GUEST BLOG: Dave Brownz – Neoliberalism is naked capitalism on its death bed

By   /   December 6, 2017  /   12 Comments

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Marxist economist Michael Roberts takes on Noah Smith’s claims that neo-liberalism is making a comeback and is actually increasing GDPs and reducing inequality. But to make that claim Smith has to use China and India as examples of successful neo-liberal economies. Roberts says that growth in these two countries comes not from market reforms but from heavy state intervention.

Neo-liberalism is naked capitalism on its death bed. It preaches more market but actually uses more state intervention. It will die only when capitalism dies. Marxist economist Michael Roberts takes on Noah Smith’s claims that neo-liberalism is making a comeback and is actually increasing GDPs and reducing inequality. But to make that claim Smith has to use China and India as examples of successful neo-liberal economies. Roberts says that growth in these two countries comes not from market reforms but from heavy state intervention.

In fact, Roberts is making the mistake here. Neo-liberalism is capitalism in extremis, not more market. He overlooks the reality that from the turn of the C20th capitalism became state monopoly capitalism, aka imperialism. The market did not set prices as it did in the heyday of competitive capitalism, but increasingly nation states created trading agreements which influenced prices. Nor has this lead to a massive reduction in poverty and inequality. Capitalism historically lifts workers out of poverty. But today both rising inequality and rising poverty are associated with stagnating growth.

China stands out as the only large economy where growth is showing up in some reduction in poverty. Neo-liberalism is therefore capitalism as we know it today, the state concentrating all its power behind the market to fix the crisis and restore profits.

But it cannot win in the long run. That’s because for all its reactionary fury, the neo-liberal state attacks on workers have not restored enough profits to put global capitalism out of our misery. That will be the job of the revolutionary workers who refuse to pay for capitalism’s terminal decline by standing up and overturning the system.

Capitalism won’t die peacefully, it will try to scramble onto our shoulders to avoid paying for its rip-shit destruction of society and nature. That’s where our attitude comes in. Do we agree to be trampled on by a panicking ruling class pushing us into genocidal wars for carbon, or do we choose to accept our historic mission of saving humanity by putting capitalism out of its misery?

Meanwhile, the bourgeois ‘experts’ are debating whether there is any life left in capitalism. What if the long depression is now over and we are into a boom, rather than facing a bust to end all busts? We agree with Roberts that the bust is coming. Whether global capitalism can emerge from that bust into a new boom, is another question. We disagree with Roberts view that capitalism can survive what we call its terminal crisis.


Dave Brownz is The Daily Blogs guest Marxist blogger

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  1. Castro says:

    Meanwhile, in No Zealand, the neo-liberal experiment is about to usher in a bunch of people (not a country) on some land, where 50% are predominantly young, poor and local and the other 50% are predominantly affluent, elderly and foreign. Buckle up, No Zealanders, the neo-liberal experiment is this “country” is going to end in civil war.

  2. Historian Pete says:

    “Whether global capitalism can emerge from that bust into a new boom is another question”.Evidence indicates that the” bust” will be extremely nasty to an extent that radical steps will be taken to totally alter our basic economic structure.No- one will want a re-enactment of what we are going to face.The only sane intelligent response to the degrees of inequality and poverty that our insatiably greedy one per cent are going to inflict on us is a socialist state where large disparities in income distribution and wealth are illegal.Enjoy it while you can-John Key,Peter Thiel and Gareth Morgan and other economic predators .You are like vultures that are so stuffed with your conspicuous consumption /carrion that you can no longer fly!Your wilful greed will be your ultimate downfall!!

  3. David Stone says:

    I think what happened was that the system collapsed in 2007/8.
    Unlike the 1920’s depression, and drawing a lesson from it the finance gurus , instead of exercising fiscal conservatism as they did back then , took a deep breath and started printing money like there was no tomorrow. Q E.
    Banks create money when they issue loans; but they aren’t allowed to create money to pay people out when they come to withdraw their deposited savings, that’s not how it seems to work. So when there were masses of defaults , shrinking the money supply, and people were withdrawing their savings and new deposits weren’t keeping up, the reserve banks and esp. the fed created new money and fed it into the banks so that they could pay depositor’s withdrawals and not go bung.
    Though feeding new money into the system is standard reserve bank procedure in normal times, the scale is unprecedented , and the purpose, rescuing banks ,is also unprecedented. But having broken the ice as it were, and this QE having seemingly averted the catastrophe , and the sky hasn’t fallen (yet), it will be utilised more automatically in the future, probably without much discussion next time. In fact I think I’ve read that an act has been passed in US that allows the fed to enter the stock market with fiat money if and when the deem it prudent to even out fluctuations and prevent a future stock market crash.
    All this is going to make it very hard to predict when a correction will happen or what it will look like.
    But my thinking now is that there will be waves of QE as bubbles in real estate stock markets and crypto-currencies burst, and will continue to be fed into the banks and thence into the hands of the 0.01%. QE will not encourage more investment in the real economy where we all live, so there will be nothing to extract from the community any more cause most people will be surviving on ever increasing debt that they can’t pay, so all the new QE money will be used for speculation as it is the only investment that shows a return.
    This I think will lead to an exponential increase in uneven wealth distribution as bank loan money shrinks due to people defaulting on existing loans, and being an able to qualify for new ones so that the money created by bank lending shrinks and is replaced by fiat money from QE which will remain in the banks and the hands of the very wealthy.
    So the finance system might not crash , it might just ruin most of humanity.
    Cheers D J S

    • CLEANGREEN says:

      But National refused to do QE david in 2014 when labour, greens and NZF said they need to enter QE land like all out trading partners are and key said no. so was he double speak as nhe knew the Australian banks were getting flushed with QE money?

      But if so why didnt he allow kiwibank to do it as he alllowed Aussie banks to do?

      Austalian Government are now doing an royal commission investigation into their branches of the Aussie Banks now so something may come to light there.

      • David Stone says:

        As you say, our banks are mostly Australian banks, someone else was rescuing them, and Kiwibank is too small to matter either way. But was QE money used to bail out South Canterbury Finance? I think it probably was. And I don’t think he would have hesitated to lie.
        The dairy prices from China held up pretty well for us then too. and we had just had a clean out of many finance companies that destroyed lots of people’s savings.
        D J S

    • dave brown says:

      Capitalism faces a long-term decline in profits as its ability to force workers and society in general to worker harder to create the profits that makes the rich richer, meets resistance. Even if QE money was invested in production rather than speculation it cannot increase profits unless costs of inputs (raw materials, labour, infrastructure etc) are held down further. In other words, capitalists need labour to produce their profits, and workers need their wages to live, but when this exploitative relationship drives wages and conditions below the poverty line, workers have no option but to take back the stockpiled wealth they produced over centuries and build a new society based on need not greed. That’s the reality; peoples’ thinking just has to catch up.

      • Sam Sam says:

        The only way capitalism saves itself is if all the central banks and governments agree to restructure all the loans they’ve put out to something that resembles being able to be payed off in 1 or 2 generations. But I submit that it would be easier to colonise the moon and start over with a novel vantage point of the collapse of humanity and maybe catch a glimpse of some nuclear flashes.

      • David Stone says:

        If you think about it though, (which obviously you do), but in this era cf previous times , wealth extraction is from the productive sector into the hands of the financial sector, rather than from the worker into the hands of the factory owner. The employer is being screwed along with his employees.

        • dave brown says:

          No. The productive sector has it own problems caused by inability to exploit workers hard enough to get a profit. This kicks the TRPF in (Robert’s is good on this). Money capital that can’t go back into more production because it is unprofitable then goes into speculation which does not create value but which creates bubbles of non-value which must pop.

          This does not mean that the productive capitalist is exploited by speculation in existing commodities. It has some impact on the profit rate only as a feedback (higher input prices), but not as a direct cause. Because speculative capital does NOT create value, or as a result, profits, and is the antithesis of finance capital which fuses banking capital with productive capital to create value.

          Capital is in decline and the crisis of falling profits in production is the evidence. Everything else that flows from that is symptomatic. Capitalism cannot be reformed by making capitalists invest in unprofitable production. That is why we need socialism now to completely take over means of production so that production is for need not profit.

    • Historian Pete says:

      There is also “The Emperors new clothes”.I refer to the U.S. dollar that has a value that is actually underpinned by nothing.The U.S. economy has been completely hollowed out except for the military industrial complex, and the economic situation which made the U.S. dollar the worlds reserve currency has been and gone.As we speak a number of countries are moving to remove the role of the petro dollar as the compulsory form of exchange for petrol payments between countries .I hardly need mention Who! At the moment the world is supporting the U.S. economy.We are about two thirds of the way through this process. So this gives us an indication of when the big bang will happen, if something doesn’t trigger it before then.Then ,all the U.S. will have left is its military might. So we can expect an accelerating momentum from the Neo-Con forces in the U.S. Empire/ Nato for war, regime change, and predatory economic penetration . Sorry to rain on your parade, but economic collapse in the next five years looks increasingly certain!!!

      • David Stone says:

        Last time. in the 20s and 30s as I remember Bob Joans pointing out, after the initial Wall St crash the share markets quickly recovered and were buoyant throughout the rest of the depression. The people with money kept it, the rest of the community had the depression.
        This is what might happen again only more extreme separation between haves and have nots. The contrast exacerbated by QE.
        D J S
        ps It’s not my parade . I think the system needs the crash to reset so it works again for everyone. Postponing it makes it worse not better.

        • Historian Pete says:

          It’s everyones parade .The circumstances of this coming collapse is completely unique in that no one in world history has ever been so stupid as to do what the U.S. has done. You could say they have been exceptionally stupid , as only an exceptional people can. The Romans trained and armed the Barbarians until they were the equal of the Roman army and thus gave away their military advantage. That was not smart .But the U.S. has created a “Capitalist military structure ” in which generals are promoted in line with their belligerence,the weapons industry has been privatized to the point that corruption has produced inferior weaponry, supersonic aircraft that don’t fly properly.And the Russians are superior in nuclear weapons.And they have shipped their manufacturing advantage to China.The overall economy is in ruins , with a predatory financial system producing nothing except debt! All regulatory authorities are either corrupt or have been removed.Its like a plane flying with no pilot. From this debacle can only come the mother of all crashes. Good luck folks, you are going to need it!