Larry Elliot, a Keynesian and economics editor for The Guardian believes that Covid has created “a new variant of global capitalism” (‘Since Covid, Capitalism has Developed a New Variant’ 30th July 2021).
Elliot states that for the last forty years the “Austrian variant of capitalism” –small state, non- interventionism, trickle-down economics, free trade, and low tax policies advocated by Hayek and other market fundamentalists, have dominated government economic policy.
Eliot does not admit this fact. Hayek’s market fundamentalism flourished because of the abject failure of Keynesianism where high inflation existed simultaneously with high unemployment. This was never supposed to happen but Eliot offers no explanation.
Hayek, with the ear of Margaret Thatcher, saw market forces as a means to strengthen corporate profitability and business dynamism. There was no alternative to the market. TINA it was called. Nationalisation gave way to privatisation and trade unions were shackled with successive anti-trade union legislation. The “small state” was still an anti-working class coercive state.
What did it for Hayek’s free market doctrines and the market anarchists who followed him, was the financial crisis of 2008/9. They said it could not occur; that the market could never fail – but it did. And the imposition of austerity programmes to balance the books made life hard for millions of workers. Instead of understanding how capitalism functions, workers threw their support behind popularists like Farage, Johnson, Trump and a myriad of others in Europe, North and South America and India.
Then there was the Covid pandemic. Covid forced governments to take a more interventionist approach, paying wages for furloughed workers, keeping businesses afloat through grants and loans, preventing landlords evicting tenants. A wartime economy, if you like.
Eliot discerns in these economic trends a “new variant capitalism” which looks very much like the economics existing before 1979 – before Thatcher and Regan. Eliot writes:
“The idea is to harness the power of the state with the dynamism of the private sector and, as was the case with Keynes, to save capitalism from itself”.
And he concludes:
“The reason a new variant has emerged is simple: there is a need for something stronger than the old model”.
However, what has emerged is the basis of a failed economic policy which will just fail again. Capitalism is an anarchic form of commodity production and exchange for profit based upon private ownership of the means of production and distribution and the exploitation of wage labour. Capitalism goes its own destructive way riven through with contradictions which reveal themselves as class struggle and periodic trade crises.
Failure upon failure
Capitalist economics is based on false premises. First, the belief that markets are harmonious and self-adjusting. Second that governments have the power to control and direct the economy in the interest of everyone.
Capitalist economics, no matter what “model” being pursued, has and always will fail in this objective. Economists can only go back to previously failed policies and reintroduce them again as though they were something new.
Laissez Faire up to the 1930s, Keynesianism up to the 1970s Monetarism in the 1980s Economic Liberalism until the last economic crisis and now it is back to Keynesianism. One failure after another.
And Eliot does not tell us why Keynesianism failed. He does not look at the history of the 1970s when the claims for Keynes’s ideas were found wanting.
Economists have learnt nothing. For going back to a real understanding of capitalism means a return to Marx. But interest in Marx was closed with the publication in 1936 of J. M. Keynes’s ‘The General Theory of Employment, Interest and Money’. This doctrine gave economists and politician’s magic powers to “manage the economy in such a way as to maintain demand”. The Keynesian doctrine announced full employment to be established and the trade cycle abolished. No more “boom and bust”.
Keynes told economists not to read Marx’s Capital, the only place where an analysis of wealth production and distribution under a capitalist system can be found. Keynes wrote of capital as:
“an obsolete economic textbook, which I know to be not only scientifically erroneous but without interest or application to the modern world” (‘A Short History of Russia’, 1925).
Keynes once famously said that when the facts change “I change my mind”. Were he alive today, would Keynes’s have the honesty to say that Marx was right and he was wrong? We doubt it.
Why did Keynesianism fail?
Throughout capitalism’s anarchic and violent history, as Marx explained, periods of good trade and low unemployment have alternated with periods of bad trade and high unemployment. This is known as the trade cycle which economists cannot predict and governments can do nothing about.
Unemployment went above a million under the Heath government in 1972, and to 1,500,000 in 1976 under the Labour Government and to nearly 2 million in 1979. This was capitalism operating in a normal way. It was nothing to do with Keynesian policies. Monetarism, which took the place of Keynes at the end of the Callaghan administration, could not stop trade depressions and periodic periods of high unemployment. It was Margaret Thatcher who took over the Monetarist doctrines of Callaghan and then dropped them for being an unmitigated disaster.
Keynes’s doctrines did nothing for unemployment but the policy’s effect on inflation was that by 1977 the general price level was ten times it had been in 1938.Following a decade of quantitative easing programmes, inflation is now rising again.
Why Save Capitalism?
The Socialist Party of Great Britain was not taken in by Keynes and his economic ideas and beliefs. We argued that full employment could not be maintained; that trade depressions cannot be eliminated and that Keynesian policies would lead to high inflation. Furthermore, Keynes’s policies of government intervention in the economy would do nothing to serve working class interests.
Why should we save capitalism? It is based upon class exploitation and its priorities of profit-making and capital accumulation means that billions of human beings have their needs unmet across food, housing, health, transport, and education. What stands in our way is not the right or wrong economic policy but capitalism and the interests of the capitalist class it favours.
Instead of capitalism, workers should consider socialism: the common ownership and democratic control of the means of production and distribution by all of society. Socialism will just not happen. It first needs the democratic and political action of a socialist majority.
