In 2008, capitalism had its second global spasm. The financial crisis set off a chain reaction that pushed Europe into a downward spiral that continues to this day. Europe’s present situation is not merely a threat for workers, for the dispossessed, for the bankers, for social classes or, indeed, nations. No, Europe’s current posture poses a threat to civilisation as we know it.
If my prognosis is correct, and we are not facing just another cyclical slump soon to be overcome, the question that arises for radicals is this: should we welcome this crisis of European capitalism as an opportunity to replace it with a better system? Or should we be so worried about it as to embark upon a campaign for stabilising European capitalism?
To me, the answer is clear. Europe’s crisis is far less likely to give birth to a better alternative to capitalism than it is to unleash dangerously regressive forces that have the capacity to cause a humanitarian bloodbath, while extinguishing the hope for any progressive moves for generations to come.
.My view on this dilemma has always been that the powers that be are never perturbed by theories that embark from assumptions different to their own. The only thing that can destabilise and genuinely challenge mainstream, neoclassical economists is the demonstration of the internal inconsistency of their own models. It was for this reason that, from the very beginning, I chose to delve into the guts of neoclassical theory and to spend next to no energy trying to develop alternative, Marxist models of capitalism. My reasons, I submit, were quite Marxist.
Neo classical economists recognise the mountain of debts and banking losses but neglect the opposite side of the same coin: the mountain of idle savings that are “frozen” by fear and thus fail to convert into productive investments. A Marxist alertness to binary oppositions might have opened their eyes.
A major reason why established opinion fails to come to terms with contemporary reality is that it never understood the dialectically tense “joint production” of debts and surpluses, of growth and unemployment, of wealth and poverty, indeed of good and evil. Marx’s script alerted us these binary oppositions as the sources of history’s cunning.
From my first steps of thinking like an economist, to this very day, it occurred to me that Marx had made a discovery that must remain at the heart of any useful analysis of capitalism. It was the discovery of another binary opposition deep within human labour.
Between labour’s two quite different natures: i) labour as a value-creating activity that can never be quantified in advance (and is therefore impossible to commodify), and ii) labour as a quantity (eg, numbers of hours worked) that is for sale and comes at a price. That is what distinguishes labour from other productive inputs such as electricity: its twin, contradictory, nature. A differentiation-cum-contradiction that political economics neglected to make before Marx came along and that mainstream economics is steadfastly refusing to acknowledge today.
In the classic 1953 film Invasion of the Body Snatchers, the alien force does not attack us head on, unlike in, say, HG Wells’s The War of the Worlds. Instead, people are taken over from within, until nothing is left of their human spirit and emotions. Their bodies are shells that used to contain a free will and which now labour, go through the motions of everyday “life”, and function as human simulacra “liberated” from the unquantifiable essence of human nature. This is something like what would have transpired if human labour had become perfectly reducible to human capital and thus fit for insertion into the vulgar economists’ models.
If capital ever succeeds in quantifying, and subsequently fully commodifying, labour, as it is constantly trying to, it will also squeeze that indeterminate, recalcitrant human freedom from within labour that allows for the generation of value. Marx’s brilliant insight into the essence of capitalist crises was precisely this: the greater capitalism’s success in turning labour into a commodity the less the value of each unit of output it generates, the lower the profit rate and, ultimately, the nearer the next recession of the economy as a system. The portrayal of human freedom as an economic category is unique in Marx, making possible a distinctively dramatic and analytically astute interpretation of capitalism’s propensity to snatch recession, even depression, from the jaws of growth.
At a time when neoliberals have ensnared the majority in their theoretical tentacles, incessantly regurgitating the ideology of enhancing labour productivity in an effort to enhance competitiveness with a view to creating growth etc, Marx’s analysis offers a powerful antidote. Capital can never win in its struggle to turn labour into an infinitely elastic, mechanised input, without destroying itself. That is what neither the neoliberals nor the Keynesians will ever grasp. “If the whole class of the wage-labourer were to be annihilated by machinery”, wrote Marx “how terrible that would be for capital, which, without wage-labour, ceases to be capital!”
Marx has given me the tools with which to become immune to the toxic propaganda of neoliberalism. For example, the idea that wealth is privately produced and then appropriated by a quasi-illegitimate state, through taxation, is easy to succumb to if one has not been exposed first to Marx’s poignant argument that precisely the opposite applies: wealth is collectively produced and then privately appropriated through social relations of production and property rights that rely, for their reproduction, almost exclusively on false consciousness.
In his recent book Never Let a Serious Crisis Go to Waste, the historian of economic thought, Philip Mirowski, has highlighted the neoliberals’ success in convincing a large array of people that markets are not just a useful means to an end but also an end in themselves. According to this view, while collective action and public institutions are never able to “get it right”, the unfettered operations of decentralised private interest are guaranteed to produce not only the right outcomes but also the right desires, character, ethos even. The best example of this form of neoliberal crassness is, of course, the debate on how to deal with climate change. Neoliberals have rushed in to argue that, if anything is to be done, it must take the form of creating a quasi-market for “bads” (eg an emissions trading scheme), since only markets “know” how to price goods and bads appropriately. To understand why such a quasi-market solution is bound to fail and, more importantly, where the motivation comes from for such “solutions”, one can do much worse than to become acquainted with the logic of capital accumulation that Marx outlined and the Polish economist Michal Kalecki adapted to a world ruled by networked oligopolies.*
Marx’s first error – the error of omission was that he failed to give sufficient thought to the impact of his own theorising on the world that he was theorising about. His theory is discursively exceptionally powerful, and Marx had a sense of its power. So how come he showed no concern that his disciples, people with a better grasp of these powerful ideas than the average worker, might use the power bestowed upon them, via Marx’s own ideas, in order to abuse other comrades, to build their own power base, to gain positions of influence?
Marx’s second error, the one I ascribe to commission, was worse. It was his assumption that truth about capitalism could be discovered in the mathematics of his models. This was the worst disservice he could have delivered to his own theoretical system. The man who equipped us with human freedom as a first-order economic concept; the scholar who elevated radical indeterminacy to its rightful place within political economics; he was the same person who ended up toying around with simplistic algebraic models, in which labour units were, naturally, fully quantified, hoping against hope to evince from these equations some additional insights about capitalism. If I am right, Marx knew what he was doing. He understood, or had the capacity to know, that a comprehensive theory of value cannot be accommodated within a mathematical model of a dynamic capitalist economy. He was, I have no doubt, aware that a proper economic theory must respect the idea that the rules of the undetermined are themselves undetermined. In economic terms this meant a recognition that the market power, and thus the profitability, of capitalists was not necessarily reducible to their capacity to extract labour from employees; that some capitalists can extract more from a given pool of labour or from a given community of consumers for reasons that are external to Marx’s own theory.
Alas, that recognition would be tantamount to accepting that his “laws” were not immutable. He would have to concede to competing voices in the trades union movement that his theory was indeterminate and, therefore, that his pronouncements could not be uniquely and unambiguously correct. That they were permanently provisional. This determination to have the complete, closed story, or model, the final word, is something I cannot forgive Marx for. It proved, after all, responsible for a great deal of error and, more significantly, authoritarianism. Errors and authoritarianism that are largely responsible for the left’s current impotence as a force of good and as a check on the abuses of reason and liberty that the neoliberal crew are overseeing today.
Even as unemployment doubled and then trebled, under Thatcher’s radical neoliberal interventions, I continued to harbour hope that Lenin was right: “Things have to get worse before they get better.” As life became nastier, more brutish and, for many, shorter, it occurred to me that I was tragically in error: things could get worse in perpetuity, without ever getting better. The hope that the deterioration of public goods, the diminution of the lives of the majority, the spread of deprivation to every corner of the land would, automatically, lead to a renaissance of the left was just that: hope.
The reality was, however, painfully different. With every turn of the recession’s screw, the left became more introverted, less capable of producing a convincing progressive agenda and, meanwhile, the working class was being divided between those who dropped out of society and those co-opted into the neoliberal mindset. My hope that Thatcher would inadvertently bring about a new political revolution was well and truly bogus. All that sprang out of Thatcherism were extreme financialisation, the triumph of the shopping mall over the corner store, the fetishisation of housing and Tony Blair.
The lesson Thatcher taught me about the capacity of a long‑lasting recession to undermine progressive politics, is one that I carry with me into today’s European crisis. It is, indeed, the most important determinant of my stance in relation to the crisis. It is the reason I am happy to confess to the sin I am accused of by some of my critics on the left: the sin of choosing not to propose radical political programs that seek to exploit the crisis as an opportunity to overthrow European capitalism, to dismantle the awful eurozone, and to undermine the European Union of the cartels and the bankrupt bankers.
Yes, I would love to put forward such a radical agenda. But, no, I am not prepared to commit the same error twice. What good did we achieve in Britain in the early 1980s by promoting an agenda of socialist change that British society scorned while falling headlong into Thatcher’s neoliberal trap? Precisely none. What good will it do today to call for a dismantling of the eurozone, of the European Union itself, when European capitalism is doing its utmost to undermine the eurozone, the European Union, indeed itself?
A Greek or a Portuguese or an Italian exit from the eurozone would soon lead to a fragmentation of European capitalism, yielding a seriously recessionary surplus region east of the Rhine and north of the Alps, while the rest of Europe is would be in the grip of vicious stagflation. Who do you think would benefit from this development? A progressive left, that will rise Phoenix-like from the ashes of Europe’s public institutions? Or the Golden Dawn Nazis, the assorted neofascists, the xenophobes and the spivs? I have absolutely no doubt as to which of the two will do best from a disintegration of the eurozone.
If this means that it is we, the suitably erratic Marxists, who must try to save European capitalism from itself, so be it. Not out of love for European capitalism, for the eurozone, for Brussels, or for the European Central Bank, but just because we want to minimise the unnecessary human toll from this crisis.
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*Austerity? Call it class war – and heed this 1944 warning from a Polish economist
The single best guide to what happened in Britain last week was published in 1944. Naturally, its author was a Polish economist. Even economics students may not have heard of Michał Kalecki – but it's the discipline that got small, rather than his legacy. In his time, Kalecki was recognised as having anticipated some of Keynes's most important ideas, years before the Master published his General Theory, and he exerted a big influence on such legendary Cambridge thinkers as Joan Robinson and Nicky Kaldor.
His article, Political Aspects of Full Employment, explains with an almost eery prescience why the coalition is attacking our wages, our working terms and conditions and our welfare state.
The tone is exhilaratingly brisk. "A solid majority of economists" agree on how to solve a slump, Kalecki says. The government borrows more and invests the cash either in building schools and hospitals or in providing benefits and tax cuts; this boosts demand and generates employment. Ta-da! Two pages in, and he has both fixed the problem of recessions and despatched most of the arguments against public borrowing that we have heard with such tedious frequency in the past five years.
What if savers become wary of lending to the state? Then, Kalecki says, the Treasury pays higher interest rates – and, since most of its lenders are British (just like now), the money will still flow back into the economy. But he notes that Churchill's war coalition has run "astronomical budget deficits", while "the rate of interest has shown no rise since the beginning of 1940". What if it becomes too costly to keep on top of the national debt? Then ministers should raise more funds, not by taxing ordinary pay or spending, which would slow the economy, but with a levy on idle wealth.
That proposal, by the way, is tossed out in a mere footnote on the second page; and, reader, if you can't love a man who comes up with a novel way of soaking the rich in one short italicised paragraph, then I fear we're never going to be friends.
Having rattled through the urgent problems, Kalecki points out that a booming economy and healthy profits would be good for the "leaders of industry", but that they will never support such government intervention. And in a sentence that sums up post-crash Britain, he identifies one of the principal sources of resistance as "so-called 'economic experts' closely connected with banking and finance" along with "big business".
The opposition posed by this coalition of bosses and financiers is motivated by three factors. First, they want as little government interference in the economy as possible; second, they don't want the state expanding into new areas and so doing them out of business. But the thing that really keeps the capitalists awake at nights is the boost to workers' confidence that will be provided by a heathy jobs market. They will demand more pay, better working conditions, perhaps even a say in how their companies are run. Fully employed, well-paid Britons will have more cash to buy things, so a healthy economy supported by the government is better for corporate profits than a sick one. "But 'discipline in the factories' and 'political stability' are more appreciated by the business leaders than profits". Rather an insecure and cowed workforce than a confident and boisterous one.
But it's Kalecki's "political business cycle" that sums up the world we're in now. Rather than opting for public investment and a healthy recovery, Britain is stuck in a slump that austerity and a blind trust in private-sector vigour is only deepening. But the parallels don't stop there. Last week, the day after MPs voted through a bill for real-terms cuts year upon year in benefits for the jobless and the low-paid, newspapers led on government briefings that the butchering of the welfare state would not stop there. Next, the FT reported, winter fuel allowance would be for the chop.
Meanwhile, living standards for those in work are also under attack: through wages that are falling further and further behind inflation and government schemes to sacrifice workplace rights in return for share options. For those slow on the uptake, there is always William Hague, telling Britons to "work harder".
The rhetoric is also echoed in our media. Last Friday, the Guardian's librarians went through all the British tabloids and broadsheets since 2007. Up to 2010, they found that Fleet Street was quite restrained in its use of the term "scrounger": a mere 46 mentions (when discussing benefits or welfare) for all of 2007. In 2010, though, that shot up to 219 mentions, and last year 240 mentions. As for shirkers v strivers, the false opposition du jour, newspapers did not use the phrase at all until 2010. Last year, the total was 10. In the first two weeks of 2013, the press had already racked up 30 mentions.
Whether from politicians or the press, these justifications for austerity are getting more strident even while evidence of austerity's failure is stacking up. It may be that Britain goes into a third recession this year; it is certainly not going to enjoy a recovery. And what was always evident in the coalition's spending plans issued back in 2010 – that our welfare state and public realm were going to get shredded – is slowly but surely materialising.
This assault on an entire social contract, says Malcolm Sawyer, a leading expert on Kalecki, is what his subject warned about. "The argument for dealing with budget deficits has provided cover for attacking wages and benefits." And austerity is just code for the transfer of wealth and power into ever fewer hands.