Capitalism isn't working

In the past 40 years or so productive capitalism has been overtaken by financial capitalism. By productive capitalism I mean the 'real economy' which includes the production of commodities such as manufacturing and services. Financial capitalism centres around money making money and includes finance, insurance and property. How did this happen? The formation of large corporations - monopoly capitalism - at the turn of the 20th century lead to the generation of massive surpluses. Some of this money was re-invested in production but the sums were so large that there simply wasn't enough productive capacity to invest in. Investors had to find other outlets for this money. Hence the massive increase in size of the banking and the financial sector in the later part of the century.

The reason is that mature capitalist economies have been suffering from stagnation for sometime. America was lifted out of the Great Depression by the spending on the Second World War and the postwar boom happened because rising wages allowed people to spend more stimulating demand for goods and services. The problem with consumer capitalism is that it doesn't work if people can't afford to buy products. Since the boom came to an end in the 1970s stagnation has been the norm. The billions sloshing around have been invested in finance and financial products and we have seen a series of speculative booms and crashes, each one worse than the last. We've had the 1987 stock market crash in the US, the Asian financial crisis, stagnation in Japan, a banking crisis in Sweden, the Dot Com boom in 2000 and now the so-called Credit Crunch.

After the Dot Com boom the weak recovery in the USA was dependent on very low interest rates and booming credit, fuelling the house price bubble which began to burst in 2007. We haven't seen the end of this crisis yet by any means. What is going to lead to a recovery? With falling incomes in the USA, mass unemployment and lack of credit - nothing. The only thing that can is another boom - but where is that going to come from? Its no good expecting China to lift us out of this. They have to have a market to sell their products and the USA provided that market, but how is it going to now?

Looking back we can see that the periods of prosperity for ordinary people in the last hundred years or so were aberrations rather than the norm. As capitalists try to squeeze wages further to boost their profits demand will continue to fall leading to further stagnation. The USA is unlikely to be able to lift the world economy out of this stagnant state. The message is that capitalism doesn't work well - even for capitalists. For the rest of us its even worse, and won't ever get better. Meanwhile vast sums of money - trillions of dollars - are chasing speculative gains when they could be spent on useful things like providing all the people on the planet with clean water to drink and adequate housing. Capitalism is an iniquitous and unsustainable economic system artificially maintained by a set of rules which could be changed democratically at any time. Now is the time to make those changes

Can't tell left from right

Some people can't tell left from right. This can be a real danger when driving. I wonder if James Purnell drives a lot, if so he should be careful because he clearly suffers from this problem. He thinks he's on the left of politics but he isn't. He's been a member of a New Labour centre-right government for long enough that he ought to know that his Party espouses reactionary causes. Like uncritical worship of the 'free' market. Lets take as an example his very own recent so-called welfare reforms which I posted about here. They represent the 21st century version of the workhouse. Rabid right-wingers like the American Rush Limbaugh would have been proud of what Purnell has done. I used Limbaugh as an example because New Labour love to copy the policies of the American right. That is where they get most of their ideas from. Progressive governments protect workers and the unemployed against the malign effects of 'free' market capitalism, they don't batter them as Purnell has done.

If you want to know how how 'left-winger' James Purnell voted on key issues since 2001 you can get this information from theyworkforyou.com:

* Voted moderately for a transparent Parliament
* Voted moderately for introducing a smoking ban
* Voted very strongly for introducing ID cards
* Voted very strongly for introducing foundation hospitals
* Voted strongly for introducing student top-up fees
* Voted very strongly for Labour's anti-terrorism laws
* Voted very strongly for the Iraq war
* Voted very strongly against an investigation into the Iraq war
* Voted very strongly for replacing Trident
* Voted moderately for the hunting ban
* Voted very strongly for equal gay rights
* Voted moderately for laws to stop climate change

So I was interested to read Purnell's latest contribution to the 'progressive' debate in the Guardian with interest. He says that "We learned the lesson that we should use markets or the private sector where they achieved the relevant outcome". He doesn't say "right outcome" just "relevant". But the only outcome of New Labour's privatisation programme has been greater poverty for for workers, a more unequal society and a lessening of opportunity for the poor, working class, and middle class. You cannot pursue policies of privatisation and call yourself 'left' or 'progressive' because the outcome is neither left nor progressive. This is the paradox of New Labour - talk about creating a better and more equal society then follow policies which lead to exactly the opposite. Create greater inequality then find a sticking plaster to put on it- like SureStart. The New Labour acolytes are being either dishonest or stupid.

Rebuilding the collective

On the 13th July I was at the Ways With Words festival at Dartington Hall. I went to see Rob Hopkins, Shaun Chamberlin and Tamzin Pinkerton speak at the Transition Morning event. I enjoyed the talks even though there was little that I hadn't heard before, but there were some good arguments as to why nuclear power won't solve our energy needs. The audience, as it usually is, was distinctly middle aged and middle class - so Rob et al. were largely preaching to the converted. There are now many Transition towns across the world and more are being set up every day. As someone who is trying to set up a local climate change group and has been involved in such groups I was hoping to hear some more from them about how to reach out to the 'difficult' parts of the community - the ones who 'don't want to know'.

At the last Green Party conference there was a talk by a woman from Totnes who is active in the GP and Transition. She said, as I had guessed, that they had reached all those in Totnes who were 'interested' but they were still in a minority. The real challenge for such groups is reaching those who are 'indifferent' - and I'm not talking about climate change deniers here. When I asked Rob and Tamzin about this their answer was (and I'm paraphrasing) - to keep plugging away, show the benefits of local food, community action etc and more people will come on board. I'm not so sure it is going to be that easy.

The whole point about Transition is its inclusive, it has to embrace all the community, hence you won't find any mention of politics or (divisive) economics in the Transition Handbook. This is fair enough but Transition is about building a collective in a world of selfish individualism. By that I don't mean that we are all selfish but that we have been 'taught' to think of ourselves as 'selfish individuals' - to put our own wants first . If you want to know more I suggest you watch Adam Curtis's excellent documentary - The Century of the Self - which charts the development of public relations, advertising and the growth of consumer capitalism in the 20th century, based on the ideas of Sigmund Freud and his nephew Edward Bernays - it is essential viewing if you want to know how we got here. Selfish individualism is now deeply ingrained in our society, that is why we find it so difficult to build communities and that is what Transition is all about - collective action.

There is another word for collective action - socialism. Putting the interests of the collective above the interests of the selfish individual is what socialism is all about. It does not mean, as is popularly supposed, oppression of the individual - that is what the capitalist media want you to think. Individual rights must be protected. But the interests of a community (collective) have to come first. At one time no one would have disputed this idea. If we go back a relatively short way in history no one even thought of themselves as an selfish individual in the way we do now. People were part of a community. In order for Transition to become a reality we have to rebuild the collective - that is the task in hand. Just don't mention the 'S' word though!

New Labour, New Cronies

Interesting story in the Independent on Wednesday about Lord Mandelson. Apparently this very important person has no less than ten people working for him in his new empire. His Lordship's newly formed Department for Business, Information and Skills gives him control of trade, consumer affairs, science and innovation, higher education, communications etc etc etc. Of course, Gordon Brown brought his erstwhile enemy Mandelson into government out of desperation, and since he saved Gordon's skin in the recent attempted coup after the Euro-election debacle, its no surprise that he has become more powerful.

When you look at Mandelson's departmental heads what do you see? Well no less than four of them are unelected Lords, and there is also a Lady. Was it really that difficult to find MPs to fill these posts? Or does New Labour actually prefer bankers and Tony's cronies to their own party members? We know that Gordon likes bankers and financiers. Look at his response to the credit crunch. Any curb on bonuses? Any break up of banks too big to fail?

The truth is that the leaders of New Labour - Blair, Brown and Mandelson - have all but eviscerated the Labour Party. It is now an empty shell. Merely a vehicle for the careerist politicians who lead it. Peter Oborne in his book the Triumph of the Political Class describes this process and how the people who rule us do it largely for their own purposes, they have become an elite, answerable only to themselves.

At one time the Labour party stood for something and people in politics paid their dues. They worked themselves up from the bottom, starting out as local councillors, and active trade unionists before moving on to parliament. The Labour Party used to have a democratic structure. The Labour Party conference wasn't mere PR window dressing - it meant something. If you want to find out more about the history of Labour Party democracy read the excellent book Parliamentary Socialism by Ralph Milliband.

Nowadays if you run the country you don't bother to debate in your own party, you don't bother to give any kind of space to people who may have different opinions to yourself, you simply parachute in people who share your views and will do your bidding. This is what New Labour did with the likes of Lord Adonis and Baroness Vadera. This is not only profoundly undemocratic but its also bad for our country. All those people who used to pay their dues to get into government learnt something valuable in the process. Now we get people coming into government with their potty ideas fully formed and untested in the crucible of democracy. This is just another example of why government in our country has become so rotten.

Unemployment is a free market failure

As unemployment rises inexorably towards three million in the UK the government has no answer. That is hardly surprising because this government is so intent in worshiping at the altar of the market that it believes that governments can't and shouldn't' do anything - that is the job of the market. So we can't expect much from this government except the harassment and impoverishment of the unemployed and those on welfare as I described in this post on the government's latest so-called 'welfare' reform.

The unemployed are the ones who are paying the most for the banker's recession. By being shut out of paid work they will suffer hardship, low esteem and health problems, often brought on by malnutrition. Malnutrition is estimated to affect three million people in the UK and cost £7.3 billion. Yet another cost dumped onto society by capitalists.

Capitalism has always lead to unemployment. In fact there was no unemployment before capitalism. It is a feature of the capitalist economic system described by Marx over a century ago:-

"....it is capitalistic accumulation itself that constantly produces, and produces in the direct ratio of its own energy and extent, a relatively redundant population of labourers, i.e. a population of greater extent than suffices for the average needs of the self-expansion of capital, and therefore a surplus population" [Marx: Capital].

Further to being an intrinsic feature of a capitalist economy unemployment is actually useful to capitalists. It creates the 'reserve army of labour' which is so beneficial to capitalists because it helps to lower wages and reduces militancy amongst workers, helping to keep them in line. No wonder capitalist governments like New Labour have very little intention of doing anything about unemployment.

Any economic system which cannot provide full employment is a failure. It needs to be replaced by an economic system that can provide full employment. Even in a capitalist society where the free market is failing governments must step in to do what the market cannot and create jobs for those without work. That is the hallmark of a civilised society. Its a pity that doesn't apply in the UK.

A Radical Programme for the Left

There has been a lot of talk about where the left goes next. In spite of the credit crunch left wing and progressive groups appear to have no coherent alternative programme to free market capitalism.

I've posted about these issues before and suggested some alternatives but here I want to explore what an alternative programme might look like. Firstly its essential to understand that the core of any alternative programme must be an economic strategy. It is essential because the economy is at the heart of our society. The economy is embedded in our society as Polanyi observed. This is historically where the left have failed to deliver. The focus thus far has been on nationalisation and delivery by the state. Thanks to the collapse of the Soviet Union this approach has lost much of its credibility. And its not just in the Soviet Union that state control of the economy has run into trouble. In the UK the Labour Party used to believe in a 'mixed economy' (in the 1960s and 70s) with utilities and public services owned and run by the state with the rest in the private sector. That also failed for reasons which are too complex to debate fully here but a large part was played by the fact that the Labour government's commitment to state control was weak and lacking in any kind of dynamism or innovation. However, when we talk of these failures we must never lose sight of the effective propaganda and financial war waged by the free-market right to undermine alternatives to capitalism.

Its important to understand why the alternative economy is crucial. As long as we rely on the 'free' market - i.e. capitalism - to deliver our economic needs we will continue to have great inequalities and mass poverty globally. That can never change because that is how capitalism works. It was Marx who first explained this process. By acquiring the surplus value of worker's labour capitalists are able to cream off the wealth from society for themselves - leaving the rest of us with the crumbs from the cake. This can't change unless we create wealth for ourselves instead of wealth for capitalists. They need us but we don't need them. You can't have capitalism and social and economic justice - they don't go together. Its essential to at least understand this basic bit of Marxism. You don't have to be a Marxist but you need to understand how capitalism works and Marx has the answers.

It is important to also understand that by capitalists I don't mean the person who runs your local corner shop, restaurant, farm, or small business. these people are not capitalists. Capitalists are the people who own the means of production i.e. Olag Deripaksa, Lakshmi Mittal, Rupert Murdoch et al. It is the multinational corporations which are the root of the problem - not your local newsagent.

So how can an alternative economy work? How can we deliver all the goods and services which we need without the 'free' market? The answer is a mixture of nationalisation and mutualism. There are some obvious things which the market cannot deliver - the railways and universal post are examples. So we nationalise the railways and keep Royal Mail in public ownership. We also need to nationalise the banks and utilities. The banks have far too much power as we have seen and essential services such as energy and water need to be available to all - not on the basis of what people can afford to pay. Also included would be healthcare, education, social services and welfare.

By nationalisation I do not necessarily mean straightforward ownership and control by the state. These nationalised industries could be not for profit companies or social enterprises where the employees are the stakeholders. We need to look for more dynamic models in order to make sure that the nationalised services do not stagnate. They must be able to pay their way, and to develop and innovate. The workers in them must be moivated to make them successful. In any case there must be no shareholders - unless that is, all UK adults are made 'shareholders' with 'shares' that cannot be sold or otherwise traded. There is no reason why public services such as health, for example, could not be delivered by mutual organisations supported by the state. We need to come up with new models because we do not want to repeat the mistakes of the past.

What about goods? there is no reason why goods can't be delivered by co-operatives as I've ready proposed in 'How to Beat Capitalism'. There are plenty of successful examples. What we need is a government which is committed to actively promoting and supporting mutualism as a viable alternative to capitalism. There are organisations such as Co-operatives UK which promote the setting up of co-operatives and these need to be encouraged and supported by the government. The Mondragonco-operatives provide a good example of how co-operatives can successfully deliver a range of goods. In the short to medium term we also need the kind of Green New Deal which is being supported by the Green Party to provide thousands of jobs and investment to help to combat climate change.

If an alternative economy is the first priority, the second priority must be democratic reform. We need a written constitution - with a removal of all royal perogatives from the government, an elected second chamber to provide checks and balances, electoral reform with proportional representation and the revival of local government. Local councils must be able to deliver services in-house, be able to provide social housing and have democratic control of local services including health and education. People, local and democratically, must be able to determine whether they want a new store in the heart of their town - not the corporations.

A programme for the left needs to begin urgent steps to move to a low carbon economy. I've already mentioned the Green New Deal But we need to much more particularly in the area of public transport. Climate change is the biggest threat to our society.

There are many other issues but these are the key ones. The left will have to work hard to persuade voters that these changes are necessary given the evident pro-market bias in the media, and left groups will have to learn to work together instead of the eternal infighting which has cursed socialist politics for the past century or so. A left government will have many obstacles to contend with. Capitalists are likely to stage an investment strike, starving the UK of capital and creating unemployment. European legislation, which enshrines neoliberal values, will have to be reformed. But all this can be done. Franklin D Roosevelt did much of this in the USA - the world heartland of capitalism - and we can do it here.

And finally a word about trade unions. There is a crying need to free up trade unions from the repressive Thatcherite legislation designed to hobble them, This must also be part of a radical left wing programme. But trade unions need to change also. In the UK they have always had very limited horizons - recruit, negotiate, collective bargaining... and er .. that's it. Trade unions did set up the Labour Party but now it has turned against them they must grab the opportunity for change by refusing to support New Labour financially and if necessary setting up a new party of the left. Their role in bringing about an alternative economy will be crucial.

None of this can be done overnight - its a long hard road. But it must and can be done. Capitalists changed the rules to suit their purposes. We must democratically change the rules to suit ours.