The wreath of conservatism. Niall Ferguson gives us a lecture. Part Two

Since Plato there has been a thread of fear running through Western political thought. The foreboding that, in putting the poor in the saddle, democracy would lead to a fatal redistribution of wealth. Thatcherism in Britain fed on this sense of apprehension: the feeling that government redistribution from rich to poor had placed handcuffs on business, and the creation of wealth. It is a political dogma that conservatives cannot let go of. UK Chancellor George Osborne’s belief that government spending was “crowding out” private sector investment springs from the same source.

Niall Ferguson’s Reith lecture is founded on this primal fear. But he neglects one small fact. That poor and rich have swapped roles. In recent decades conservatives have become so successful at combating this supposed defect of democracy that now in western states, all boasting universal suffrage, redistribution works in the opposite direction. From poor to rich. Or to be more accurate, from the majority to a rich minority.

The ubiquity of corporate welfare in the UK, as shown in part one, is such that its presence can longer be politely hidden. As an example consider the Bank of England’s "funding for lending" scheme which will offer cut-price loans to banks, in exchange for some of their toxic assets such as credit card debt – “assets” which will be transferred to care of the government, otherwise known as the taxpayer. The scheme is worth £80 billion: just £3 billion less than the £83 billion cuts in public spending which the Conservatives are implementing in order, they say, to eliminate the government’s fiscal deficit. Cuts, equivalent to taking 19% from the budget of every government department, which will have a palpable effect on the welfare of people, as opposed to corporations, in Britain.

In continental Europe, the story is similar, and sometimes even more blatant. Spain ran a budget surplus prior to the economic crisis. Nevertheless the right-wing Spanish government of Mariano Rajoy is forcing through a €65 billion austerity package in order to pay for another  €100 billion bail-out of insolvent banks.

Don’t Call it Democracy

Many people now experience government as a racket, shovelling money with alacrity down the throats of banks and corporations, but denying, with stony-hearted glee, basic support to people when they need it most. In Britain, you can pay national insurance and tax for decades, but if you fall ill you find that the “benefit”, which you have paid for, is time-limited for a year. That is, if you are considered ill enough to qualify for benefit at all.

 The honest conclusion from all this is that we don’t live in democracies. We live in “polyarchies” – countries with universal suffrage and fair elections but where a privileged class ensures that, whoever wins, it benefits from government spending and tax avoidance. Former New York Times foreign correspondent Chris Hedges describes our political domicile as a “corporate state”.

But it’s also true that, in these polyarchies, the people who present themselves as fiscal conservatives aren’t conservative at all.

Top of Niall Ferguson’s list of wasteful US government programmes to be culled, come Medicare and Medicaid. They are ways in which the government pays for the cost of medical treatment for people on low incomes and the retired. And it’s true the costs are rising exorbitantly. But that is because these programmes pay for huge cost of private, as opposed to socialised, medicine. A recent international study illustrated the size of the expense. A routine visit to the doctors, the study found, cost $23 in France compared to $89 in the US. The price of an angiogram – a scan to see whether arteries in your heart are blocked – was $789 in America, compared to $35 in Canada.

So one way to seriously reduce the costs to the taxpayer, a sensible person might conclude, would be to create a public health system, resembling the French system, for instance. The “public option” is supported by 65% of Americans, opinion polls say. But to conservatives like Ferguson, the thought is simply verboten. (Actually what Americans got in the recent health care reform was compulsory registration with private medical insurers, a compromise that ensures costs go on rising and that says a lot about the pointlessness of American liberalism.)

Fiscal Incontinence

The idea of using taxpayers’ money to subsidise the private sector is such an unthought of feature of conservative strategy, that it is almost a reflex, rarely rising to consciousness. The possibility that costs might be reduced to the taxpayer by challenging  private sector structures cannot be contemplated.

 In Britain, the 2012 Health and Social Care Act will compel the National Health Service in England to commission services from the private sector. The cost to the public of this new market has been put at £20 billion a year. According to the authors of The Plot Against the NHS, “Each consortium [now clinical commissioning group] will have to employ a team of commissioners to negotiate contracts, monitor their performance, accountants to pay all the bills, lawyers to vet contracts and conduct court cases over disputes, team to vet drugs prescribed by GPs, and check their referrals to specialists and the treatments proposed by specialists. It will also need an advertising and PR department. Every hospital and chain of clinics will need the same.”

The Act, the largest reorganisation of the NHS in its history, has been introduced by the Conservatives in the face of deep opposition, and whilst they inflict £83 billion spending cuts elsewhere. The symmetry with the interests of corporations, regardless of the financial cost to the public, is unmissable. According to health researcher Alyson Pollock, the private health care industry does not want a purely private market. “Its interests lie,” she says, “in becoming for-profit providers in a basic health care system funded out of taxation.” And, at a time of austerity, they are getting what they want.

The similarity between the fate of the de-nationalised railways in Britain and the awaiting fate of the NHS has been noted. An equally inconvenient truth is that re-nationalisation of the railways has been estimated to save £1.2 billion a year. And yet, despite this policy having overwhelming public support, all the main political parties, Conservative, Liberal Democrat and Labour, each one fervently committed to saving public money, reject re-nationalisation. When it comes to derailing the corporate gravy train, our fiscal conservatives magically transform themselves into fiscal incontinents.

You might draw the conclusion that Leftism is the only option that makes financial sense.

Self-regulation

Niall Ferguson ends his lecture with the now familiar conservative lament that, at root, people caused the economic crisis themselves. “As our economic difficulties have worsened, we voters have struggled to find the appropriate scapegoat,” he tells us. We blame politicians, “but we also like to blame bankers and financial markets, as if their reckless lending was to blame for our reckless borrowing. We bay for tougher regulation, though not of ourselves.”

This is clearly meant to be a rhetorical flourish but there is, actually, a simple way of “regulating ourselves”, a method that has been used, often quite brutally, by conservatives in government for decades. The method is interest rates, the price of lending money. The government, or the central bank, sets the rate, and banks and other financial institutions set their rate at similar levels. Government interest rates, in the US and UK, are at historic lows. At 0.5% in the UK, the interest rate is at the lowest level since the Bank of England was formed in 1694. Savers suffer because the interest they get is lower than inflation, while borrowing and spending are officially encouraged.

As far as the state is concerned, Ferguson believes that "you can't solve a problem of extensive debt with more debt”.

But with the wider economy, apparently you can.

If conservatives, such as Ferguson, had the courage of their professed convictions, they would argue that interest rates should rise, to say 8 or 10%. This would reward and encourage saving and discourage the binge borrowers whose reckless behaviour plunged the economy into such dire straits. But I don’t hear any calls to raise interest rates. In 2011, David Cameron did plan to tell the Conservative Party conference that people should pay off their credit card debt. But when the speech was leaked, it was pointed out that if his advice was followed, consumer spending would drop by a quarter and GDP by 15%. The speech was rewritten.

The only conclusion to draw from this silence is that continued borrowing, by consumers and banks, is saving the economy from completely collapsing. In other words, the response to the bursting of a huge credit bubble is to strain to create another one. I’m not an economic historian but that doesn’t look sustainable to me.

As far as conservative thought is concerned, the light is beginning to get in.

The wreath of conservatism. Niall Ferguson gives us a lecture. Part One

I have finally worked out the perplexing intellectual strategy of modern conservatism. It is, despite appearances, nothing to do with personal responsibility, wealth creation, the minimal state or really not liking gay marriage. It is rather aimed at constructing a parallel universe in complete contradiction to the way the world actually is. And then to go to work to get people to accept this surrogate version of reality and use the ensuing collective delusion to quietly fleece people seven ways from Sunday in the interim. 

For the first four years of this economic crisis, the strategy worked like a dream. Now the cracks are beginning to show.

It is an epiphany that springs irresistibly to mind when the poster boy of contemporary conservatism, Niall Ferguson, opens his mouth. The problem with austerity, he evinced in a recent BBC Reith lecture is not that there’s too much of it, but not enough. (It might be said that in his contrarian relish for austerity, Ferguson is the mirror image of the inveterate Marxist-Leninist Slavoj Žižek – Stalin did not go far enough. But that is a matter for another post).

“If young Americans knew what was good for them, they would all be in the Tea Party,” says Ferguson. You will search in vain for a ‘not’ in there. He really means it. Capitalists of the world unite and stop all those poor people getting hand-outs from the government.

But there are obstructions in the way of sating the conservative dream. “Today’s Western democracies now play such a large part in redistributing income,” frets Ferguson, “that politicians who argue for cutting expenditures nearly always run into the well-organised opposition of one or both of two groups: recipients of public sector pay and recipients of government benefits.”

Those pesky benefit claimants, selfishly opposing reform by committing suicide.

Seeing that government’s redistribution of income plays such a large role in conservative demonology, it is worth examining this crime in detail. It would be amiss not to start with the £1.5 trillion increase in the national debt of Britain caused by the banking bail-out in, a redistribution described as the largest single transfer of wealth from poor to rich in England since the time of William the Conqueror. But, William, it was really nothing compared to the US bail-out which cost the government $7.7 trillion, more than half the value of everything produced in the US in 2008. I think that can be classed as a redistribution though not the direction traditionally imagined by conservatives like Ferguson.

Since then of course there has been further government generosity for the richest among us. In June the British government announced an £80 billion emergency support programme for banks, through which they will be given cheap loans in exchange for “poor quality assets like credit card debt”. The Bank of England also promised to pump a minimum of £5 billion a month into “City institutions” to “improve their liquidity”.

This is all in addition to the ongoing marvel of Quantitative Easing, the creation of money by the government. QE is paid, not to benefit claimants or public sector workers, but to banks. Government QE hand-outs will soon amount to £375 billion. The Federal Reserve in the US has dallied a little more in this particular dark art. The practice has cost more than $2.2 trillion there.

It is worth adding that the country highlighted by Ferguson as having the highest public debt, Japan, is the very same country that pioneered Quantitative Easing and has been furiously bailing-out its finance sector for 20 years. There might be a clue there as to the cause of its public indebtedness but I’m not an economic historian like Ferguson.

In totting up the full extent of government redistribution, it’s important not to forget the Private Finance Initiative in Britain: a policy that originated with the Conservative government in 1992, and was then enthusiastically adopted by Tony Blair’s New Labour. It is estimated this will cost taxpayers £300 billion. The poor, unless they own a large percentage of shares in Siemens, don’t benefit from this particular act of government redistribution.

A fifth of government spending in the UK now goes directly to the private sector in form of payments for outsourced services, a proportion that will only increase as outsourcing enjoys a boom not seen since the 1980s. And these companies are always such tremendous value for money. Since the railways in Britain were contracted out to the private sector (by John Major’s Conservative government), taxpayer subsidies have increased twelve-fold to £6 billion a year. The cost of the collapse of tube maintenance company Metronet to the taxpayer £2 billion. The cost of bailing-out the privatised nuclear power generator, British Energy in 2003, was £3.6 billion. The Labour government’s scrapped identity card scheme was estimated to have benefited private contractors to the tune of £6 billion. The bill of the recent car-crash of a PFI project involving Somerset Council and IBM has been put at £31.5 million.

The great leap forward in corporate welfare undertaken by the current Con-Dem government is workfare. A scheme in which the state forces young people to work for large companies for nothing, while paying bare subsistence costs – ie their benefit.

“It is a mystery that while traditional right-wing commentators like the TaxPayers Alliance and the Mail object to funding an individual’s benefits,” writes Alex Andreou in the New Statesman, “they appear quite happy to cross-subsidise huge conglomerates.”

And all this without mentioning the war. The Iraq War, that is. In whose cause Ferguson was such an enthusiastic cheerleader. The war cost the American government an estimated $3 trillion and the British government £4.5 billion. The cost to the UK is £20 billion if Afghanistan is included. And who is exactly is paid to make all those missiles, aeroplanes, guns, bullets and uniforms? It wouldn’t be private, profit-making corporations would it? The bill is always posted to the same address – the state, funded by the taxpayer.

While we’re on the subject of war, it is timely to mention a confession in 2001 by the then US Defense secretary Donald Rumsfeld that the Pentagon “cannot track $2.3 trillion in transactions”.

“I could go on” as Steve Coogan once put it. But you’re probably getting bored by now.

“In the absence of effective scrutiny,” writes Dan Hind, “popular resentment of state expenditure concentrates on transfers of wealth from the middle classes to the poor, rather than on transfers from the majority to a relative handful of insiders."

And for conservatives, resentment, unlike government spending, is something you don’t want to go to waste.

“Well, Ted, like I said last time, it won't happen again” Bob Diamond and the culture of corporate repentance

Imagine, if it is not too disturbing, being romantically enmeshed with capitalism. Apart from living in an absurdly cluttered house full of gadgets you were persuaded to buy on your credit card, you would, by now, be sick and tired of same lame excuses for errant behaviour. And the clockwork promises of a fresh start.

Bob “the time for remorse is over “Diamond is angrier than anyone at the rigging of interest rates, he assured Barclays staff in a memo. The guilty ones will be asked leave, he pledged, before leaving himself. Barclays will reorient its business around “clear principles”, we are promised.

This, little more than year after Diamond made “good citizenship” a corporate priority.

By a strange coincidence, Diamond resigned on the same day that giant UK pharmaceutical corporation GlaxoSmithKline was fined $3 billion for “the largest healthcare fraud in US history”.

GlaxoSmithKline admitted trying to get American psychiatrists to promote anti-depressants to children. GSK staff also bribed doctors to prescribe GSK products by, amongst other methods, paying them millions of dollars to go on speaking tours and giving away tickets to Madonna concerts.

“I want to express our regret and reiterate that we have learned from the mistakes we made,” said chief executive Andrew Witty. “When necessary, we have removed employees who have engaged in misconduct.”

Last year, Rupert Murdoch offered sincere apologies in full-page adverts in UK newspapers for the phone hacking undertaken by News of the World staff. “We regret not acting faster to sort things out,” he said, before promising that his papers would become a “positive force in society”.

It might sound irredeemably cynical, but each time I hear corporate promises of reformed behaviour, the immortal words of Father Dougal McGuire spring to mind: “Well, Ted, like I said last time, it won't happen again”.

Even if one is very, very generous, and not at all credulous, and takes at face value the strenuous official denials of knowledge of wrongdoing (in the cases of Barclays and News International), one question does arise. Why do corporations always find themselves chock full of people who undertake anti-social actions which result in more money for them and higher profits for the corporation?

It couldn’t have anything to with the fact that corporations are legally obliged to maximize profits. That they are institutionally selfish organisations, dedicated to destroying the competition? Could it?

But because the current British political discourse cannot make 2 and 2 equal 4, politics inhabits a fairly tale landscape of one public inquiry after another into the moral failures of corporate culture, each promising to “restore confidence”. George Osborne’s “age of responsibility” has about as much chance of coming about as England do of beating Spain in the next World Cup Final.

Even the pale pink Polly Toynbee, who in today’s political culture probably counts as a dangerous leftist, can’t avoid making the obvious connections.

Rupert Murdoch, she pointed out, has done what all businessmen do, given the chance – strive to gain a monopoly. The consumer and morality can go whistle. “The success of his business was built on gaining the edge by evading regulators and avoiding taxes, as all companies will unless stopped,” she said. “So let's not obsess over his character.”

But we are obsessing about Murdoch’s character and Bob Diamond’s character and the cultures they propagated. All this obsessing, consciously or unconsciously, evades an understanding of a structural explanation for corporate crimes

It was not ordained by Yahweh on tablets of stone at the dawn of time that the economic organisations humans depend on for their livelihood should be run for the exclusive benefit of small groups of owners. Or that those enterprises should compete for their survival with similarly constituted rivals in a market. But contemporary politics and culture acts as though it was.

It really is time to see through the excuses.

Don't keep calm and carry on. A guide to the economic crisis for the perplexed by the mildly confused

The rasping cough the world has been suffering from for four years now threatens to turn into pneumonia. There is a double dip recession in Britain, the European debt crisis is coming to a head, both the US and China are running out of steam economically. But the range of remedies to address the crisis is either ignored or misinterpreted by mainstream media. So here is, an admittedly biased but more informative, guide to the global economic meltdown and what different people want to do about it

1 The Austerians

Like the Klingons but much worse. Leading austerians are Angela Merkel, David Cameron, George Osborne, Christine Lagarde and Spanish Prime Minister Mariano Rajoy. The fundamental idea is that government deficits, grossly exacerbated by the huge, and ongoing, bail-out of the banks, estimated at $18 trillion worldwide in 2009 by the UN, need to be erased by cutting public spending on social programmes such as pensions and welfare benefits. The effects range from the extreme, schoolchildren in Greece too dizzy to do PE because they don’t have enough to eat to the more specific targeting of isolated groups, such as the sick and disabled in Britain.

Medical metaphors – involving a medicine that has to be swallowed – are routinely employed, as are appeals to a stoical sense of endurance. The wartime slogan, “Keep Calm and Carry On”, has become ubiquitous in Britain during David Cameron’s “age of austerity”.

But it’s not just about the deficit. As Keynesian economist Paul Krugman puts it, austerians use the crisis rather than solve it. Following the example of Milton Friedman, exposed in Naomi Klein’s book The Shock Doctrine, austerians exploit the economic situation as a way of advancing by huge leaps, their political project. Thousands of enterprises are being privatised in Greece, tax cuts for corporations and the wealthy are imposed in Britain, governments in Spain and Italy are making it easier for employers to sack workers while Conservatives and venture capitalists ache for the same approach in Britain. These are all supply-side policies masquerading as ways out of the economic crisis.

There is a strong element of masochism to the austerians’ approach. Austerity is presented as a “deserved doomsday to the borrowing way of life” in the words of American author Thomas Frank in Pity the Billionaire. The refrain is that a lot of people, especially those in continental Europe with their long holidays, early retirements and generous pensions, need the bracing winds of economic reality. The ghost of Ayn Rand  hovers in the background of austerian proclamations with her worship of billionaires and contempt for the exploiting masses.

Unfortunately for the austerians, the intractable problem of bank debt cannot be wished away. Austerians get into a lather about public debt but are endlessly forgiving about the much larger presence of private debt. (Once David Cameron did try to link the two in a speech to the Conservative party conference in 2011, but his leaked suggestion that people pay off their credit card debt was swiftly forgotten as the realisation dawned that it would completely tank the economy). In Spain, insolvent banks are bankrupting the country. In Britain, overall debt amounts to 469 % of GDP, of which the government’s share comprises only 11 per cent.

But, most significantly for the austerian approach, there is little popularity in enduring horrible tasting medicine if it does more harm than good. A double-dip recession is not a ringing endorsement of austerity. The slippery goal of austerians, “confidence” among employers, is more elusive than ever. Manufacturing confidence in the UK is at a 35 month low.

2 The Keynesians

Keynesians and austerians don’t like each other. But the source of their animus is frequently misunderstood. Each thinks the other side is playing a dangerous game. Austerians believe that Keynesian solutions, increasing government spending and expanding employment through state schemes, are a gross interference with the downturn taking its natural course – in capitalism. To austerians, Keynesians cause the dangerous precedent of using the state to respond to popular demands, and the creation of state enterprises represents an unacceptable form of competition with the private sector.

But to the Keynesians, the austerians, aside from being economically wrong-headed, are playing with fire in a different way. Their insistence on allowing, even fomenting, immense social pain, drags the class nature of capitalism into sharp relief. (see the fourth group, the Marxists). Speaking of the Great Depression, Keynes’ biographer, Robert Skidelsky, put it like this: “If the leaders of capitalism insisted on treating problems of demand as though they were problems of supply, and on screwing down the wages of workers in order to restore profit, then a class war could easily arise which would vindicate Marx’s prophesy.”

Keynesians believe that austerians focus on the long-term is foolhardy because of the suffering it permits in the meantime. “In the long run, we’re all dead,” Keynes famously said. In the medium run, we’re exceedingly pissed off and open to new ideas, he might have added.

Keynesians, it should never be forgotten, want to save capitalism from itself.

Paul Krugman is probably the world’s most famous Keynesian. The Financial Times columnist, Martin Wolf, is also essentially a Keynesian who is scathing about austerity. More populist Keynesian solutions are propagated by the Guardian columnist Simon Jenkins. The economy “needs that old Keynesian salve, money in circulation,” says Jenkins. “If money can be showered short term on banks, it can be showered short term on consumers, whether through benefit handouts, vouchers, tax holidays or scrappage schemes.”

Keynesians believe that the secret of getting out of an economic recession isn’t the manufacture of “confidence” but the maintenance or resuscitation of demand. People spending money in other words. Keynes spoke about the vital role of “effective demand”. Keynesians don’t believe in the efficacy of supply-side solutions and are more relaxed than the austerians about inflation. They think the austerians cherished policy – cutting government spending in a recession – is economic madness.

But, like the austerians, the Keynesians face some intractable problems. They may be winning a not very difficult argument about the wisdom of cutting government spending during a recession, but the Keynesian warhorse “demand” will not prove so easy to get up and running. The reasons for stagnating real wages are deeper than can be addressed by Keynesian one-off pump priming. They comprise the results of the historic domination of corporations and employers and will not be easily undone within this system though they have been masked by record consumer debt.

Secondly, Keynesians are basically right in assuming that public debt is not enormous by historic standards and so continuing government stimulus is not a problem in that sense. But public debt is dwarfed by private debt – corporate and consumer. And Keynesians have no solution to that beyond “refloating” the economy through government spending and intervention so that, in time, in theory, growth returns and fiscal difficulties are gradually overcome. For more on the Keynesian impasse, see category 5, “The Post-Capitalists”.

3 The Left Keynesians

The core ideas of Keynes usually, but not always, go hand in hand with a desire to reform capitalism. This might mean reducing the influence of finance through, for example, a financial transactions (Robin Hood) tax or banning financial products like derivatives. It might entail rehabilitating state ownership or altering the nature of corporate ownership. It might encompass increasing the taxation of corporations, empowering trade unions or reducing economic inequality. Economists such as Ha-Joon Chang, Stewart Lansley, Duncan Weldon and Ann Pettifor sit within this camp. The writer, Thomas Frank, would be a Left Keynesian.

Left Keynesians generally want to reform capitalism without replacing it. Ha-Joon Chang is implacably opposed to austerity but isn’t anti-capitalist. “Despite its problems and limitations, I believe that capitalism is still the best economic system that humanity has invented,” he says.

The policy of new French President, Francois Hollande, of introducing a 20-1 pay ratio in enterprises owned by the French government, is a Left Keynesian policy. As is his plan to introduce a 75% tax on income over €1 million.

For Left Keynesians, the model of what to do in an economic slump is provided by the American New Deal of the 1930s. Then, under the Presidency of Franklin Delano Roosevelt,  banking was regulated by tough new laws, trade union recruiting eased, corporate taxation increased, social security created and 12 million unemployed Americans were put to work through government conservation and cultural projects. Economic growth reached double digits but, significantly, the Depression wasn’t defeated (the slump returned in 1937). What finally put the Great Depression out of everyone’s misery was World War 2.

A contemporary re-imagining of the American New Deal of the ‘30s is the Green New Deal which involves creating thousands of jobs through the formation of a  “carbon army” in order to undertake massive ecological reconstruction.

What is commonly classed as “far left” is frequently Left Keynesian in orientation. The programme of the Greek left-wing grouping Syriza echoes many features of the American New Deal. Syriza wants to create 100,000 additional public employees, re-balance the economy in favour of manufacturing rather than finance, and nationalise banks reliant on state aid.

One of the stand-out policies of the Left Front candidate, Jean-Luc Mélenchon, in the French Presidential election, was a maximum income, a 100 per cent tax on income above €360,000. The maximum income was first proposed by the archetypal Left Keynesian, Franklin Roosevelt, in 1942.

4 The Marxists

We now enter anti-capitalist territory. Marx, unlike Keynes, did not want to save capitalism from itself, although Marxists are not always as anti-capitalist as people imagine. The American economist, Richard Wolff, is one of the most famous contemporary Marxists. He explicitly calls for New Deal type policies in the face of the downturn, such as increasing taxation of corporations and the wealthy and a massive government jobs programme for the unemployed.

But Wolff does not stop there.  He makes a class analysis of society, the very thing that Keynesians fear austerity will make popular. He proposes going beyond capitalism by changing the way production is organised. He wants to “coopertivise” the whole economy, making workers their own bosses, ending the control of economic enterprises by small boards of directors. He envisages a form of economic democracy. The Mondragon collection of cooperatives in the Basque country is frequently referred to by Wolff as a model. Cooperative firms there include banks, supermarkets and educational institutions. Over 83,000 people are employed. The pay differential between the highest and lowest paid is 4.5-1. In the conventional capitalist economy, the pay differential can be 300-1.

Economic democracy would have the effect of ending exploitation in the Marxist sense. Wealth would remain in the hands of the people that produce it. They would receive the “full fruits” of their work as Clause 4 of the British Labour party’s old constitution once put it. One factor in creating the financial crisis – huge borrowing caused by stagnating real wages – would be overcome by this change, as would spiralling inequality.

New Deal, Left Keynesian reforms are not enough, says Wolff, in part because we know from experience that they will inexorably be undone by corporations if the way they are organised is not altered. To introduce reforms without changing the nature of corporations is to ensure their eventual failure.

Whilst Left Keynesians tend to favour traditional, “after the fact” reforms, such as government intervention and  wealth redistribution, Marxists such as Wolff challenge inequality and the control of wealth by small elites at their source.

This is Wolff speaking:

                                                                                                                                          Wolff’s solutions do not convince all Marxists, let alone all anti-capitalists. Some Marxists would say that introducing economic democracy is not a route out of capitalism or a market economy, but merely a different form of capitalism.

                                                                                                                                           However, not all Marxists go as far as Wolff either. They might, in reality, be Left Keynesians. David Harvey, for example, wants political leaders in the West “to get down to doing what has to be done, to rescue capitalism from the capitalists and their false neoliberal ideology”.

                                                                                                                                           5 The Post-Capitalists

                                                                                                                                           Marxists believe in a post-capitalist future, even if many don’t want to do anything until capitalism is sprawled on the floor and ready to expire. The reason for a separate category of “post-capitalists” is that Marxists are usually fixated on who owns and controls “capital” or wealth. Post-capitalists are concerned with wealth but also transcending capitalism because it unavoidably entails exponential growth in a finite world. It is, by its very nature, ecologically unsustainable. Participatory economics and social ecology both envisage post-capitalist societies that have left growth behind.

                                                                                                                                           One post-capitalist economist, Harry Shutt wants to “dethrone the god of growth”. He argues for the necessity of seeking an economic order “compatible with negligible growth for the indefinite future”.

                                                                                                                                          What makes Shutt interesting in the current debate over what to do in response to economic failure is that he believes Keynesianism can’t possibly succeed. A return to growth – and Keynesianism is all about resuscitating growth – is neither possible, nor desirable.

                                                                                                                                          Not possible because debt has grown so large that it is a permanent drag on attempts to revive growth. Accumulated bank debt is the problem that will not go away in Europe, and is bankrupting governments, Overall debt is at record level and it is overwhelmingly private debt. Debt is nearly five times as large as GDP in Britain. Keynesians, to Shutt, have no solution to this mass of debt beyond enlivening the economy through government spending. And that one-off spurt can’t work over the long-term because companies and consumers are too weighed down by debt.

                                                                                                                                           But there is a deeper reason as well. As technology develops, it is accompanied by a decline in the demand for “fixed investment”, outlets for the investment of accumulated profits, that are essential for capitalism to function. “Fixed investment” means investment in tangible products like cars or fridges or steel.  

                                                                                                                                        Thus, in the words of Stewart Lansley, the “money economy” – finance, private equity, acquisition of companies by other companies and which does not need much fixed investment – has become vastly more profitable than the “productive economy”.

                                                                                                                                        With the decline of the “productive economy” comes a parallel decline in the demand for paid labour. This, in turn, impacts upon the ability of consumers to support growth through spending.

                                                                                                                                              “It portends” Shutt writes, “what is coming to be seen as a new industrial revolution, which is rendering market capitalism as obsolete as feudalism was at the dawn on the French Revolution in 1789.”

                                                                                                                                              The logic of this analysis, if correct, is that neither austerity or Keynesianism can work as economic strategies. Keynesianism is the last trick in the capitalist routine. If that doesn’t revive growth, we are entering an unexplored landscape.

                                                                                                                                             The contours of that landscape might be glanced in Spain at the moment, where the economy has collapsed to the point where a quarter of adult population and half of all young people are unemployed. There is growing interest in an unconditional income, paid to everyone as a matter of right. "Brute experience" as Milton Friedman called it, may well prove the mother of invention.

Christine Lagarde, we salute you!

Christine Lagarde, managing director of the International Monetary Fund, has a talent for communication that should stun us all. In one interview, lasting probably no longer than an hour, she has managed to encapsulate to a developed world audience the real role of the IMF in the world. A feat that, for decades, has eluded assorted socialists, NGO dissidents and apple cart capsizers.

Greece, as everyone knows, is subject to an IMF/EU/ECB austerity programme that has seen its economy shrink by a fifth, public sector salaries drop by 40 per cent, and private sector salaries by a quarter. Conditions, according to one observer, are so desperate they are not third world, but fourth world. Children in Athens schools are too dizzy to do PE because they don’t have enough food.

From the Guardian:  “Asked whether she is able to block out of her mind the mothers unable to get access to midwives or patients unable to obtain life-saving drugs, Lagarde replies: "I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time. Because I think they need even more help than the people in Athens."

Lagarde, predicting that the debt crisis has yet to run its course, adds: "Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax." She says she thinks "equally" about Greeks deprived of public services and Greek citizens not paying their tax.

"I think they should also help themselves collectively." Asked how, she replies: "By all paying their tax."

Asked if she is essentially saying to the Greeks and others in Europe that they have had a nice time and it is now payback time, she responds: "That's right."

Thanks to Lagarde, it becomes unnecessary to point to the Cambridge/Yale University study of IMF intervention in former Soviet bloc countries and its finding of 100,000 extra deaths resulting from cuts to public health spending demanded by the IMF’s “strict economic conditions”.

Her “solution” to the crisis, which involves Greek citizens paying their tax, makes it redundant to highlight the good corporate “citizens” fleeing to Luxembourg to avoid paying anything to the state or the third of large companies who pay no corporate tax at all in Britain.

Lagarde’s helpful reference to the IMF’s role in Niger makes it superfluous to draw attention to the “degradation” of health services there, “crippled” in order to meet debt payments. Or the privatization that has put them beyond most people’s reach. Or the 19 % tax increases on flour, milk and sugar, later withdrawn after protests (now there is a lesson in self-help).

Christine Lagarde, you are doing a fantastic job. More interviews please.

The second time as tragedy as well. Is history repeating itself in Greece?

The great events of world history occur twice, said Hegel. “He forgot to add,” corrected Karl Marx, “the first time as tragedy, the second time as farce.”

But perhaps Hegel was right. The Greek trauma shows history repeating itself, but as Dudley Moore once put it, “I can’t see the bloody joke.”

In the 1930s, as the Great Depression spread, the liberal market civilisation that had reigned for a century, swiftly broke down. Into the vacuum came two forces. One was a civilised response to suffering, the conscious subordination of the capitalist economy to the needs of democratic society, exemplified by the American New Deal. The other was Fascism, which caused, in the words of the contemporary historian Karl Polanyi, “sickness unto death”.

In Greece now you have a left-wing grouping, Syriza, falsely labelled “far left”, expressing mass opposition to the austerity of the March Eurozone bailout, that is systematically dismantling the features that made society liveable. 

As they rise, so too do the Neo-Nazi Golden Dawn, a very different response to the same breakdown. Syriza offers the hope, writes one Greek economist, of avoiding “a disaster than might truly lead to the rise of fascism.” 

In the 1930s the upholders of the old order – the economic liberals, the free-marketeers of their day, believed everything would be fine in the end provided people just grinned and beared it. Wages had to be cut, social services slashed and jobs destroyed but if the pain was stoically endured, the economy would eventually return to health.

But this belief in super-human stoicism was always a fantasy. “To expect,” wrote Karl Polanyi, “that a community would remain indifferent to the scourge of unemployment, the shifting of industries and occupations and to the moral and psychological torture accompanying them, merely because economic effects, in the long run, might be negligible, was to assume an absurdity.”

Now we are asked to believe in the same absurdity. The intransigent role of the ‘30s economic liberals is now played by the German government. “The Greek nation knows what it has to do,” said the German finance minister Wolfgang Schaüble last week. “Most Greeks want to stay in the euro. We need to make it clear to them that the terms for that are the fulfillment of the reform requirements of the aid programme.”

What the “reform requirements” mean for ordinary people was brought home by a Greek film-maker, Constantine Giannaris in The Guardian newspaper on Saturday.

“The scenes here at the moment are horrifying, the kind of scenes unthinkable in London or Berlin,” he wrote. “Not third world, but fourth world. Many immigrants and asylum seekers here are looking through rubbish cans [for food], and now impoverished workers, hundreds of them, are having to sift through recycling, taking the scraps of metal and paper to sell in order to make ends meet. We have junkies with no methadone or needle programmes, and prostitution is rife.”

Everything will be alright in the long-run says the German government, echoing ‘30s economic liberals. But in the long-run, as John Maynard Keynes observed, we’re all dead.

Syriza’s “far left” programme, its response to this unnecessary suffering, isn’t radically left-wing. The programme’s features – a moratorium on debt repayments, a debt audit, redistribution of income, bank nationalisation (perish the thought!) and an industrial policy to rejuvenate manufacturing – would have been considered fairly centrist after the Second World War. It’s less radical, in some respects, than the American New Deal.

In Greece now, the orthodoxy has been scorned by most people for the callousness it entails. The centre has been exposed as extreme and unyielding. Into the void comes both a new form of the extreme Right and the radical Left. They are both a rebellion, as Polanyi understood, against the same determinism. But they are completely different.

One side wants a humanitarian response to suffering. The other just wants to take it out on other people, often immigrants. According to the Golden Dawn leader, “The new Golden Dawn of Hellenism is rising. For those who betrayed their homeland, the time has come to fear. We are coming.”

What is happening in Greece may be an extreme example, a 21^st century repetition of the political dilemmas of the 1930s. Or it may be a foretaste of things to come. The awaiting fate of Spain, Portugal and Italy, for example, which all have their own histories of fascism.

But if history is repeating itself, we have the freedom to learn from last time. If they win the next Greek election Syriza will, to be honest, play a role of saving capitalism from itself, as the New Deal did in the thirties. The rationale will be to alleviate colossal suffering and, because the alternative to doing nothing, fascism, would be far worse than neoliberal capitalism.

But after you have preserved civilization, you have to question the logic of reforming and making human an economic system that periodically plunges humanity into unnecessary suffering. The real tragedy would be to humbly wait for the next plunge.