Saturday, September 05, 2009


Pretty much:

Consider this. There is a staggering amount of spare capacity in the economy. Existing productive resources lie unused, while social needs are unmet, because there is no profitable means by which such resources might be used. Companies are not investing, and are not hiring. The banks are still not lending, preferring to hoard funds against future shocks, because their managers do not believe there are sufficient profitable investment opportunities in the economy. This situation is actually absurd. We have, collectively, all the means we require to house, feed, educate and employ the population, but we may not dispose of those means because there is no profit in doing so.

The approach of governments in response to this has first been to defend the financial sector at all costs - or rather at the cost of a trillion dollars in bailouts and stimulus, and $5 trillion in quantitative easing programmes. This has been branded 'socialism', but it is a staple of neoliberal ideology that the banking system is so central to the system's ability to reproduce itself that the state must spare no means in protecting it. It is no surprise either - the financial sector has been the single biggest source of corporate profits in both the US and UK economies in recent years.


The left-Keynesian solution to such absurdities is to socialise that spare capacity, use deficit-financing to fund jobs, boost incomes and stimulate demand, and boost the bargaining power of labour so that consumption is supported by reasonable wages rather than debt - all of which would be a good start. However, to the extent that governments have engaged in job creation, income-boosting and stimulus, they have been timid and reverential as regards existing property arrangements.


This refusal to socialise assets and make meaningful efforts to redistribute wealth is one reason why employment continues to fall, and why demand remains weak - and this is in turn a large part of the reason for Nouriel Roubini's cheerlessness as regards the 'recovery'. The effects of the stimulus will exhaust themselves by next year at this rate, but private sector demand is unlikely to have recovered by that point.


So, this is the dilemma that capital presents us with. There is spare capacity, there is abundant labour, and there is money ready to enter into circulation as capital. And there are real, pressing social needs that these resources could theoretically be put to work to meet. But there are few profitable investment opportunities in any of that.


The enclosure of certain public assets is obviously on the agenda, and a transfer of public wealth is already occurring de facto, as indicated above. Social Security is certainly a prized item for finance capital, and Obama might have more success in delivering that to private capital than in delivering meaningful healthcare reform. However, the real opportunities for such divestment may lie overseas. The lack of domestic investment opportunity is fuels authoritarian imperialism and is arguably what - more than anything else - drove the adventurism and extremism of the Bush era. If US capitalism cannot be successfully reproduced and expanded on the basis of current relations, then a new wave of violent expansionism - perhaps smarter under Obama, but still very brutal - is a realistic scenario


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