The Corona crisis demands different and more in-depth analyses and syntheses.
Some causes of our poor management are society shortcomings – economic, democratic, educational and informational. These are failures of analytical thinking. Inextricably interconnected, they need addressing as a network.
Power correlates highly with wealth. The concentration of wealth concentrates power. Concentrated power weakens democracy. If we do not manage the continuing concentration of wealth, we connive at the demise of democracy. If we do not expose and oppose Neo-liberalism’s concentration of power, which gathers to itself yet more wealth and power, we are democrats in theory only.
Neo-Liberalism turns nations into financial capitalist entities instead of industrial capitalist ones. This is presented as “economics” but is also profoundly political power playing. “Off-shoring”, which moves manufacturing skills and corporate tax-paying abroad, affects the social equilibrium. It reduces the pay and infrastructures for the many. We become less productive, less skilled and more dependent consumer society and so less confident and powerful and more easily controlled and exploited.
Even with its shortcomings, industrial capitalism brought the benefits of significant sections of society having powerful skills, giving economic, social and political confidence and the power to use it. This enhances democracy and restrains the power of the finance industry’s use of weaponised debt. Industrial capitalism saw developments of democracy, public health, trades unions/professional equivalents etc. which are all essential for a sustainable democratic society.
“Three-phase democracy”, economic clarity and equity, higher quality primary and secondary education plus encouraged access to life-long forms of tertiary education, enabling all to progress economically and confidently through life-long skill acquisition, give economic and democratic health.
We need educational systems which result in life-long learning and skill hunger.
“Three-phase democracy” has certain input, processes and output. All are enabled to vote, media partiality and lobbying are minimised, and one needs a food bank. More transparent democratic management of big-money donations and post-political career facilitation and less binary, oppositional politics would help.
Our national government is increasing “Free Market” modelled. “The Free Market” is a lie. Like all human activities, markets must have rules. The current rules are rigged for the rich.
We need neither nil/minimal nor maximal regulation, but optimal.
Lack of “press freedom” rigs the informational markets. The corporate media is undemocratic and oligarchic, so choice and divergence are reduced. “Our” government colludes, with self-protecting restriction of public access to democracy necessary information.
Education and the media avoid key terms and concepts. We believe ourselves to be free because a deliberately deficient popular vocabulary obstructs realistic analysis.
Stylised analysis of society presents it as the government, the very rich and the rest.
Government for the rest grows democracy. Government for the very rich kills it.
The justification of capitalism is the stimulus of competition and the discipline of destructive failure. These were destroyed in and after 2008.
Did the unconditional 2008 bankers’ rescue kill capitalism and democracy?
Cities like Leicester sacrificed for the City of London?
* Steve Trevathan is chairperson of Lyme Regis and Marshwood Vale Liberal Democrats.
21 Comments
“Neo-Liberalism turns nations into financial capitalist entities instead of industrial capitalist ones.”
This isn’t really true. Germany is as neoliberal, ordoliberal would be their term for it, as they come and they’ve looked after their industrial base. They do it by adopting mercantilistic policies, though, which might work for some countries but won’t work for everyone. They are essentially beggar-thy-neighbour – especially if you’re silly enough to want to share a currency with them.
Mercantilism leads to trade wars which leads to real wars.
The problem for 21st century mercantilists is there’s no gold involved any longer. Germany is just storing up IOUs from the debtor countries which will never be repaid.
https://www.handelsblatt.com/today/finance/promoting-trade-germany-first-the-return-of-mercantilism/23570190.html
Looked at the title of the author. Surprised it wasn’t Mr J Corbyn.
I started off with an open mind and degree of interest. What I found myself reading was not some interesting analyses of recent events.
Instead, it was some sort of turgid political speech.
I soon stopped reading.
The article asks “Did the unconditional 2008 bankers’ rescue kill capitalism and democracy?”
To quote Churchill “Democracy is the worst form of government except for all those other forms that have been tried” and to paraphrase that quote “Capitalism is the worst economic system, except for all the others,”
In 2015, the World Bank found that for the first time ever, less than 10% of the world’s population was living in extreme poverty. Between 1990 and today, the number of people living in extreme poverty fell by more than one billion. Those kind of statistics reaffirm what President John F. Kennedy was getting at when he said: “No American is ever made better off by pulling a fellow American down, and every American is made better off whenever any one of us is made better off. A rising tide raises all boats.”
Free markets simply means a system in which the prices for goods and services are self-regulated by the open market and by consumers on the basis of supply and demand. Planned economies have proved very poor at meeting the needs of consumers without the discipline of price discovery and competition in a capitalist economy.
It is monopoly that causes the problem in free markets, where supply is controlled or restricted or credit is expanded to the extent that price discovery is not enabled.
The great majority of new debt creation is used to acquire land and financial assets – stocks and bonds. Since the financial crisis it is these assets that have been inflated by QE and spiralling levels of household and corporate debt. It is sometimes called rentier capitalism. Nothing of lasting worth is produced by this inflation of asset prices, but it serves to extract an ever greater share of the value of what is produced in the form of interest and rents.
So the rising tide only inflates some boats – those with investments in land, stocks and bonds and not those with incomes from wages, benefits, pensions or money savings.
Free markets are part of the solution not the problem. Breaking down monoploies in hoarding of development land and the excessive debt creation that comes with it coupled with state investment in the infrastructure and housing needed for markets to develop could do much to rebalance growth across the UK.
Democracy is the child of capitalism, to pretend otherwise sets us on the road to dictatorship.
“A rising tide raises all boats”
Or maybe just the luxury yachts?
Of course, there is no such thing as “a free market”. Capitalism doesn’t exist independently of government. The government creates the currency, is the biggest player in the economy and sets the rules for all transactions in the economy. If Govt says we have to pay 20% in VAT then we pay 20% in VAT on every taxable transaction. If Govt says that workers should be paid a minimum wage, then they should be paid that wage. If Government says that children should be in school rather than working in factories……
So we have to distinguish between the role capitalism has to play in producing the goods and services we need and the role of Government which sets the rules in a more, or less, democratic fashion. So democracy has nothing to do with capitalism per se but it does have to do with Government. That’s why we want the market to be regulated, and not free, and regulated in a way that benefits us all.
The title “The Death of Capitalism” is really a bit of click bait, for what follows is a scatter gun overview of many of the problems our society faces. Steve’s view’s on education and the media would, I imagine, be broadly supported by most here but I found the references to wealth, power and the economy a little abstract and obscure. Power is obviously correlated with wealth but twas ever thus and the antidote was supposed to be democratic politics that created other ways of influencing policy.
I’m still not sure I understand what “neo-liberalism” means in this context. Much of it seems to be a description of how global capitalism work. For example, companies do go “off shore” to reduce costs and increase profit and this does have a negative effect on domestic workers. So what is the solution ? Protectionism ?
Observations like “the rules are rigged for the rich” need expanding with some examples. Which rules is particular ? Rules that say you can keep your cash ? And then we are told that we have Free Markets, which implies a lack of rules anyway. (Of course as @Peter Martin points out, we don’t have free markets. Governments in all nations have their paws all over them.
If capitalism fails, what replaces it ? A state run economy ? By all means lets argue for greater worker control, broader shareholding and more co-operatives, but that’s still capitalism by my definition.
I think many on these pages view capitalism as a mere economics. Capitalism determines our social and political system, in fact it is central to our culture.
Capitalism is, or should be, merely a stepping stone to something better. It is not the end of history, as a particularly intelligent idiot once wrote.
It is a good point that C J Williams makes. Modern capitalism really began in the late 18th century with the Industrial Revolution and with the economic growth that has transformed the living standards of human beings. The institutions that enabled this development were:
Democracy – government policy began to favour the interests of society at large including merchants and manufacturers rather than the nobility.
The Limited Liability Corporation – this greatly reduced the risks of investing leading to much greater investment.
Patent rights to protect inventors – this transformed the financial incentives for innovation and development of technology.
Widespread literacy and education – the decision to make primary and then secondary education mandatory paved the way for rapid and sustained economic growth.
Current economic laws and institutions are the result of conflicting pressures about whether to leave markets to their own devices when turning resources into output or use the power of government to intervene in markets in order to secure a different set of outcomes.
Markets can deal with complexity but government interventions usually don’t – meaning that they often risk reductions in productive and allocative efficiency.
Negative externalities (e.g. coal-burning power plants) require government intervention to mitigate environmental harm.
Unequal distribution also requires government intervention to moderate inequality.
These factors are both a cause and consequence of the fact that modern economies are a mix of market production and government intervention.
For the most part, what to produce, how much of it to produce, and who gets it, is decided by voluntary transactions made by individuals and businesses. But sometimes, the government uses its coercive powers to achieve outcomes that wouldn’t happen if individuals and businesses were left to their own devices. Today’s mixed market economies combine a mixture of markets and government intervention based on democratic policies or self-interest in the case of totalitarian states.
Thanks to all who have contributed to this conversation!
C. J. W. puts it well as does J. B. in his expansion.
“If the state does not regulate the market, then the market is occupied by monopolies, speculators, and God knows whom. The role of the state is to create the most advantageous conditions for the increase in investment and economic activity – – -people saying that the state should stay out of the economy are working in the interests of those who want to control the market.” [S. Glaziev]
C. C. makes an interesting point about protectionism having a part to play in a better overall economic policy. A protected P. P. E. industry might have saved many deaths, much suffering and hastened a return to a social-distancing free economy. South Korea went from being economically weak to economic power through a policy including carefully chosen and managed protectionism.
P. M. – Perhaps the theory and practices of governments cannot be separated from the predominant economic theories and practices of their places and times, as governmental activities affect the economy? That “we want the market to be regulated –in a way that benefits us all” is spot on. Alas, our current wealth contaminated near-democracy does not do this, as the actualities of, and data on, food banks and homelessness show.
C. J. W. – Agreed, but we might consider another parent too, such as the Enlightenment?
J. B. – Thank you for pointing out the “real life” problems resulting from debt/money creation going into the financial economy and not into the “produce-consume-service” economy.
P. – You might find a more interesting read in the writings of M. Hudson and D. Baker which are much more detailed and upon which the above piece was based.
M – Is the reference to the possible authorship by Corbyn J. a criticism, a commendation or a general comment?
P.M. – Thank you for the most interesting attachment. The German economy could very well be labelled as “Mercantilist”. Perhaps the avoidance of “outward debt” and the encouragement of the debt of other states has a similarity to the attitudes to precious metal deposits of historical mercantilism. It has much to commend it. Lower labor/labour costs help but, for a state to be “Three Phase Democratic”, internal costs such as housing, health, education and infrastructures must be kept low too. Neo-Liberalism does the opposite and works to control the engines of politics, education and communication.
Stuart. It is capitalism that has improved and enriched the lives all people.
Joseph Bourke. You list certain criteria for the modernisation of capitalism but they are not the cause. Capitalism requires surplus value, in other words more than you and your family require. The agricultural revolution provided this. Surplus value provided the investment and also the leisure time for men to invent new technology and drive the industrial revolution. Crucial to the developement of modern capitalism were the concepts of desire and choice.
The creation of desire and the ability to choose are Liberal concepts that shape both the our economy and politics. Liberal Democrats must remember that capitalism can be and is a great social, political and economic system. Capitalism is Liberalism and should be defended, it is after all what provides for the social goods we all desire.
Steve Trevethan. Thankyou. I would have mentionrd the Enlightenment but I type very badly and slowly. Other parent include Tea and Sewers.
Kinda don’t feel qualified to join in too much with the discussion as I really am not an expert on this subject but one thing that strikes me as missing from all I read is the solution. What is it people propose to replace the current system with.
According to historical materialism (as developed by Karl Marx), there are five stages in the economic development of society: Primitive Communism, Slavery, Feudalism, Capitalism and Socialism.
Primitive Communism is the mode of the hunter-gatherer tribes. Because there was no surplus product, no individuals could appropriate it and turn it into private property in the means of production.
With the arrival of agriculture and more advanced productive forces regular surpluses were possible in production. Tribal society began to separate into families, each with its own head and each with its own means of production. Mostly, clan leaders within tribal society stood at the head of groups of families, constituting themselves a kind of tribal nobility. They appropriated to themselves the main means of production – the land; herds of sheep, goats and cattle; and tools. Thus was born private property
and with it, the division of society into classes, one of which owned means of production and used them to exploit those who had none.
It was on the basis of a higher productivity of labour that slavery arose. With the development of bronze and iron weapons, those who possessed them were able to wage war on less warlike peoples, taking prisoners who were forced to labour for their captors as slaves. Thus slave society was born out of the break up of primitive communism.
The new productive forces acquired under the slaveowning mode of production demanded for their further progress a new type of society, a new framework of property relations in which they could develop unhindered – Feudalism.
During the 16th century capitalism underwent a rapid expansion, stimulated by the great explorations which vastly expanded trade and commerce. The bourgeoisie, enriched by this and by the slave trade and the development of manufacture, began to challenge the feudal monopoly of political power. In England, feudalism was overthrown in the late 17th Century. Thus England was the first country to establish capitalism on a national scale. Later they were followed by France and all Europe. According to Marx, socialism (that is, the lower stage of communism) is the next stage of societal development.
The difficulty is capitalism isn’t ‘A Thing’. Lots of different ways of managing the economy are called ‘capitalism’ because, probably, it has some residual cachet in that it’s seen as – and is certainly promoted as – the opposite to boo-hiss ‘communism’.
But… the US version of so-called capitalism has gone entirely to the dark side and become monstrously predatory, for instance driving a coach and horses through long settled property law for the benefit of Wall Street in the aftermath of the 2008 debt crisis. In fact, so much of the economy, including very obviously health care, are now highly predatory that I would describe it as a kleptocracy (rule of thieves). I think the US is on track to either revolution or full banana republic status within the near future unless there is a sharp change of direction.
The version we have in the UK isn’t quite as bad yet but should be rightly be called ‘crony capitalism’ or ‘finance capitalism’ (it’s both) and is highly inimical to the health and prosperity of ordinary people although some of its worst effects are tempered by the remnants of the welfare state.
Curiously, it is very ‘top down’ in the sense that targets are extensively used to drive the public sector and more besides. That makes it surprisingly like Soviet communism that also relied heavily on targets which didn’t work any better for them than they do for the UK today.
The cure for the UK’s cancerous versions of capitalism is, of course, an effective opposition meaning in practice one that understands the issues, is well organised, strategic in its thinking, and sees the opportunities. Tragically, we don’t have that, not even close.
However, I am convinced there is a huge hunger for a decent opposition and the first party to get properly organised and start articulating a vaguely sensible vision will win big. But (big hint to leadership candidates), there is no path to that outcome via identity politics of any sort. For Lib Dems it means getting real about the dysfunctional way the party is run and fixing it and then getting to some understanding of how the economy works.
@Joseph That was an interesting read and summery of Marxist possition but what I do not understand is why you posted it exactly? Are you supporting that or is it just for discussion? What is the point of your post, not dissing just dont understand if it is your position or not.
Either way, I think it is demonstrably false, based just on european history, china had slaves for its entire existance and arguably had the first money. It had slaves before money. And a very early caste system running alongside slaves… And is a communist capitalist nation with worse social programs than the capitalist socialist Europeans.
Like calling anything capitalist or communist seems rather black and white to me anyway, Are free schools socialist? Or to be a capitalist country does it have to be some form of ancap fallout world? Does 1 socialist program make your country not capitalist or does have any form of free market make a communist one capitalist?
Anyway marx was wrong about industrial development and his Malthusian thinking on population too. And was wrong about how communist states would operate. I think he had some good thoughts on alienation however.
@ Chris Cory,
‘…..companies do go “off shore” to reduce costs and increase profit and this does have a negative effect on domestic workers. So what is the solution ? Protectionism ?’
Some would say that. But it doesn’t sit well with the Liberal tradition of free-trade. So what else is there?
OK so the capitalists move jobs abroad. Call centre workers are now in India. Our shirts are made in Bangladesh. Our shoes are made in Vietnam. etc etc That’s always going to happen.
This is highly deflationary to the UK and other advanced economies. We’ve created a pool of unused labour, which can be employed to do something else without creating extra inflation. If its done properly we still get our shirts and shoes made but we get the something else too. We need to have a commitment to full employment, and the Govt can then use its fiscal and monetary capacity to expand the economy to take up the slack.
This is, however, easier said that done! Many industrial workers haven’t taken well to the change to the new economy. But, it has still happened to a large extent. However, it’s happened too quickly and without thought to the social consequences. Also there has been far too much reliance on monetary expansion of the economy. This is just another way of saying that the UK govt has actively encouraged the creation of high levels of private sector debt to sufficiently increase aggregate demand. It’s created the bubble economy.
The real danger is when bubbles burst. You’d think the neoliberals would have learned from the 2008 experience! But I’d say they haven’t. If we have a repeat experience some neolibs will blame it on Brexit, others and will blame it on the Covid epidemic.
David Pocock,
Kark Marx framed his writing around the history of societal development (driven by the available means of production) and assumed that the inherent tensions in capitalist production would inevitablty lead to a transition to socialism where the means of production were held in common.
We have seen that where communism has been tried the capitalist class that controls the means of production is simply replaced by party apparatchiks or family dynasties, as in the case of North Korea or Cuba, and forms of Marxism in Zimbabwe and Venezuela have brought those countries to their knees.
You ask “What is it people propose to replace the current system with.” The answer for me lies not in replacing Capitalism or free markets but in a fair distribution of the benefits of natural resources. The mechanism is land value taxation ((land here includes all natural resouces including the electro-magnetic spectrum).
The historical analysis of Marx is essentially correct that throughout much of history control of the natural resouces that life depends on has left the great mass of people with a subsistence living and a privileged class with the surplus value from production.
The value of production can be said to flow to three principlal factors – Land, Labour and Capital – in the form of land rents, wages and profits/interest. The value derived from land (which is a gift of nature) should be shared equitably via collection of a land value tax to fund public services and benefits. The value accruing to Labour should be in accordance with the effort and skill required in various labour markets. The value accruing to capital should be on the basis of a return to produced capital in a competitive and free market.
Once the monoply of land and the debt creation that goes with is addressed via land value taxation, than a market based capitalist system can be both productively efficient (so resources aren’t wasted) and allocatively efficient (so the economy is producing the things that people want most).
The disribution of land rents in the form of public services and benefits allows the worker to reap the reward of his own labour (mitigating the issue of alienation) and the saver/investor to receive a return on capital. It will also move the economy away from a rentier form of capitalism based on financialisation and debt burdens or rental obligations that have to be carried for much of working lives.
I’ve had to skim rather lightly over all the foregoing, and suspect that what I was looking for hardly appears, overwhelmed by an avalanche of historical learning and a point to point tennis match of interesting facts and isms. But listening for a central and critical social, political, and economic term we all aspire towards, why is there so little mention of Democracy?
What I seem to read is a blindness, or a refusal to confront, the core deficiency in today’s United Kingdom: Democracy. Our version of it, at the national level, is a grotesque travesty. FPTP? You can’t make me laugh.
Everybody knows it. Once Parliament’s composition reflects the wishes of the Kingdom as a whole (whatever bits of it remain), then perhaps we shall make progress on such basic problems as the iniquitous and unwarrantable disparity between the very well off, and the lower half of the others. Our first task as Liberals is to educate ourselves and then everyone on the need for representative democracy, All else, at present, is hot stale air and the din of bogus debate.
Thanks again all round!
C. J. W. – Excellent practical socio-economics with the tea and sewers reference! Iron beds too?
D. P. — If you buy, sell and use money, you are an economist! You might find some useful suggestions in “Rigged” by Dean Baker and “The Case Against Intellectual Property” by M. Baldrin and D. Levine.
J. B. – Might an early significant step in the start of capitalism have been the enclosures of the Tudors?
G. – Thank you for your acute observations! The most important point of socio-economics is to make its society efficient, comfortable all round and living in a sustainable World. Please keep encouraging the L. D. s to get into a forward gear!
D. P. – Your pointing out the error and inaccuracy of over reliance on binary thinking and conversing is mightily agreed with!
P. M. – Your point about the “Bubble” creation is most important! Yes, the bubble will burst. The Neo-Libs will say and do anything to continue to delude the public and avoid responsibility. Might too many Neo- Libs suffer from “Wealth Addiction”?
“Money is like sea water: the more you drink, the thirstier you get.” [Roman Proverb quoted by Hudson M.]
J. B. – Very much in agreement with you! Education for analytical thinking and more media diversity and competition might help. Taxing rental income resulting from favourable location, especially that resulting from the development of public amenities might be a reasonably easily achieved target.
R. L. – I could hardly agree more! Genuine “Three Phase Democracy” is vital for the economic health of our society. Please keep working for it!