I found this letter to the editor in the Scotland Herald pretty spot-on with its analysis, so I thought I’d repost it. Worth reading, even without the article he’s responding to. [alex]
Ian Bell’s superb analysis that we are undergoing a “paradigm shift” in economics is timely and insightful (October 25). This is potentially a wonderful time in human history. As someone who has read Marx, Mr Bell recognises the inevitable consequence of capital accumulation as paper “value” in a system in which money is issued as debt, at interest.
Thus finance capital expands exponentially in the hands of fewer and fewer people desperately trying to increase their individual net worth through calls on the product of the real economy, which has to grow to meet these.
In contrast, the real economy can grow only as far and as fast as increasing productivity and technological innovation will allow, resulting in what the great US Green economist Herman Daly calls the “fallacy of exponentially increasing natural resource productivity”, whereby mainstream economics proclaims resource infinity – a scientific absurdity – and treats depletion and pollution as joint externalities.
Thus the desperate search for economic rents in all areas of life (the encroachment of the private into the public under the Thatcher/Reagan voodoo economics of the Chicago school), and a succession of speculative bubbles. Mr Bell also recognises this as the consequence of class war, whereby the owners of capital retain an outrageously unfair proportion of surplus value. Proof that the class war is still alive: bailouts for the owners of capital, and recapitalisation of destitute banks from public funds, the usual expected remedies now being applied: Some pseudo-Keynesian activity used to stimulate demand (but the owners of capital will not let this go too far). There will be some winners from the fire sales of assets (Citicorp and JP Morgan spring to mind) and there will be great anger and hardship.
But the probability that this will work this time is limited by two things: we are likely at peak oil, thus destroying any prospect of growth in the real economy, and global warming plus biofuel production is increasing basic food prices through scarcity of food and water, and finity is taking care of all other basic resources. Meanwhile, the expansion of western economies (demanded by finance capital) is limited largely to the military-industrial (the civil real economy having been exported to points east to exploit cheaper labour there). So the Keynesian option is seriously limited, except by war, which is problematic since present wars are being financed by the Saudis and Chinese purchase of T-bonds – and these are going badly – but sadly not impossible (read some of Joseph Biden’s speeches and quiver).
The finance capitalist paradigm is broken, probably beyond repair. For students of Marx, there is absolutely nothing surprising about this, the only surprise being that anyone is surprised. Indeed, much of this was also understood (but forgotten by his country) by the great Thomas Jefferson, author of the American Constitution, and president: “I believe that banking institutions are more dangerous to our liberties than standing armies.” Well, now we have both – owned and controlled by the same people.
The Marxian analysis is right, to a point. But Marx was a man of his time, and like Adam Smith, who grew up on the nascent Scottish coalfields, saw the “infinite” potential of extraneous hydrocarbon injections as part-liberator of the working class. (Marxism, too, is into “technological fixes”).
This option is no longer open. A recession that reduces consumption in an ecologically challenged world is no bad thing, so long as we share the hardships. The present crisis offers us a new beginning: a move to steady state economics and a system that returns humanity to a balance with the rest of our natural ecology. We have reached the end of the present paradigm; what matters is to choose the right successor. If we don’t? The words of another great US scholar and statesman spring to mind: “This sucker is going down”. For “sucker” read planet.
Dr John O’Dowd, Bothwell.