The nature of crises is a multi-faceted one; they seem, at first, to come from nowhere yet they are the unfolding of underlying laws of motion to their ultimate and destructive conclusion; they are both a moment of great catastrophe but also one of great opportunity; they are, so to speak, the end of one definite epoch and the violent birth of another. It is in the interstice between epochs in which the future is determined.
This current economic and political crisis, like all such crises, has left us all in a state of flux. The ideas that dominated the discourse for the last three decades are now unravelling at a pace, their intellectual credibility rendered threadbare and laughable.
The watchwords of ‘deregulation’, ‘liberalisation’ and ‘financial innovation’ have been transformed from the lynchpins of neoliberal thinking on the economy to mere explanations for the systemic failures of the last 2 years. I took great enjoyment in watching Alan Greenspan come before a committee of the House of Representatives and admit that he had found a “flaw in the model that [he] perceived as the critical functioning structure that defines how the world works, so to speak.” This, of course, translates as, “my ideological perception of reality clashed horribly with actual reality”, or, more simply, “I was totally wrong.”
However, being proved wrong is not, in itself, enough. To quote another leading figure in the history of neoliberalism, Milton Friedman: “Only a crisis-actual or perceived-produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.” It is not good enough for the prevailing intellectual currents to be discredited; they need to be actively replaced.
The exemplar par excellence of this approach was in Britain during the 1970s. The post-war era produced the longest interrupted period of economic growth in history at a time when varying forms of social democracy held sway and a crude Keynesian interventionism maintained capitalist stability after the decades of recession and stagnation. By the 1970s, however, his ideas were, too, becoming discredited, and were finally killed off by the OPEC oil crisis and the ominous emergence of stagflation. Capitalism, it seems, could not handle this growth of affluence, wages needed to be driven down; industries needed to put aside their social responsibilities in the pursuit of pure profit; the trades unions needed to be crushed to put the workers back in their passive place in the capitalist social relations of production.
The intellectual justification for this reorientation of capitalism away from the so-called ‘post-war consensus’ towards what we now recognise as neoliberalism was found in the works of the extreme libertarian theorists, Friedrich von Hayek and Milton Friedman, and readily accepted by sections of the ruling class. Thatcher’s acolyte, Keith Joseph, was a willing adherent and Thatcher herself was very much influenced by Hayek to the point of slamming a copy of ‘The Road to Serfdom’ on her desk, proclaiming “This is what we believe.” Despite these ideas being proved totally wrong in practice already after their grim trial run in Pinochet’s Chile, they were propagated vigorously in the intellectual scene by the Institute for Economic Affairs and given an explicitly political and policy-driven agenda within the Tory Party by Joseph and Thatcher’s Centre for Policy Studies. By the fall of Jim Callaghan’s Labour government in 1979, their time had come and over the subsequent 11 years neoliberal ideas were applied viciously with disastrous effects on British industry, its levels of employment and its society as a whole. David Cameron speaks now of ‘Broken Britain’ without admitting the truth that it was his party that was originally responsible.
What confuses the current narrative today is that in major economies like Britain and Germany, it was the traditionally left-of-centre social democratic parties that adopted neoliberal ideas with all the fervour of recent converts in the 1990s. What should traditionally be an opportunity for the centre-left is for them too a severe crisis. New Labour swallowed neoliberalism whole and attempted to temper it mildly with timid social policies, leaving intact the general contours of the free market system. The result has been the alienation of large swathes of their traditional vote and a crisis of legitimacy within the political class a whole; the expenses scandal was not a cause but a symptom of a political crisis which stems from the clustering of the three largest parties around a space on the centre-right of the political spectrum. It is the Tories who are benefiting from this the most but even their poll ratings are not what Labour’s were in 1997; this is not a vote of confidence in the Tories but, rather, a vote of no confidence in Labour that is manifesting itself in support for the party most likely to end Gordon Brown’s spell as Prime Minister.
On the other hand, in Iceland the Left and the Greens were the beneficiaries of the crisis and in the Republic of Ireland, the Labour Party has overtaken Fianna Fail in recent polls. What this seeming inconsistency means is that the narrowing of the political and ideological chasm between the parties in Europe has reduced the party-political fallout of the crisis to a question of the pure chance; in other words, it is a question of which party was in government before the crisis hit. This obscures questions of political and ideological conceptions of the causes of the crisis. In short, it renders traditional and formalistic politics ineffective at articulating the anger of the voters and implementing the necessary steps to take in order to push real political change.
In ‘academia’ and much of the popular literature on the recent crisis there has been a general shift leftwards towards the sort of vague Keynesian interventionism that eventually won sway after the Great Depression. Larry Elliott and Dan Atkinson’s book on finance, ‘The Gods that Failed’ speaks of a nebulous ‘New Populism’ that sounds like a rehashed social democracy. Recently in the US, Paul Krugman has been in demand to offer his two cents, the man who describes himself as “a free-market Keynesian” who likes “free markets, but [with] some government supervision to correct market failures and ensure stability.” The battle of ideas revealed itself in the 2008 US Presidential Election when the more interventionist Democrats overcame the free-market Republicans to put Barack Obama in the White House. The amount of campaign money raised from business interests by the Democrats is an indication of a tendency for the ruling class to favour intervention when it suits them (ie. when they need to bail out the banks with the taxpayers’ money to prevent a total systemic collapse) and to oppose it when it is injurious to their interests (in the case of business regulation and taxes on capital). It is this sort of realignment of forces that is typical in a period of crisis. I am reminded of Gramsci’s comments that
“A crisis occurs, sometimes lasting for decades. This exceptional duration means that incurable structural contradictions have revealed themselves (reached maturity) and that, despite this, the political forces which are struggling to conserve and defend the existing structure itself are making every effort to cure them, within certain limits, and to overcome them.”
Thus, the de facto nationalisation of banks by the outgoing Bush government and the conversion of Gordon Brown to bonus-bashing and interventionist posturing. Rehashed Keynesianism is nothing but the ruling class attempting to preserve the status quo by more radical and desperate means.
Unfortunately for the radical Left their organisational capacity is not currently sufficient to wage a war on the hegemony of the neoliberal-Keynesian false dichotomy, and articulate a vision which supersedes the reactionary paradigm of the status quo. There have been some scattered victories in which the Left played a real part, such as the Visteon occupations and the refinery strikes, but nothing truly spectacular. Nothing worthy of the magnitude of this crisis. The European election, with the notable exception of Joe Higgins, was a disappointment for the Left and saw the election of two odious fascists in England. One potential cause for optimism is the outworking of the crisis within French and German social democracy, with the Nouveau Parti Anticapitaliste and Die Linke proving able to consolidate the radical left and, in the latter case, tempt some left social democrats from the Social Democratic Party.
The most convincing analysis of this crisis, to me, is David Harvey’s insistence on the crises of 1998, 2001 and the present crisis being based on the speculation of asset-values. This reliance on assets and asset-backed securities stems from having increasingly post-industrial economies in which the rate of profit is highest not in industry but in financial services. The implications of this are that the current crisis is the largest in a run of crises stemming a fundamental imbalance in the nature of advanced capitalism. If the Left is not to miss the most serious crisis of capitalism since 1929 it needs to unite around a common platform and articulate a consistent vision of where we are now, where we want to go and how we are going to get there.
The alternative is to relapse into another cycle of boom and bust, misery and impoverishment, imperialism and economic catastrophe. We must make Socialism politically possible for the time in which it becomes politically necessary, for the sake of us all and the planet we live in. Keynesian populism is not a lasting solution to this crisis; we must provide a real alternative.
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