The spectre of Marx haunts the debate

Contributors to the debate about capitalism increasingly find themselves obliged to consult Marx, the primary authority on the system, and to try and refute his arguments for its replacement.

The deepening global economic crisis is driving the discussion. Every attempt to resolve it just makes matters worse. Every new set of figures negates the idea that the problems are temporary.

As the Telegraph’s Jeremy Warner has it today: ‘Normally, the economy will bounce back quite quickly from a cyclical contraction, fast rendering the anti-capitalist backlash redundant. But this time, there is no such recovery.”

He points out that more than three years since the recession started, Britain’s economic output is still below the level it reached in 2007. Prospects for growth do not appear on the radar.

Meanwhile, a redistribution of wealth is going on apace – from the poor to the rich. “There is no hardship for those seen to have caused the slump. Bankers and company bosses are paying themselves even more than they were during the boom; the wealth divide continues to widen.”

Warner, assistant editor and leading business commentator, uses his article to bash Ed Miliband (bit of an easy target) for failing to come to terms with changed conditions and declining to accept New Labour’s role in the build-up of debt that has overwhelmed the economy.

But he has to admit: “Rightly or wrongly, capitalism is seen to have failed. To counter rising forms of populism, it must find ways of recreating and reinvigorating itself.” Unfortunately for Warner, the patient’s vital life signs are heading in the opposite direction.

Enter Emanuel Derman, a former managing director at Goldman Sachs, and one of the leading proponents of the financial engineering that propelled the credit boom to its catastrophic collapse. He opens his new book (Models Behaving Badly: Why Confusing illusion with reality can lead to disaster, on Wall Street and in Life) with a famous quote from Marx and Engels his co-thinker and factory owner: “All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face, with sober senses, his real conditions of life, and his relations with his kind.”

Ultimately, however, like many other commentators, he thinks there is life in the old dog of capitalism yet if only the financial system abandoned its reliance on mathematical models. Ah, if the answer were so simple!

To his credit, Derman acknowledges the relevance of Marx while author and academic John Kay, visiting professor at the London School of Economics, tells the readers of the Financial Times that capitalism actually no longer exists (which is news to those under its heel). “The political and economic environment in which Marx wrote was a brief interlude in economic history.”

Kay argues that the nature of share ownership is so diffuse compared with the individual capitalist of 19th century England that “people do not know who owns their work tools because the answer does not matter” while “control over the means of production and exchange matters a great deal to the organisation of business and the power structures of society”. Kay suggests that we abandon the term capitalism and refer to the “market economy” instead.

But far from being a refutation, Kay’s analysis reinforces the method that Marx and Engels developed and used in their work, which revealed not just the inner, contradictory logic that drives the system to its alternating periods of credit-enhanced growth and catastrophic collapse, but the necessity of its continually changing its form.

Most importantly of all, Marx and Engels’ dialectical method showed the temporary, historical nature of the system and how it created the conditions for the socialisation of production. With due respect to Warner, capitalism has not just “seen to have failed”. It has failed in practice and it urgently needs replacing.

Gerry Gold
Economics editor

Reclaim democracy now!

Just because global elites are always harping on about “democracy”, claiming it as the ideal political system, doesn’t mean that we abstain from the question. The challenge is to fight for a more advanced democracy than society has achieved so far.

We shouldn’t accept the present democracy as the last word on the subject but see in its historical and social context. While the Russian Marxist and revolutionary Vladimir Lenin considered bourgeois democracy, a “great historical advance in comparison with medievalism”, he qualified this by adding:

But this democracy is always hemmed in by the narrow limits set by capitalist exploitation, and consequently always remains, in effect, a democracy for the minority, only for the propertied classes, only for the rich… in the ordinary, peaceful course of events, the majority of the population is debarred from participation in public and political life.

Before him, Fred Engels, who collaborated with Karl Marx to produce ground-breaking analysis, wrote his seminal work on the origins of private property, family and the state. In it, Engels explained that however democratic the modern representative state was, its function was to maintain the rule of one class over another.

And that remains the case today in the democracies like Britain, the United States and France. Since Engels and Lenin, however, the fusion of capital with politics, particularly in the last 30 years, has further emasculated representative democracy. The Real Democracy Now movement that has flowered in Spain immediately and correctly identified the merging of the political system with corporate and financial power as the source of the problem.

So what should we struggle for? What about replacing democracy for the rich with a democracy for the dispossessed, the poor and the disenfranchised? What about extending democracy in new ways, by freeing people from the rule of the corporations and the banks, not to say the reactionary media? What about bringing democracy to the workplace, the school and the university through co-ownership and self-management?

Achieving these objectives will without doubt require the dismantling of the present state which in innumerable ways maintains and sustains the status quo. The is because, as others have shown, the present limited democracy is the political form that capitalism has assumed for itself.

It is both democratic and undemocratic at the same time, allowing certain freedoms while denying access to real power itself. You cannot imagine an advance in the nature and content of democracy within the present state because the two stand in contradiction to each other.

Opportunities for resolving this apparent puzzle are emerging through the movement of society itself in countries like Tunisia, Egypt and now Spain. We have to go beyond demands for participation and transparency. Important as they are, they sidestep the question of the nature of the state itself.

Arguing for and building people’s assemblies is a way forward in Britain and internationally. They can build on the growing resistance to the ConDem government on a range of issues and practice democracy by seeking to represent the widest range of social and political interests. They will challenge sectarian behaviour and undemocratic practices and discourage closed committees and pre-planning fixed agendas.

Assemblies established on a permanent basis can discuss the nature of the present democracy and what could be better; the nature of power – who’s got it and how do ordinary people win it. They can encourage sovereign decisions and direct action. They are both a means to bring people together across sectoral lines as well as the potential means by which we can democratically transform society and replace the state with a network of assemblies. Let’s reclaim democracy!

Paul Feldman

Communications editor

Out of control

Some people you meet have a touching faith in global capitalism, although they would never put it like that. They believe that the authorities are more or less always in control of affairs and they will always be able to “manage the crisis” to avoid disaster. The assumptions behind this are that a) capitalism is a rational system that follows a predictable logic b) they have all the answers up their sleeves. Of course, if you add a) and b) together, there is no chance of challenging, let alone defeating, the economic system.

This viewpoint is found not just in universities but among militant trade unionists too. They prefer not to talk about the current economic crisis because they believe it is a passing phase, which the authorities are getting a grip on. So in the end, both the academic and the trade unionist can carry on with their present activities. One can continue to write impenetrable texts which neverthless advance careers, while the other can still focus on industrial issues or speak demogogically at meetings, ignoring the economic crisis altogether but still sounding miitant.

In reality, the financial authorities only wish they had as much control and power as they are ascribed! They know better than their opponents that capitalism is far from a rational, organised system. Production is carried out by private corporations operating purely to maximise profit. Commodities are turned out without firms knowing for certain whether goods will actually be sold because this is subject to the whims of the market. Reliance on credit, especially in the sphere of consumption, adds to this uncertainty and leads to overproduction in a world of scarcity. Subjective factors like confidence and trust are essential aspects of capitalist economic activity which no one “manages”.

Taken together, these diverse aspects of the capitalist system come together to constitute an objective process, a level of reality that has always been beyond conscious control and is more so in the present period of globalised economy where borders and national government policies are disgregarded by powerful economic and financial forces. None of ths is hot news. In 1848, Marx and Engels in the Communist Manifesto compared modern bourgeois society to “the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells”. They wrote of crises of productive forces that become too powerful for private ownership to handle and as a result “bring disorder into the whole of bourgeois society” leading to “enforced destruction of a mass of productive forces”. Sounds familiar?

But let’s not take Marx and Engels as the sole authority. Fast forwarding to April 2008, those in the know say something quite similar. Take George Magnus, senior economics advisor to investment bank UBS. He has warned that “there is a quite serious risk that the de-leveraging downturn could run amok: credit contraction causes economic contraction, which causes further write-downs and capital destruction, which leads to more credit contraction and so on”.

Magnus has also said that what the central banks are doing is just “firefighting” and that if the banks don't want to lend, no amount of extra liquidity is ultimately going to help. He should know about the crisis. UBS this week announced a $19 billion writedown in assets, to go with $18 billion losses revealed earlier this year. UBS is now top of the global mortgage writedown chart.

Yesterday, First Direct becamethe first UK major mortgage lender to close its doors to new customers. The bank - one of the country's top 20 home loan providers - gave only five hours' notice. The move came as figures showed that more than 90 mortgage products a day have been scrapped over the past week as lenders put the shutters down. Oh yes, they are really “managing the crisis”!

Paul Feldman
AWTW communications editor