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Lens on Labour: Words economists use – “Marx”, “capitalism”!

by Len Arthur

Karl Marx (1818-1883)

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I read ‘Capital’, the major work written by Karl Marx, when I was about 16 and an active member of the Young Socialists, which is what the Labour Party youth section was then called. Throughout my working and political life I’ve found that Marx’s analysis provided an effective understanding of what was happening to the international economy. Clearly the world has not stood still and I’ve worked at seeing how other economists like Keynes and Hayek challenged Marx and also followed analyses that have taken account of how capitalism has changed since the late 19th Century. In this sense, if asked, I will tell people that I remain a Marxist, his work providing an analysis of capitalism that has stood the test of time.  But not in the sense he provides readily accessible answers to the problems that currently beset us: these remain to be worked at.

The crisis of capitalism that we are currently facing is possibly the worst peacetime crisis since capitalism as a system came to dominate the social activity we call economics. Even with an understanding of past crisis such as that of 1929 – 1933, those with responsibility for economic management have very few options left. The crisis is more global and interlinked than previous experiences and the problems appear to be deeply rooted in the purpose, ownership, control and distribution of investment: or as Marx would say, value created within the process of production. Answers have to address this structural issue of power over the ownership and control of the process of production: democratically, we have to question whether production, simply for the maximisation of profit, provides us with a satisfactory method of addressing wealth creation. Do we all benefit, in terms of basic needs and can we arrange not to destroy the planet in the process?

Now this might sound like abstract madness; Keynes’ phrase ‘in the long run we are all dead’ rings in your ears. But our current situation requires us to put our cards on the table: we are either in the school where we face a crisis rooted in the ownership and control of capital or we are in the school where we face a business cycle crisis that with a few big and hefty pulls on the tiller and we will get back to business as usual. Some thinking along these lines is required to make a judgement about ‘capitalism’, as is being talked about by Cameron and Miliband.

If you are interested in delving a little deeper at this stage there are three books that I’ve found useful: The Big Short by Micheal Lewis which is a real novel type page turner; Zombie Capitalism by Chris Harman which is comprehensive and heavy in parts, which can be skipped; and How Markets Fail by John Cassidy which takes apart the classical economic theories that Cameron was relying on to say markets – less regulated of course – work for us all. Visually Professor Richard Wolff is also worth watching and listening to.

We face a crisis based upon the financialisation of the economy: it has become more profitable to shift investment to speculate in debt and related futures than to actually produce goods and services that satisfy peoples’ needs. In ‘short’ we face a bankers’ crisis that is rooted in the structural problem of the profitability of what most of us would call the real economy.

The Cameron view of how we address this situation is to force down wages costs through market deregulation so that UK costs allow competition with some of the cheapest world suppliers: the race to the bottom. As John Harris pointed out in yesterday’s Guardian over 4 million of the 28 million employed in the UK are self employed, essentially as cheap labour, outside of law and agreements covering employment. Even in employment, as an anonymous letter from a mother about her son in the Guardian the day before stated, many are on zero hours contracts that can result in ½ day a week of minimum wage work but that prevent working for anyone else.

Along with cutting benefits, pensions, regional pay – you know the list – that is the Tory view of how we are to save their capitalism, while they stuff their pockets with millions.

This is why I find Balls’ and Miliband’s position so worrying. They walk the tightrope between different analyses of the crisis but by supporting cuts at this time, and as an opposition, they cross the line into the Tory view of the world: the deficit is the problem and the workers have to pay for it. False Economy, for example, provides many possible alternative approaches. It may be difficult to make the argument about the structural challenges of capitalism and win elections, but we should also consider if it is possible to win elections playing the Tory game, considering the changed world we live in. Then again you may not consider it so changed. Can you just imagine the situation where, like Edward Heath, Osborne suddenly comes over all Keynesian and goes for growth even for PR purposes? The Labour Party would then be more right on the economy than the Tory government.

Well there we are I’ve suggested another way at coming at the debate. Here is the text of the key statements: Ed Balls’ speech to the Fabian meeting; Len McCluskey’s response in the Guardian; Ed Miliband responds to Len; Ed Miliband’s speech on responsible capitalism

To finish, here is an interesting graph and argument, sourced from within the investment industry, about what is the real debt problem.

British Private Sector debt out-does the world

As private industry is the largest borrower, trying to reduce those debts, and government cuts public spending at the same time, the result is to re-enforce a downward cycle. Low and behold, we have the Peacocks disaster! As David Blanchflower said in this week’s New Statesman (not Marxists by any means by the way)

‘Yet what Balls should have been more clear and robust about is what can be done to spur growth, beyond slowing public spending cuts and his rather timid five point plan. The UK government can borrow 30 year money at roughly 3%, which represents a once-in-a-generation opportunity to borrow long at negative real interest rates [due to inflation rates LA] and to use the money to invest in our crumbling infrastructure, with a powerful emphasis on job creation. Now that would be a bold plan.’

Yes, and we could demand that the Government do this to cancel Peacocks debt and allow the workers to set up a cooperative of a company that actually turned in £27m profit last year. It brings it all closer to home, doesn’t it.

Len Arthur is a Labour Party Member, Political Education Officer for his Constituency Party, and a former Trade Union Activist and Lecturer.

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