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ANALYSIS: BRIAN O'BOYLE
Posted: Nov 23, 2009
Capitalism can’t escape economic crisis
By Brian O’Boyle
Pic: Children eat food scraps off the street in Asia
Strategies for accumulation are always supported by an ideology, and when accumulation begins to falter, it is inevitable that questions will be asked about what went wrong. Economic crises challenge ruling-class legitimacy, and one response is to jettison those ideas that previously offered an ideological defence.
This can be seen, for example, in the crisis of the 1970’s, when the (40-year) Keynesian hegemony was quickly replaced by an ultra right-wing variant of neoclassical economics. While the Keynesians had argued that a trade-off existed between unemployment and inflation, Friedman’s monetarists pointed to the existence of stagflation (inflation and stagnation) as proof of the folly of trying to interfere with the market. Control of the money supply (to control inflation) was all that was needed, and the economy would find its optimal position automatically. The reality of course, was very different. However, the crucial objective had been achieved, as the capitalist class now had a new set of ideas to prop up their legitimacy.
This monetarist interlude was quickly replaced by a more robust ideology known as neoliberalism. Neoliberalism had two parents not one, as Friedman’s emphasis on the efficiency of markets was bolstered by Hayek’s insistence that capitalism expressed our deepest desires to be free. Neoclassicism was thus amalgamated with ideas from the Austrians and both were pressed into ideological service by a newly emboldened capitalist class.
Neoliberal ideology remained intact for twenty five years, as free-market capitalism became the overwhelming orthodoxy in policy circles. Margaret Thatcher’s insistence that capitalism had no alternative was widely accepted, and the ‘laws of the market’ defined the bounds within which everyone could act.
Today the idea that markets adjust to an optimal equilibrium is obviously difficult to sustain! We are, after all, in the midst of the biggest crisis for seventy years, and even staunch defenders now accept that markets become utterly destructive if left to their own devices (see for example Martin Wolf in the Financial Times). Markets must be regulated, and those that have undermined the system must be forbidden from doing so in the future.
Fine words indeed, and when these are added to the massive stimulus packages currently being implemented, one could be forgiven for thinking that Keynes had ‘arisen from the ashes’. In Britain, commentators such as Will Hutton speak for many on the left when he argues that we are now embarking on a more left-of-centre (Keynesian) policy agenda, and that this should help to redress some of the dreadful consequences of free-market capitalism.
That governments are now extolling the virtues of managing the economy is no doubt true, but to expect that this will lead to a more just society is to fundamentally misjudge the nature of the relations between theory and reality. Bourgeois theory is little more than an ideological prop, and whilst the capitalist class may shift their allegiance from one to the other, the basis of policy making is always to sustain the conditions for capital accumulation.
Thus it was that, during the (so-called) Keynesian era, governments rarely if ever embarked on counter-cyclical policies, only doing so around the time that Keynesianism itself became discredited! Similarly in the neoliberal era, national governments (despite official pronouncements) continued to play a massively important role in sustaining the conditions for accumulation to take place.
This job is well nigh impossible in a decentralised competitive economy and Nation-states must continually support the process if it is not to collapse. Capitalism is structurally unable to sustain itself, and even with government intervention the tendency is always towards instability and crisis.
This then leads to the need for competing ideologies. For just as the neoclassical school can offer a strong justification for markets in a neoliberal upswing (best allocator of resources; maximizes welfare, etc.), it becomes less than impotent in the collapse. This is where the alternatives come in, as Keynesianism is used to justify massive stimulus packages for those deemed ‘too big to fail’. While for the rest of us, the recession becomes somehow a ‘blessing in disguise’ as Austrian ideas about ‘trimming the fat’ and ‘creative destruction’ come to the fore.
One of the perversions of capitalism is that crises are functional to its long-term survival, as mass destruction (of capital and livelihoods) allows the system to restructure itself. Boom and bust are inherent features of the economic system, and bourgeois theory reflects this, with ideological props for each of these periods.
Hutton may well rejoice at the new found acceptance of Keynesian intervention, but as this policy has been implemented, it has become clear that what we actually have is Keynesianism for capital (massive transfers from working people to sections of the capitalist class) and neoliberal austerity for the rest of society. Mary Harney famously argued that we should follow (neoliberal) Boston as opposed to (social democratic) Berlin in letting markets dictate our economic future. Today, she argues that ‘the time for ideology is passed’. Indeed it has, for today the government must get on with the serious task of convincing capital that Ireland is ‘open for business’ regardless of what the theory says.
A version of this article appears in the print edition of Socialist Worker No. 307
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Nov 23, 2009: Capitalism can’t escape economic crisis
