Responding to George Monbiot

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Responding to Monbiot, or How a Keynesian Social-democrat Discovered (Neo-)Liberalism Thirty Years after the Event

This is a response to an article (‘Bang Goes the Theory’) of George Monbiot’s in the Guardian Weekly on 14/1/2013. It’s about Monbiot’s discoveries with respect to the neoliberal hegemony of the last thirty years. It was sent to me by a friend with the note ‘right up your street’. Monbiot’s words are in italics.

1. “The policies which made the global monarchs so rich are the policies squeezing everyone else. This is not what the theory predicted. Friedrich Hayek, Milton Friedman and their disciples – in a thousand business schools, the IMF, the World Bank, the OECD and just about every modern government – have argued that the less governments tax the rich, defend workers and redistribute wealth, the more prosperous everyone will be. Any attempt to reduce inequality would damage the efficiency of the market, impeding the rising tide that lifts all boats. The apostles have conducted a 30-year global experiment and the results are now in. Total failure.”

I would call this Monbiot’s idealistic view of the 30-year neoliberal ‘experiment’. I am here using the word ‘idealistic’ in the philosophical sense of ‘idealism’ as a notion that ideas and the mind, not material interests, determine most reality. Here is how I would interpret the above paragraph:

A quasi-religious/academic sect (Hayek, Friedman and ‘disciples’) and key organs of multinational Capital itself (IMF, WB, OECD, business schools) get together and decide to conduct a vast social ‘experiment’ in the west because they sincerely want to make not just themselves (the ‘monarchs’) but EVERYONE ‘prosperous’ by implementing their neoliberal economic theories. (How touchingly altruistic of them).

As is common with most social democratic progressives I know, the complex world system of capitalism and empire is here reduced to the workings and intentions of various ‘significant’ personalities and/or conspiracies. There is never any concept of a social system and its complex workings. I can only briefly sketch my materialist counter-view of the STRUCTURAL turn to neoliberalism in the late 70s:

At the end of the post-war growth/capital accumulation cycle (c. 1947-1973) and an increase in social discontent (60-70s), Capital begins to roll back the post-war Keynesian ‘social contract’ (welfare state) and relative working class strength (unions, high wages, wage/profits ratio) in order to regain greater control and power over the political executive, ex- and intensify capital expansion and further enrich themselves (neoliberal ‘structural reform’ of deregulation, privatisation, globalisation etc).

All this was already spelled out by many leftists during the turn to neoliberalism with Thatcher and Reagan in the late 70s. Better late than never, George.

2. “But if growth is your aim – an aim to which every government claims to subscribe – you couldn’t make a bigger mess of it than by releasing the super-rich from the constraints of democracy.”

My interpretation: Governments are only interested in one thing: economic growth. So now, as neoliberal ‘experimenters’, they have simply goofed because growth is less than it was in the 50-60s.

Counter-view: governments (aka the intermeshed executive and entertainment arm of Capital) are not only interested in economic growth but in keeping Capital happy; they don’t ‘aim for’ or create capital growth themselves, they can only facilitate it and pick up the social and environmental costs at taxpayers’ expense.

For George, there are no capitalists (usually a taboo word for liberals and social democrats) and CEOs running corporations but only ‘the super-rich’ (presumably including Madonna, Brad Pitt and Roger Federer). These have been released from ‘the constraints of democracy’, presumably meaning from the previous Keynesian state’s limitations imposed on Capital as part of the post-war social contract. As for ‘democracy’, we do understand this word is journalistic shorthand, but in actual fact ‘democratic’ governments are (partly) elected oligarchies enmeshed with Capital and ‘democracy’ has yet to be implemented anywhere.

I have tried out to spell out the reasons for the high growth of the 50-70s below, and it certainly wasn’t because the ‘super-rich’ were ‘constrained’ by ‘democracy.’

3. “The remarkable growth in the rich nations during the 1950s, 60s and 70s was made possible by the destruction of the wealth and power of the elite, as a result of the Depression and the second world war. Their embarrassment gave the other 99% an unprecedented chance to demand redistribution, state spending and social security, all of which stimulated demand.”

This paragraph seems like a truly original, fascinating reading of post-war economic history. Unfortunately, it has only a rather tenuous basis in fact. It immediately begs a whole gamut of questions. Why and how should economic growth be linked to the destruction of elite wealth and power? Where was elite wealth or power substantially ‘destroyed’ by the Depression and war? This wasn’t even the case in totally destroyed Germany and Japan (where the economic and other elites managed the post-totalitarian transition very well indeed), much less in the US, UK or Australia.

(This is not to negate the possibility of some possible destruction and shifts in capital ownership as happens on an ongoing basis within the normal cut-throat workings of capitalist competition and concentration, or shifts in capital-government power relations that are dependent on class struggles).

Finally, why should any posited wealth/power destruction, if it did happen, even cause such a degree of ‘embarrassment’ that it led to an ‘opportunity’ for ‘the 99%’ (whoever that is) to demand social change? Is George seriously suggesting the origins of the welfare state lay in a postulated FEELING, in some sort of SHAME on the part of ruling elites? Surely this is really taking a personalising, idealistic view of social change to new heights of absurdity.

My own historical-materialist counter-view: weakened by the collapse of capitalist legitimacy in the Depression, the strong eruption of working class struggles and the competitive existence of Stalinist state socialism, the social compromise of the New Deal and the following Keynesian warfare-welfare state ‒ plus the third industrial revolution and attendant mass employment (cars, TV, consumer goods, agro-chemicals, cyber-automation, atomic weapons and power) ‒, form the social basis for the strong post-war cycle of capital accumulation and the relative strength of the working class.

4. “The neoliberals also insisted that unrestrained inequality in incomes and flexible wages would reduce unemployment. But throughout the rich world both inequality and unemployment have soared. The recent jump in unemployment in most developed countries – worse than in any previous recession of the past three decades – was preceded by the lowest level of wages as a share of GDP since the second world war. Bang goes the theory. It failed for the same obvious reason: low wages suppress demand, which suppresses employment.”

Spoken like a true Keynesian, George: increase demand by giving workers higher wages and everything will be hunky dory. The simplistic left-wing social democrat’s paradise: let’s go back to the ‘idyllic’ 50 and 60s. Problem is, the capitalists are right in this respect, it won’t work, the globalised world is a different one. Inflation, higher wage costs means non-competitiveness and thus more capital flight. The rich world’s working and middle classes are shrinking BECAUSE the emerging world’s working and middle classes are growing albeit within the greatly increasing inequalities of industrialising ‘primary capital accumulation’ (Marx) in those countries. That’s the way globalised capitalism works, George, like it or lump it (and work for a post-capitalist system).

5. “As I say, I have no dog in this race, except a belief that no one, in this sea of riches, should have to be poor. But staring dumbfounded at the lessons unlearned in Britain, Europe and the United States, it strikes me that the entire structure of neoliberal thought is a fraud. The demands of the ultra-rich have been dressed up as sophisticated economic theory and applied regardless of the outcome. The complete failure of this world-scale experiment is no impediment to its repetition. This has nothing to do with economics. It has everything to do with power.”

Finally, here in this last paragraph, and despite all the previous idealistic confusions and obfuscations and self-imposed taboos, George is almost coming to the party. ‘Dumbfounded’, he realises that all these neoliberal theories were not altruistic endeavours (the ‘rising tide that lifts all boats’) after all but rationalised expressions of crass class interests (increased profits, wealth, power and control, global expansion). That is, they were ideologies in the classical Marxian sense of ‘false, but socially necessary, (class) consciousness.’ From this critical perspective, the purported altruism of neoliberalism is certainly ‘a fraud’, but the rest of its program isn’t. It’s open class warfare from above, often perpetrated by our dear ‘progressives’/Social Democrats themselves (Hawke-Keating, Blair, Clinton-Gore, Schroeder-Fischer etc.). And yes, it certainly ‘has everything to do with power’, the power of the ruling class (not just ‘the ultra-rich’). And it is this power, unless massively challenged, that is leading us all over the cliff of ecocide.

Encore un pas, just another step, George, and beware, it’s welcome to the warm, albeit fractious, bosom of the radical left where you do indeed have ‘a dog in the race’, one that incorporates and then goes considerably beyond the belief that ‘no one, in this sea of riches, should have to be poor.’

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~ by Peter Lach-Newinsky on January 18, 2013.

8 Responses to “Responding to George Monbiot”

  1. Nice, succinct, true and helpful Peter. Monbiot did a similar thing back in July when he wrote a piece called After Rio, We Know. Governments Have Given Up On The Planet. He only found out in July 2012!! Oh well, slow and steady (oh, and ‘careful’) wins the race. Or perhaps it keeps one in a job!

    • Exactly. Monbiot is about as ‘radical’ as the liberal corporate media gets. But all my friends are basically social democrats, so that’s where I like to get the odd knife in, just to keep sane in a crazy sort of way, I guess. What can you do.

  2. In order to critique the supposed 30 year run of Hayakian Free Market theory, must understood what the criteria for a free market actually means.

    The past 30 years have NOT met these criteria.

    In a free market the government does not step into bail out failed banks and or enterprises that have gambled money or invested foolishly.

    In a free market central banks do not control the single most important price in the economy, the future price of money or the INTEREST RATE.

    In a free market, the government is meant to be there for only a few purposes:

    Protection of contracts
    Enforcement of the Law and protection of Individual’s rights
    Armed Forces for defense only
    Supply of goods and services that are not priced well by a free market (some social safety nets, health insurance, infrastructure and pollution of the commons)

    That’s all.

    But instead the constant meddling into the economy and supplication to corporate welfare interests have completely skewed the free market into a monstrosity of government-corporate interests.

    Central Banks tinkering with interest rates that could have been set by banks and individuals choosing from a market of banks created every single bubble we have had in the past 30 years. And each time the bubbles burst the Keynsian prescription of lower interest rates (cheaper money and hazardous investments) and more deficit spending (warping of market choices into government inefficient projects as well as corruption) as a weight on future generations is simply repeated.

    Now we are at the end of the line, in debt to the hilt with only corrupt politicians and their corrupt wealthy “elite” benefiting.

    • Thanks for the comment, Aziz. Let’s agree to agree on your last line perhaps, even though I also agree with your argument that neoliberal ‘free markets’ are of course no such thing. You continue to believe in them and in laissez-faire although we no longer live in Adam Smith’s semi-rural England but in a world economy dominated by about 500 transnationals. I don’t. The INHERENT tendency for ‘free market competition’ to destroy itself (e.g. via capital concentration and centralisation) was already central to Marx’s critique of political economy in Das Kapital. Hope you’ve read it?

  3. Hi Peter. Thanks for the reply. I was addressing Hayek’s world not Smiths a la Road to Serfdom and/or The Constitution of Liberty and how they relate to Free market or “Neo-Liberal” theories. I have read Kapital as well as a few other books of Marx, having once found his work very compelling. I still think there is much there however, mostly through omission, i have come to the conclusion that it doesn’t offer a Utopian pathway, rather quite the opposite.

    In a choice between the flawed path of progress offered by a strict sense of individual Liberty and the path desired by collectivist mind sets, I prefer the former.

    It is true that there are large multi-national interests in the world and it feels like they dominate the agenda, but they do so by infecting the political classes. I am on your side in regards to critique of this enemy even if I am not in agreement as to either the cause of our present maladies, nor to the direction of policies.

    The revolutionary moment should have been in 2008 when governments bailed out these institutions. It may have been painful for several tens of thousands of bankers but for average account holders they could have gone to cooperative banks and building societies that did not participate in the leveraged bets encouraged by artificially low central bank interest rates.

    In any case I like your writing style and look forward to looking through your work some more and perhaps debating with you on our disagreements.

    • Thanks Aziz (?), much appreciated. Look forward to more of your comments. Also assume you’ve read Naomi Klein’s great analysis of Real Existing Neoliberalism’s global destructions in her The Shock Doctrine? Anyway, appreciate your friendliness, so vive la differance. Just en passant, you probably know that anarchism(s), even collectivist forms of anarchism, have a very ‘strict sense of individual liberty’, which they share with liberalism and which distinguishes them from ‘collectivist mind sets’ as in orthodox Marxism or fascism. Anarchism can sometimes be read as the fierce independence and individualism of liberalism taken to its anti-capitalist, socialist/communist conclusions, a universalist and cooperative invidualism, as it were…

      • Just to add a little to what Peter has said…

        When talking about “individual liberty” I think we should be clear about what we mean. John Stuart Mill has written (in On Liberty) that:

        “The only freedom which deserves the name is that of pursuing our own good, in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it”

        In my opinion, a lot of free market advocates ignore the *critical* caveat to Mill’s statement (“so long as…”) about the effects of our freedoms upon others. Take private property rights. I hear the argument made all the time that the the government should be limited to defending the rights of property and person and enforcing contracts. It is rarely acknowledged that protection of the property rights of the rich could conflict with the rights of the poor to “life, liberty and the pursuit of happiness.” But in the real world, rights can conflict. As Noam Chomsky has put it:

        “Property rights are not like other rights, contrary to what Madison and a lot of modern political theory says. If I have the right to free speech, it doesn’t interfere with your right to free speech. But if I have property, that interferes with your right to have that property, you don’t have it, I have it. So the right to property is very different from the right to freedom of speech. This is often put very misleadingly about rights of property; property has no right. But if we just make sense out of this, maybe there is a right to property, one could debate that, but it’s very different from other rights.”

        I think advocates of so-called free markets (free for whom?) need to be *much* clearer on how they avoid the rights of the poor being trampled upon by the government enforced freedom of the rich (a freedom undeserving of the name, in Mill’s sense). I remain unconvinced.

      • Also @Aziz, just as an aside, central banks actually exert a pathetically limited influence over the size of the money supply – they don’t really cause inflation or bubbles. The money multiplier model that is taught in undergraduate economics textbooks (which says that central bank ‘base money’ controls the much greater amount of money private banks can create) is simply not true. Also, there is actually no evidence to suggest that central bank interest rate adjustment lead to increased money creation by private banks, and some evidence to suggest that the causation is the opposite (i.e. that interest rate adjustments *follow* the creation of new private bank money – they do not lead it). In practice, the only factor really limiting the creation of new digital money by (private) banks is the degree of confidence these banks have that their “loans” will result in profits. Give these videos a go:

        http://www.positivemoney.org/how-banks-create-money/banking-101-video-course/

        I’d also really recommend you get hold of a copy of Positive Money’s new book “Modernising Money” once it comes out. I’ve been going through a proof copy and it is excellent – clear, comprehensive and very thoroughly researched.

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