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What next?

November 4, 2011

It has become clear to everyone except the professional political class that things cannot go on this way. As the world economy limps from crisis to crisis and world leaders gather to discuss the best way to maintain their positions of power, occupations are spreading around the world and gathering support from, not only the people, but also intellectuals, artists, economists and even religious organisations. The magnificent response of the people of Oakland, California to the savage suppression of democratic rights by the local authorities is one clear sign that the people have had enough. We have reached the bizarre position where only politicians believe that the rich should not pay more tax. Led by Warren Buffet, many of the wealthiest people in the world have expressed support for more progressive taxation. While Republicans vying for the Presidential nomination argue about whether an electrified fence or two fences would better protect the Mexican border the fact is that people are actually leaving the US because Mexico currently offers more opportunities.

The most important fact is that the neo-liberal experiment of the last few decades, what one might call the Great Leap Backward, has failed. In fact this project must be considered to constitute as great a crime against humanity as Stalin’s or Mao’s. Like Stalin and Mao the Washington Consensus argued that ends justified means and that present suffering was necessary to bring about a future paradise. The victims of neo-liberalism are spread around the globe and therefore harder to quantify but by effectively enslaving the developing world with debt, stealing natural resources, refusing medicine and backing violent psychopaths such as Pinochet to quash democracy, the West and the US in particular have damaged the world in a way which will take generations to heal. The best defence of Thatcher, Reagan and the others who supported this policy is folly. Either they were too stupid to realise that the results of deregulation and the forced opening of developing markets would be disastrous or they acted with full awareness of the consequences. Given Reagan’s actions in Central America the latter interpretation is not excessively cynical. Since the end of colonialism proper capitalism has allowed the West to continue plundering the former colonies with the added twist that through debt the exploited now pay their exploiters for the privilege. In the East the rise of China has exploded the myth that capitalism and democracy go together. A pessimist might suggest that without a radical break our future can be seen in China today. Democracy in the West has become less accountable and states have been accruing the powers of tyranny to themselves, possibly in compensation for the fact that the overbearing influence of the financial markets has left them with little power over anything else.

In economic terms the measure of capitalism’s failure is the growth of inequality. The gap between the global rich and poor has increased over the last few decades. Wealth does not ‘trickle down’, on the contrary it is siphoned up. The poor of the world have been aware of this for years but it was inevitable that the same process should also occur in the rich nations themselves. This inequality has become very apparent in the US and the UK and the political class of neither country has any plan to reverse it. We should bear in mind the importance of inequality. There is good reason to believe that financial inequality is one of the biggest causes of a whole range of social problems. There is for instance, a greater correlation between inequality and violence than between poverty and violence. More equal societies score better in measures of health, education, etc. It can thus be seen that inequality is bad not only for abstract reasons of justice but for sound economic reasons. High crime rates are bad for the economy and expensive to the state. The question is thus, how do we create societies which are more equal and therefore, not only more just, more happy, more democratic, but also better functioning.

It seems to me that there are three options or courses we might follow. Two of these are essentially utopian, though as Slavoj Zizek has pointed out, the real utopians today are those who believe that the current system can continue. The safe course must be a move toward greater regulation, more state intervention, more progressive taxation, mixed economies, etc. This can be combined with serious banking and democratic reform, wiping out third world debt, allowing developing nations to nationalise their own resources and raise import tariffs to protect their economies while they develop. A serious crackdown on worldwide tax evasion could raise enough money to seriously address the problems of world poverty and disease. At the same time real things could be done to protect the environment from the depredations of the market and begin a move toward some form of sustainable economy. This is more or less the old social democratic agenda, long since abandoned by many of the left parties in Europe. The great advantage of this course is that we already know that it can work and, while doubtless angering those who have grown rich by pillaging the planet, it could be achieved without violent revolution.

The first of the utopian options is directly opposed to the previous course, i.e. the genuinely free market. The most likeable of the proponents of this course is US Congressman Ron Paul who always reminds me of Tigger. (And it takes a Tiggerish enthusiasm to maintain his principles and his sanity while forced to debate with idiots in front of a crowd literally baying for blood.) The argument is that the world’s problems are caused by excessive regulation and interference. The opening of developing world markets was not the problem, it was the fact that the US hypocritically maintained its government subsidies and other forms of protectionism while insisting on the right to flood foreign markets with cheap goods. If the free market were only allowed to operate properly then a fair society could be achieved. Whether this is true or not, it is important to bear in mind that this vision is utopian. A genuinely free market of the kind Adam Smith envisaged has never existed so we have no historical evidence that it would work. Free marketeers are rather like Trotskyites in this respect. If one claims that capitalism/communism has been shown not to work they both reply that they have never been properly tried. The Soviet Union did not represent real communism for the one and neo-liberalism does not represent real capitalism for the other. The prospect of an unregulated free market also begs the question, what of democracy? It seems to me that we would have to give up many cherished notions about representative government if this course were to be followed.

Karl Marx (1818-1883)

What neither of the options above address is capitalism itself. What if Marx was right? Thus, the third course would be to do away with capitalism altogether. To say that capitalism is the problem is not to deny the power, dynamism and innovation of the market. In fact the very strengths of capitalism may be the problem as they threaten to overpower us. It is worth bearing in mind that among the most recent innovations of capital were those very financial instruments that precipitated the banking crisis. If Marx was right, or if the problem is money itself or our attachment to the idea of private property, then there is no point in trying to create a ‘capitalism with a human face’. It is quite possible that the power of the market cannot be tamed and that any solution that does not address this is no solution at all. Finding and building a viable alternative would represent one of the greatest challenges humanity has faced and a huge risk. I can see no way that capitalism could be ended without violent revolution taking place in most of the developed world so it seems only fair that those who propose it should be prepared to accept that consequence. And this raises the biggest question of all: what should replace it? There are many visions competing for attention in this regard and they all have passionate advocates. I do not intend to discuss them all here but would simply say that if capitalism is the problem then ‘what comes next?’ is the most important question of our time.

It is worth bearing in mind, however, the truth, unpalatable particularly to the young and idealistic, that the fact that there is a problem does not mean that there is a solution. It may not be possible to create a society that lives up to our ideals of justice and liberty. There is, in fact, no good reason to think that we should. This must not be cause for defeatism, however. It is clear that we can do better than this and if we can’t then we don’t deserve to survive.

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  1. What Next? | Always Question Authority

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