Keynes with a neo-liberal twist? By William Bowles

10 November 2008

“Just imagine saying, “production for use leads to stagnation; production for death leads to exchange value and profits.” Now don’t jump on me! Wait, I have to go into capital expansion and its being “the breath of capitalism” and, as yet, no forseeable future opportunities for capital reproduction to the magnitude needed for its expansion.”

The above excerpt from a short note from my compadre Patricia in the am triggered a thought about how the state, at least in the UK and in much of the EU, has reacted to the latest, and undoubtedly the worst crisis capital has yet faced. For unlike earlier crises, especially those of the 1970s which presaged the so-called neo-liberal revolution, the nature of Britain’s working class has undergone a profound transformation (along with other ‘advanced’ economies). And, at the risk of repeating myself, or anyway repeating the quote I’ve used before, I think it speaks reams about the real fear the ruling political class feels about the current situation.

In turn, this has led them on the one hand, to reacting without thinking things through and on the other, to be propelled by the following interpretation of a changing capitalism and its working class:

“The Middle Class Proletariat — The middle classes could become a revolutionary class, taking the role envisaged for the proletariat by Marx. The globalization of labour markets and reducing levels of national welfare provision and employment could reduce peoples’ attachment to particular states. The growing gap between themselves and a small number of highly visible super-rich individuals might fuel disillusion with meritocracy, while the growing urban under-classes are likely to pose an increasing threat to social order and stability, as the burden of acquired debt and the failure of pension provision begins to bite. Faced by these twin challenges, the world’s middle-classes might unite, using access to knowledge, resources and skills to shape transnational processes in their own class interest.” — ‘UK Ministry of Defence report, The DCDC Global Strategic Trends Programme 2007-2036’ (Third Edition) p.96, March 2007

The profound transformation of the nature of the working class follows the de-industrialization and subsequent financialization of the British economy, thus the totally misnamed GDP of the UK is now measured effectively by only two indices, 1) the wealth generated through the financial services sector and 2) consumer consumption via (the formerly) cheap credit.

The two are obviously organically connected, when the former went pear-shaped so did the latter. The degree to which this has struck abject fear into the ruling class can be measured by the drastic steps now being taken to assuage the fears of the public.

First was the intervention to save the commercial banks from complete collapse and then when that didn’t work, the Bank of England cut the interest rate by 1.5% and when that didn’t work either, the government stepped in and no doubt did a bit of behind-the-scenes arm twisting to get the banks to pass on at least some of the interest rate reduction, not that it’ll make that much difference, as we’re on a downward dive.

Now there is talk of ‘massive’ tax cuts, focusing it would appear first on the diminishing driving public (see ‘Traffic levels fall for first time in decades: Motor firms head for crash’, the Independent on Sunday, 9 November, 2008).

“Traffic on Britain’s roads is decreasing significantly for the first time since the three-day week of the early 1970s, suggesting the car economy is heading for a crash, official figures revealed yesterday.”

Having gotten people addicted to endless consumption, not only through endless credit-financed purchases but in selling people the idea of a ‘property-owning democracy’ so beloved by Thatcher, either the state faces a literal 1930’s-style collapse of employment or they prop up the entire sorry mess by borrowing tens of billions of pounds essentially to ‘keep up appearances’.

Brown raises tax cut speculation
Gordon Brown has increased speculation he may cut taxes, saying he was looking “at everything” that could be done to help people through the downturn.

And apparently the first £50 billion loan didn’t do it, so the rumour is that it’s to be another £15 billion in tax cuts. It’s a fascinating situation and without precedent and when you consider that the state is single biggest employer, you begin to see just how intimately entwined the state is with the economy, blowing away the fallacy that it’s the ‘market’ that decides.

But then isn’t this the eternal hallmark of dogma, akin to the earth is flat even when it’s obvious that it ain’t. Compare the situation today with that of the 1970s when the state was under no compunction about attacking the standards of living of working people and in the process throwing millions out of work and destroying entire communities. And does it need to be stated that it was those policies that led directly to the situation today?

But with no trade unions or ‘communist agitators’ to blame this time around, the state is caught in a bind of its own making, so essentially it’s having to ‘buy off’ the population. This is ‘Keynesian economics’ with a neo-liberal twist.

Survey Suggests Over 75% Think Politicians Lie
Senior MPs are trusted less to tell the truth and not to misuse power.

Public trust in senior politicians has fallen in the last two years, according to a survey carried out for the Committee on Standards in Public Life.

The committee’s chairman, Sir Christopher Kelly, said he found the results “deeply disturbing”.

The survey suggests 22% of people think government ministers tell the truth – down from 27% in the 2006 survey. — Trust in top politicians ‘falls’

To give you an idea of the twists and turns the state and its media accomplices are going through, it’s only weeks ago that the the ‘experts’ were telling us that the interest rate could not be cut as it would lead to rampant inflation.

What we have then is not an merely an attempt at an economic response to the crisis but an overtly political one, surely unique in the history of capitalism, even Roosevelt’s ‘New Deal’ doesn’t compare for there is no massive capital investment in infrastructural development. Instead, it is avowedly an attempt to keep the wheels of consumer consumption turning by lowering taxes!

And of course, with 60% of our ‘GDP’ comprised of consumer spending it’s no wonder for there is no place left to go. Consider the alternative: re-industrializing? As Patricia would say, ‘PULEESE!’

Yet of course, when you consider the capital projects the country does need, especially affordable housing and public transportation, any sane government, if it is going to get us all into debt up to our eyeballs, then at least let it be something of benefit to the public. But of course, where’s the profit? Such projects have to be linked to economic expansion under capitalism, but globalization has put paid to that particular get-out. With a population effectively reduced to little more than consuming the products churned out of the world’s cheap labour markets, what choice does the government have, short of admitting that capitalism has failed and it’s time to think about getting rid of it and replacing it with a sane, rational alternative, socialism.