We are all socialists now

A couple of days ago, I thought my call for full-scale nationalisation of the banking sector would remain beyond the pale of political acceptability for at least a week. But in today’s paper I read the following, very sensible assessment

Inevitably, the US, Britain and Europe are going to end up with nationalised banking systems in one form or another, and with governments guaranteeing not only their deposits but probably all their liabilities. The nationalisation will be a temporary emergency measure. But for some time at least the systemically important banks effectively are going to be public utilities and must be regulated accordingly.

This taxpayer rescue of banking systems opens up a new and potentially very important avenue for unfreezing bank lending and restoring the flow of credit. If governments effectively control the banks, what is to stop them from demanding that they start lending again?

And what wild-eyed socialist wrote this? Alan Wood in the Australian.

Meanwhile, calls for a guarantee of bank deposits are gaining force.

Of course, none of this constitutes a shift to socialism in any meaningful sense of the term. But it does mean, for quite some time to come, the end of neoliberalism (or free-market liberalism or whatever you want to call the set of ideas centred on the proposition that markets can do a better job than governments in managing risks of all kinds). The question of what will replace neoliberalism has come up so suddenly, and in such chaotic circumstances, that no-one has a clear answer. I’m confident that the response must be broadly social democratic, but there are a lot of details that need to be filled in.

Note The spam filter has been rejecting comments because of the ci*lis problem in the post title. I’ve fixed that, but commenters will probably need to asterisk the S word (Soci*lism) to avoid the filter.

47 thoughts on “We are all socialists now

  1. As the whole world’s economy is being sucked down a bottomless black hole, I really get off watching the world’s leaders, economic pundits and spineless sycophants squirming as they put forward all sorts of inane, impotent, idiotic theories designed to quell public outrage over the pillaging of tax payers money rewarding corporate crooks for a job well done.

    What more could a Socialist ask for, than governments all around the world saying “screw you workers; we are going to rob you blind to prop up business.” Have you any idea how much work that saves us?

    Economic impasse, monopolies and cartels, the rearming of the nation states, an army of unemployed cheap labour, the impotency of bourgeois governments

    Marx was right, and that’s that. What more proof do you need?

    The Crisis in Democratic Morality.

    In order to guarantee the triumph of their interests in big questions, the ruling classes are constrained to make concessions on secondary questions, naturally only so long as these concessions are reconciled in the bookkeeping. During the epoch of capitalistic upsurge especially in the last few decades before the World War these concessions, at least in relation to the top layers of the proletariat, were of a completely genuine nature. Industry at that time expanded almost uninterruptedly. The prosperity of the civilized nations, partially, too, that of the toiling masses increased. Democracy appeared solid. Workers’ organizations grew. At the same time reformist tendencies deepened. The relations between the classes softened, at least outwardly. Thus certain elementary moral precepts in social relations were established along with the norms of democracy and the habits of class collaboration. The impression was created of an ever more free, more just, and more humane society. The rising line of progress seemed infinite to “common sense.’

    Instead, however, war broke out with a train of convulsions, crises, catastrophes, epidemics, and bestiality. The economic life of mankind landed in an impasse. The class antagonisms became sharp and naked. The safety valves of democracy began to explode one after the other. The elementary moral precepts seemed even more fragile than the democratic institutions and reformist illusions. Mendacity, slander, bribery, venality, coercion, murder grew to unprecedented dimensions. To a stunned simpleton all these vexations seem a temporary result of war. Actually they are manifestations of imperialist decline. The decay of capitalism denotes the decay of contemporary society with its right and its morals.

    The “synthesis� of imperialist turpitude is fascism directly begotten of the bankruptcy of bourgeois democracy before the problems of the imperialist epoch. Remnants of democracy continue still to exist only in the rich capitalist aristocracies: for each “democrat� in England, France, Holland, Belgium there is a certain number of colonial slaves; “60 Families� dominate the democracy of the United States, and so forth. Moreover, shoots of fascism grow rapidly in all democracies. Stalinism in its turn is the product of imperialist pressure upon a backward and isolated workers� state, a symmetrical complement in its own genre to fascism.

    While idealistic Philistines – anarchists of course occupy first place tirelessly unmask Marxist “amoralism� in their press, the American trusts, according to John L. Lewis (CIO) are spending not less than $80,000,000 a year on the practical struggle against revolutionary “demoralization�, that is, espionage, bribery of workers, frame-ups, and dark-alley murders. The categorical imperative sometimes chooses circuitous ways for its triumph!

    Let us note in justice that the most sincere and at the same time the most limited petty bourgeois moralists still live even today in the idealized memories of yesterday and hope for its return. They do not understand that morality is a function of the class struggle; that democratic morality corresponds to the epoch of liberal and progressive capitalism; that the sharpening of the class struggle in passing through its latest phase definitively and irrevocably destroyed this morality; that in its place came the morality of fascism on one side, on the other the morality of proletarian revolution.

    Leon Trotsky, “Their Morals and Ours” 1938

  2. Nationalising an insolvent bank using preferential equity and then selling them off once they are restructured (with certain of the banks debts perhaps cancelled) seems little different in pure technical terms to putting the business into administration (as opposed to liquidation). Of course nationalisation makes the government look more heroic.

    As to the notion that there are closet social*sts all over the place this is something I’ve been saying for years. At last JQ has acknowledged that there are reds under all the beds. 😉

  3. JQ in comment 16 said:

    Tom, if you want to me rephrase the argument in a more nuanced way, let me say “the idea that we should be relying more on markets and less on governments to manage risks of various kinds is unlikely to survive this crisis”. I think it’s fair to say that this idea has been dominant in public policy circles for some decades now…

    That’s an improved formulation, John, but even though its a deal weaker than your original, I still don’t think its very meaningful. For instance, the policy body I work for has examined numerous markets over the years in which it has advocated more regulation and government involvement to deal with risks than previously existed, as well as numerous markets in which it has recommended less regulation. It approaches such matters on a case-by-case basis, and its judgments involve the fine weighing of many factors. It may well have recommended deregulation in more instances than it has advocated additional regulation, but that outcome can not reasonably be said to constitute or reflect an “idea that we should be relying more on markets and less on governments to manage risks of various kinds”.

    Unfortunately, important distinctions and nuances of that nature get lost in the Puseyesque-style treatment of the issues here. You point out that it is hard to get nuance into a 200 word blog. I accept that, but others (Nick Gruen at Troppo, for instance) have adapted to the format by being less far-reaching and/or definitive in their statements, while still remaining interesting and challenging.

  4. This is not the seventies, we live in a globalised world, we cannot drop out of competing with the rising nations of Asia, statism and collectivism does not answer the question.

  5. So for the sake of TonyG, it is probably best not to insert explanatory notes from one context into another.

    Anyway I assume the concept of ‘free market’ is well understood and probably does not need restatement.

    I think TonyG’s point is that a regulated free market would not produce crisis.

    My point is that a capitalist regulated free market would still end in crisis.

    The problem is the long-run build up in per-capita debt and the false impact this has on market prices (through artificial demand) compared to real value.

    This is a pure capitalist phenonema, independent of the type of market.

    Whether regulators were asleep at the wheel is beside the point – they are in the wrong vehicle.

  6. Chris Warren is correct. This is an organic contradiction of capitalism that cannot be avoided.

    The type of market in place at any given time is a response to the prevailing economic conditions, not vice-a-versa.

    Milton Freidaman was considered a crackpot out on the fringes during the seventies while he is now considered an economic luminary, as the prevailing economic conditions have changed demanding deregulation to allow the further expansion of capital that was already heading into an impasse and the winding back of hard fought for concessions won by the working-class after WWII.

    The argument of Big Government, small government for example has no material relevance other than an expression of the needs of the ruling elites at particular times during the cycle of capitalism.

    Bourgeois politics its nothing more than the reactionary rule of the masses by a united front of government and big business. Policies are reactionary short term drivel.

  7. John, whilst the inept financial institutions need State governments to save their hides today banks were long ago acutely aware of the problems associated with constrained liquidity and failed to correct the problem. If anything the inept financial institutions have only themselves to blame for the current mess.

  8. How can you have capitalism that generates 12.5% budget deficits?

    Latest Bloomberg report…………

    *******************************

    The 2009 budget deficit could be close to $2 trillion, or 12.5 percent of gross domestic product, more than twice the record of 6 percent set in 1983, David Greenlaw, Morgan Stanley’s chief economist, told Bloomberg this week. The deficit accounted for 2.2 percent at the end of the second quarter.

    **********************************

  9. How can you have a capitalist economic theory that requires 68% of gdp in debt?

    Bloomberg continued…….The last paragraph is illuminating.

    *********************************

    Debt Limit

    Gross U.S. debt, which includes debt held by the public and by government agencies, this year reached about $9.6 trillion, or about 68 percent of gross domestic product. The rescue legislation increased the government’s debt limit to more than $11.3 trillion from $10.6 trillion.

    On top of all that, budget watchdogs say the sheer size of the interventions is making Washington more profligate than usual. To attract votes in Congress, leaders added several costly items to the $700 billion rescue, including extensions of some tax credits and tax breaks for makers of wooden arrows and stock- car racetrack owners.

    Under normal circumstances, there would have been more resistance to such expenses, said Robert Bixby, executive director of the Concord Coalition, a non-partisan budget watchdog.

    The rescue legislation “creates a mask for all sorts of fiscal irresponsibility,” said Bixby. “It covers up a multitude of sins.”

    ————————————————-

    To contact the reporters on this story: Matthew Benjamin at mbenjamin2@bloomberg.net
    Last Updated: October 10, 2008 07:55 EDT

  10. Total US debt, according to the Fed Bureau of statisics is $53 trillion (government, business and private)For the year ending 2007/2008, total debt increased by 5.5 times that of GDP.

    The US requires between 3 and 4 billion dollars a day of direct capital investment just to service this debt.

    Debt has accrue in the US like every other industrialized nation that lost it manufacturing sector to cheap labor destinations in Asia and then imports its commodities and borrows funds to fuel domestic spending creating artificle bubbles, with the unavoidable disasters that follow.

    Consciouss government policy has nothing to do with this meltdown, this is capitalism working according to it organic nature–its never ending search for greater extraction of surplus value from the working class ti maintain profits

  11. Total US debt, according to the Fed Bureau of statistics is $53 trillion (government, business and private) For the year ending 2007/2008, total debt increased by 5.5 times that of GDP.

    The US requires between 3 and 4 billion dollars a day of direct capital investment just to service this debt.

    Debt has accrue in the US like every other industrialized nation that lost it manufacturing sector to cheap labour destinations in Asia and then imports its commodities and borrows funds to fuel domestic spending creating artificial bubbles, with the unavoidable disasters that follow.

    Conscious government policy has nothing to do with this meltdown, this is capitalism working according to it organic nature–it’s never ending search for greater extraction of surplus value from the working class to maintain profits

  12. The accusation that capitalism caused the economic crisis only shows your lack of understanding as to how capitalism works. Using the word organic only confuses the matter more. Call it what you want but its not capitalism. Where you get this bitter dillusion from mystifies me. You could never provide any substantial facts that our current financial crisis is caused by “capitalism” without finding “inteventionism” by some collective agency.

    You might find some real solutions if you stop pointing your finger at unrestrianed capitalism when it has never really existed. Its like a damned witch hunt.

    Call it what you want but don’t dirty the name of something you fail to understand.

    A country democratically may elect socialist government because they want it to work. The big question of course is will it work. A quick observation of many of our current world communities you will notice democratic and undemocratic societies have socialist style interventions riddled the whole way through them like a cancer. Know thats organic.

  13. That’s right 3 depressioms followed by three wars is no evidence of the organic impasse of capitalism.

    If it is not an organic impasse why hasn’t it been solved? There has been plenty of time to do so. The thing is they can’t because even while it is unravelling around their ears all they can do is close their eyes and throw trillions in tax payers money down a black hole and hope for the best.

    Of course the trouble is it’s not pure capitalism, if it was completely deregulated it would be different. The Bankers and the finacial parasites would transform into the benevolent keepers of the peoples of the world.

    As for what you consider to be socialism is not worth commenting on. Read Trotsky instead of listening to your capitalist buddies and you may learn something.

  14. PS A quick observation of anything means you know nothing about it. Is Cuba socialist, is Venezueala socialist, was the USSR and China socialist….well only if you are a capitalist, because none of them meet even the most basic criteria for socialism, one of which is the complete eradication of the nation state. I’m pretty sure that hasn’t happened

  15. Frank

    “That’s right 3 depressioms followed by three wars is no evidence of the organic impasse of capitalism”

    The German government in the first two wars decided rather than trade with europe that they may as well concquer those coutries and own the resources. No capitalism here. Just think if we took down all the borders, got rid of nationalism, and dealt with each other on an individual basis there would be no big governments to take us to war using their propaganda machines.

    Depressions are part of the business cycle. With every big expansionary boom there will be a depression to match. So if their was a little boom then their would be a little depression. My point being excessive intevention tends to swell the expansionary boom. Interventions tend to be driven by social agendas at least on the exterior.

    “Of course the trouble is it’s not pure capitalism, if it was completely deregulated it would be different.”

    Your acknowledgement of the above is provides a more balance view which I appreciate.

    “Read Trotsky instead of listening to your capitalist buddies and you may learn something.”

    I will take that on board. I have no capitalist buddies I am surrounded by social democrats thus my interest in JQ blog.

    The countries you have mentioned have socialist agendas but being extreme in nature I guess classifies them as much further to the left then a social democrat.

    My concern is that the cost of any intervention by the state be costed properly in the same breath as insuring the rights an liberties of every indivudual not be comprimised AT ALL.

    Capitalistic principles are critical (and appreciated by most social democrats) but any state intervention must measure the true cost of its effects on the efficiencies capitalism creates. My interest is how much state intervention can we afford. Looking at our current crises it is hard not to draw the conclusion that many of the social democratic governments across the world haven’t costed (as in $ and moral hazard) their interventions well.

  16. Social Democracy kills me. The father of social democracy was the German Eduard Bernstein, his theories of Social deomcracy were smashed by the advent of WWI (refer Rosa Luxemburg’s Reform or Revolution)

    Social deomocracy is nothing more than left wing nationalsim, they are no diffent to the greens. You can’t impliment genuine socialist policies within the framework of capitalism as both systems are diametrically opposed.

    Genuine Marxist socialism calls for *The eradication of the nation state.
    *The means of production and distribution to be expropriated and put under the democratic control of the workers with production and distribution based on social need, not for the enrichment of a handful of venture capitalists.
    *The abolishment of private property–not personal property. In otherwords the natural resources of the planet belong to all, not to exxon mobile or chevron who then form cartels holding the world to ransom.
    *A world planned economy based on social need using the most advanced scientific methods at our disposal

    Socialism will never be implimented by a vote because the capitalists will never allow such a thing. What service does fascism serve? To crush all independent workers unions and representitve bodies, eespecially those advocating that they relinquish their positions of privelege.

    Hitler and Bush are not random figures that appear at certain times in history, the are a direct manifestation of the crisis of capitalism that throws up the ruthless despot to protect its interests any way necessary.

    The reallocation of resouces from the military government bureacracies, and all sorts of of government espionage agencies, can feed the world two or three times over alone.

  17. In NSW there has been a long love affair with ALP softly softly policies particularly after Greiner user pays principles – now all users pay and they get nought in return

  18. its a failure of NSW ALP to capitalise on the natural advantages placed before them and unfortunately their long tenure has ensured that the opposition probably have a similar misunderstanding.

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