Fighting the pro-capitalist state

Owen Jones has a brilliant description of how the state doles out welfare to the rich whilst bashing the poor. What should be the political response to this?

I fear that social democrats see this merely as a failing of personnel; if only we had politicians of enough courage and sense of justice, things would be different. In fact, this is nowhere near enough. There are powerful structural reasons for the pattern Owen describes - for why, in Marx's words, the state is "a committee for managing the common affairs of the whole bourgeoisie." I'm not thinking here merely of the fact that capitalists make political donations and offer well-paid jobs to superannuated politicians and expect their money's worth from doing so. There are two other mechanisms.

One is that governments need economic growth, which makes them dependent upon capitalists. Michal Kalecki put this well:

Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence.  If this deteriorates, private investment declines, which results in a fall of output and employment...This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis.

This explains why the government gave big handouts to the banks. In 2008 bankers could credibly claim that without those handouts, the economy would have collapsed.

Broadening the point slightly, it also explains the spread of outsourcing. In a world of secular stagnation, profits can't grow much through ordinary investment and technical change, as both are weak. Instead, profits must grow by expanding the domain in which profits can emerge - hence the corporatizing of state functions.

Secondly, politicians believe that the private sector has management expertise. Outsourcing happens because ministers think that the private sector can manage some functions better than government. And the banks were left unreformed because the government thought bankers' expertise was necessary to restore the banks to profitability.

A reversal of the trends which Owen decries requires a weakening of these two mechanisms. Is this possible?

I suspect the second mechanism is the more vulnerable one. The left can and should devote far more effort to attacking the myth that private sector managers have expertise. This would consist of:

 - Pointing out that the claim to such expertise is very often merely an ideological front for theft.

 - Emphasising the distinction between markets and capitalism. Insofar as the private sector does increase efficiency, it is to a large extent because market forces drive out (pdf) inefficient producers, and not because good management raises the performance of existing ones.The fact that outsourcing firms are often incompetent  fraudsters shows how hard it is to raise efficiency in honest ways.

 - Granted, there is sometimes such a thing as good management. But it consists (pdf) in ensuring good control and feedback structures are in place. It does not mean mindless wibble about leadership, strategy and vision.

 - Where some people have the skill to build such structures, their expertise should be under democratic control. The expertise of scientists and economists is subordinate to the political process. The expertise of managers should be no different.

Saying all this, though, merely runs into a problem. The state is actually shifting in the exactly opposite direction. It is embracing a top-down cult of management which is the enemy of creativity and professionalism.

Marx thought that the pro-capitalist state could only wither away after a socialist revolution. I fear he was right - and that such a revolution is a distant prospect.

Comments

[Roy Lonergan]

Which, I guess, is one of the arguments for a small state that does less and therefore needs a smaller pork barrel.

[Truthspeaker]

There will never be a revolution in Britain (England), socialist or otherwise.

The English are apathetic about everything and utterly resigned to whatever befalls them. Their only response to politics, to war, to Islam, to terror, to entrenched inequality, to economic decline etc. is to shrug and then grumble in private.

We can't make the trains run on time, there's chaos when it snows more than 0.5cm, there's chaos when it rains more than 4cm, there's chaos when it's more than 25 degrees outside. There's chaos when leaves fall on the tracks. We've traded common sense and independence for bureaucracy and petty-minded rule-following absolutism, and we deserve everything we get.

[Truthspeaker]

How far we have fallen from the great Victorians.

[Doug]

The incompetence of private firms is well known to people who've worked in them. For example, my son worked for PC World and the centralisation and inflexible short term planning of that company would have made Stalin blush.

Another issue that rarely gets flagged up is that, despite the pressures - financial and political - and the complexity of running such an organisation, most NHS managers are extremely effective. And without a profit motive to push them - shocking isn't it?

[Ben]

Good to see your view of the UK getting more bleak. Keep going you have a way to go yet. The main thing is serfdom due to private property with restriction on building supply and unfettered credit.

As another poster says the Brits really are asking to be farmed. They just do anything they are asked. Mix in the fact that the older generation are willing to bury their own kids in housing debt for paper wealth and you have a kingdom that will be ruled forever.

[Deviation From The Mean]

I agree that we are effectively held to ransom by the capitalists (and not the Unions as the right would have us believe) and I agree that some on the left fail to to account of this. I have often made the argument that within a capitalist system the Tory policies do make sense sometimes! Union bashing makes sense in a capitalist system. Friedmanite economics make sense in a capitalist system just as much as Keynesian economics.

Arguing for progressive economic reform in what is a cyclical and circular system (to some degree) is effectively arguing for reactionary economic reform at the same time.

I think your are either an anti capitalist or not. A social democrat, in the late 20th century Western sense of the term, is effectively just a delayed neo liberal.

But I do have a problem with the idea that the market drives out inefficient producers, this is Owen Jones point, it doesn't because the inefficient producers get state help! Which is the entire point of socialism for the rich!

[Dave Timoney]

Re "profits must grow by expanding the domain in which profits can emerge - hence the corporatizing of state functions".

That's plausible, but surely the attraction of the state sector is not merely that it is virgin territory for profits, but that many outsourced services remain de facto monopolies, which allows for larger profit margins than could be achieved in the "open" market.

[Boffy]

"On April 12, 1871, i.e., just at the time of the Commune, Marx wrote to Kugelmann:

"If you look up the last chapter of my Eighteenth Brumaire, you will find that I declare that the next attempt of the French Revolution will be no longer, as before, to transfer the bureaucratic-military machine from one hand to another, but to smash it [Marx's italics--the original is zerbrechen], and this is the precondition for every real people's revolution on the Continent. And this is what our heroic Party comrades in Paris are attempting." (Neue Zeit, Vol.XX, 1, 1901-02, p. 709.)"

Lenin (State and Revolution)

Marx did NOT beleive that "...the pro-capitalist state could only wither away after a socialist revolution. I fear he was right - and that such a revolution is a distant prospect."

He believed that state had to be smashed as part of that revolution. What withers away is not the capitalist state, but the semi-state created by the workers themselves that takes its place!

[fairleft]

"The state ... is embracing a top-down cult of management which is the enemy of creativity and professionalism." I disagree. The capitalist state long ago or has always embraced that top-down cult, except for that 40-year window between about 1930-35 and 1970-75. (And even during those semi-social-democratic days there was a big powerful minority of braying 'GM or Wall Street knows best' types ...) What's relatively new is managers subordination to the market, which means in real life pleasing the stock market analysts. This has destroyed managerialism as traditionally understood. Big firm managers used to be able to carry out longer-term plans that didn't need to please the knee-jerk neoliberal and financialist biases of market analysts, but all of that becomes nearly impossible once you've listed on a stock exchange.

[rogerh]

Well I suppose the alternative to capitalists is the Department for Business, Innovation and Skills - please stop laughing.

You touch upon the nub with '.... the expertise of managers should be no different'. The trouble is the important players are beyond the reach of mere MPs and even the law. Any attempt to change that seems futile and indeed the more perceptive politicians and public managers have already sold out. The game has changed and accountability is almost a distant memory. How it will end I don't know but purchases of large rolls of piano wire will be noticed.....

[pablopatito]

Generally agree, but I'm not sure about the rise of UKIP on an anti-EU agenda and its significant influence on mainstream politics.

No serious politician wants to leave the EU and very few capitalists want to leave. Everyone agrees it will be bad for corporate profits and the main people who are likely to "benefit" are working classes living in deprived areas.

Under your argument, we would never leave. And yet there is a good chance we will?

Depressing though UKIP is, I think it shows that the working classes can get organised and have an influence, so it gives me some hope.

[Ralph Musgrave]

Chris says “In 2008 bankers could credibly claim that without handouts, the economy would have collapsed.”

Under the existing and fraudulent fractional reserve banking system, that’s true. But there’s an alternative (backed in the past by at least three economics Nobel Laureates) and that’s FULL RESERVE banking. Private banks just don’t need taxpayer funded support under full reserve: credit crunch or no credit crunch.

[Frédéric Bastiat]

Apologies, but I couldn't post hyperlinks explaining some of the terms I've used. If anyone has any questions, I'll try and field them.

The author is incorrect in why the government gave banks such generous handouts. The economy would not have collapsed, as it didn't in 1920, but we'll get to that.

The author also neglects the important cause of the problem; Government.

To begin with, the cause of the crisis was government's implementation of Plank 5 of Marx's 10 Planks of his Communist Manifesto (scroll to the bottom to see the 10 planks [this characterising of Tory policy as Marxist makes you seem a bit of a crank, also as pointed out Marx is using "monopoly of credit" in a much stricter sense than you seem to understand): Central Banking, notably here in and in the USA, who price fix the price of money (the interest rate) far below what the market would naturally. This cheap money is borrowed and gambled with by big private banks, whom are the only ones with access to this cheap line of credit, and with it they gamble and speculate like a teenager at the Casino with Dad's credit card; more recklessly than they would if they had to pay fair market value for the capital. This unholy alliance between private banking and government banking breeds severe misallocation of capital (malinvestment), and sees banks speculate and cause bubbles in property, stocks, and worryingly now also government bonds. Alarmingly, this also sees private enterprise borrow money to invest in plant equipment and hiring staff, as manufacturing wrongly thinks consumers have saved up excess cash in banks, justifying the low interest rates at the bank, but in reality rates aren't low because of excess savings but because government's Marxist central bank price fixed the rates low, and the potential customers are actually swimming in debt rather than savings. This is known as "The Business Cycle," and a crash is guaranteed once the true state of affairs is exposed by irresistible market forces. The author has written of The Business Cycle before, though didn't take a strong position on it. I challenge anyone to find a theory that explains the Boom Bust phenomena more aptly than the Austrian School's.

Benefitting from government's Marxist central bank, banks have grown to a grotesque size, and falsely claim to be too big to fail, as the blog's author does also. Government believes this, and provides guarantees to banks, this creates "Moral Hazard." Private banks became even more willing to take a risk, knowing that the potential costs or burdens of taking such risk will be borne, in whole or in part, by the State. Government cultivated this Moral Hazard with private banks early on with deposit insurance, and does again when it bailed them out recently. The irony is that the banks are not actually "too big to fail, or jail." In truth, we could have let them fail and let the market correct the malinvestment brought about by central bank price fixing, and have done so in the past, and the economy recovered in a mere year.

When government claims the power to regulate, big business will try to capture it to succeed, rather than face the brutal competitive regulation of the market place keeping them more honest, where consumers like you and I decide the winners. The relationship between the market intervening State and private banks is as toxic as it is deep-rooted now.

This meddling by political animals' bailout assurances creating Moral Hazard, and the rigging of interest rates at Government central banks creating malinvestment and starting The Business Cycle, has hugely distorted the market and inhibited the process of creative destruction (where failed business is allowed to go bankrupt, and more sound competitors are rewarded with market share and fill the void of the defunct bad operators, whose assets are sold off to actually successful entrepreneurs).

Business can only get "mega-big" by 2 ways: 1. The free market way, or 2. The crony way:
1. Out innovates and competes the competition, to please you, offering you the best deal.
2. Gets government to regulate the competition out of the market place, usually under the rubric of "safety."

We want more of 1, and less of 2. You should decide who succeeds in the market, not political animals looking for campaign donations from lobbyists. The answer is not more government, the answer is to repatriate from government the power to choose winners in our market place back to you and me, the customer. And, to abolish government's Marxist central banks. If government cannot get the price of milk right, how on earth can they hope to get the price of money right.

[Igor Belanov]

@ pablopatito

"Depressing though UKIP is, I think it shows that the working classes can get organised and have an influence"

Are you kidding? UKIP might be able to win some votes in 'working class' areas, but its members and leaders are basically disillusioned 'petit-bourgeois' ex-Tories. There is virtually no working-class organisation and influence involved in UKIP, and there is no coincidence that UKIP's main targets include places like Thanet and Clacton.