for the huge rise in the rate of profit, which also created the conditions for the progressive fall in interest rates, rise in asset prices and expansion of credit based upon it.
The development of networked PC's, the developments in telecommunications etc. opened the door for large companies to operate on a modular basis. It facilitated electronic payments and credit – the ATM would have been impossible without the microchip, as effectively would have been the credit card and store card etc. It facilitated the introduction of Just In Time and Flexible Specialisation, and its unlikely that the shift of large amounts of production to Asia itself would have been possible without it.
Floridi's description of the rapid pace of IT development is, in fact, no different to Marx’s description of the rapid pace of machine production, in the 19th century, when he says, machines were often scrapped, even before their production had been completed, because they had already become out of date. I was considering the situation the other day in relation to media production. We have seen the cost of equipment fall massively, as a consequence of this technological development. Paul himself is an example of how this development enables even individuals to become their own producer of media, available to a mass audience. In fact, it has promoted a rapid growth of such independent production. But, it occurred to me that Marx describes a similar situation, in the 19th century, when cheap, efficient sewing machines became available. A plethora of self-employed seamstresses sprang up, all enabled to work from their own homes. The inevitable consequence was that, in competition with each other, the market could not sustain all of them, and they were forced to charge a pittance for their products, rather like the situation that faced the Scottish pebble collectors. A similar situation exists with Uber drivers. As I've written on that, it illustrates the importance of forming a co-operative, and I'm glad to see that Paul has been promoting that solution too.
The network effect that Paul refers to, whereby the more people networked together, for example, on a telephone system, is in reality nothing new. As Marx points out, networked labour, i.e. co-operative or social labour, also produces something for nothing, by which he means in addition to the unpaid labour of the worker.
Paul argues that this information revolution creates a challenge to capitalist property, because it can't make the necessary calculation of values, and “is the root cause of the collapse, fibrillation and zombie state of Neoliberalism.”
I disagree. Marx demonstrates the way land has no value, and yet is sold as a commodity; capital has no value, and yet is sold as a commodity. The price of land is capitalised rent, and the price of capital is the rate of interest. And, ever since stock markets arose, stocks and bonds themselves have been bought and sold as commodities, even though they have no value, their prices determined on the basis of the intersection of supply and demand.
Neoliberalism has collapsed because asset prices were driven higher at the expense of actual capital accumulation. Reality, and the ultimate predominance of industrial capital has simply and inevitably reasserted itself.
I will conclude the analysis of this chapter, in part 7.
No comments:
Post a Comment