A crisis of the system that no amount of spending can fix

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The system of production currently dominating the globe is in crisis. The UK economy is 20% smaller than at the beginning of the year. The US and the rest of Europe are 10% smaller. World trade and finance are freezing up. This is a crisis of unprecedented proportions and threatens a new world depression. How did this happen? What has changed in economic management and policy since the last world depression that has brought us to this point in history?

Workers and their unions seemed to be on a path of uninterrupted progression in the post World War Two world.

Advanced capitalist societies in Western Europe, North America, Australasia and Japan, seemed able to adapt enough to provide basic democratic and social rights, including elected governments and union recognition.

For at least three decades it seemed that rights and living standards broadly progressed each decade. Gross inequalities appeared to be being muted not exacerbated.

Full-employment was the official goal of all governments. Conservative and social-democratic governments had a broadly “Keynesian” economic approach. The governments and their economic advisors were confident they could smooth out the ups and downs of the business cycle, maintain full employment, and achieve uninterrupted growth.

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In the mid-1980s in New Zealand, real wages reached their highest level and workers had an almost uninterrupted right to strike over any issue. We exercised that right with increasing frequency whether it was over a workplace bullying or dismissals; political strikes against the Vietnam war, nuclear warship visits or sports contacts with apartheid South Africa; or solidarity with other workers in struggle in New Zealand – including general strikes if needed.

It also appeared that society was becoming more open-minded and progressive around issues of women’s rights, racism, and opposition to colonialism and apartheid. Peace movements targeted nuclear weapons and imperialist wars with mass support.

But an inflationary economic crisis emerged in these same countries in the mid-1970s that provoked a political and social reaction against that progress. 

Coming out of World War Two the US was the pre-eminent economic and military super-power. The new world empire was based on the US dollar functioning as the world currency. The dollar in turn was guaranteed to be “as good as gold” by having a fixed exchange rate to gold. 

However, financing the budget deficits needed to run their wars in Korea and Vietnam, saw US dollars being accumulated abroad and foreign holders starting to lose confidence that the US would be able to maintain price stability. Some demanded gold in return for their dollars. The first casualty of the weakening US dollar was its link to gold being severed. The US and therefore the world went off the gold standard altogether during 1971-73.

This policy was applauded by both Keynesian economists and their “Monetarist” critics around Milton Friedman and the Chicago School. But the immediate effect was to feed the inflationary tendencies already besetting the US and its allied currencies around the world.

US inflation moved from 1-2% a year in the 1950s and late 60s to over 5% then over 10% a year in the 1970s before hitting a high of over 13% in 1980. In New Zealand, it was, if anything, even worse.

An economic recession hit the US in 1973-75 that turned into a combination of stagnation and inflation dubbed stagflation. Printing more dollars to combat the recession simply fed the inflationary beast. The dollar price of gold soared as money traders started to dump dollars for gold. Hyperinflation threatened which would have ended the US’s role as the economically dominant empire.

The US rulers were determined to protect their dominance at almost any price including doing whatever was needed to break the inflationary spiral and restore the stability of the dollar as the pre-eminent world currency.

The man given the job by US President Carter was Paul Volker who was appointed to head the US Federal Reserve Bank in August 1979. Volker had also been involved in the earlier decision to go off the gold standard under former President Nixon. What was dubbed the “Volker Shock” required pushing the official cash rate up to a peak of 20% in 1981. Inevitably a deep recession ensued in 1981-82 pushing unemployment up to 10%. Saudi Arabia and other Gulf states also played a critical role by depositing their hundreds of billions of petro-dollars into US banks directly. If you wanted to know the secret behind the “unbreakable” US-Saudi alliance that is it.

The dollar was restored, inflation was broken, dropping from 14.8% in March 1980 to below 3% by 1983. The era of financialisation and de-industrialisation also ensued over the following decades. General Electric became GE Money because it was easier for capitalists to make money by being financial capitalists than it was by being industrial capitalists. 

The deep recessions alongside shifting production in key industries to China and other Third World countries also helped break the back of the insurgent labour movements in the advanced capitalist world.

A new ideology that glorified free markets, free trade, and declared the resultant wealth accumulation and inequality as necessary and beneficial to society. Profit-seeking above all else was deemed the driver of capitalism and promoted productivity and efficiency because only the most efficient could win.

The fact it also created a small class of billionaires dominating global production through their vast monopolies was again just a necessary evil at worst and something to be glorified in reality. “Greed is good” became the capitalist mantra.

This system is ruthlessly efficient. But is also a system that requires uninterrupted growth and maximum exploitation of labour and the environment. 

It is also a system that requires an endless growth of debt of all sorts to keep the next few decades of growth from ending in a new deep recession or depression.

The 1980s was the decade of the election of US President Ronald Reagan and UK Prime Minister Margaret Thatcher. Both were aggressive union-busters and promoted an ideological return to a reactionary promotion of individual self-interest over the collective interests of society. In fact, “there is no such thing as society” declared the pathological Thatcher. 

Monetarists were put in charge of economic policy everywhere and they tended to discourage the accumulation of public debt but be rather indifferent to the expansion of private debt. Right wing governments didn’t necessarily follow their prescriptions, however, especially when it came to budgets for war and tax cuts for the rich causing deficit spending and debt accumulation. Reserve Banks were given “independence” from governement policy control with a policy prescription to target a low and regular inflation rate of 1-3% by targetting a steady expansion of the “money supply” which they incorrectly conflate as including both government-issued token money and bank-created credit money. 

They promised that such policies would eliminate recessions and allow for the uninterrupted expansion of capitalist production. 

Stability was restored, but the next three decades saw three business cycles that were anaemic compared to capitalism’s glory days after World War Two. And they seemed to require ever-larger doses of debt to keep expansions going or prevent even deeper recessions from hitting.

Every form of debt has grown enormously over the three decades from 1980 to 2010 –  government, household, corporate and yet we ended that period with the “Great Recession” of 2007-8 which was the deepest crash in the capitalist system since the 1930s Great Depression. This has now been followed by what could be the “Greater Depression” of 2020.

Getting out of the Great Recession required the application of monetary and fiscal measures that had not been ever applied on that scale before and the abandonment of monetary orthodoxies imposed in the 1980s to protect against a new inflationary crisis as we saw in the 1970s to save the US dollar and world empire.

The US Treasury brought US government debt instruments directly to support the banks during the 2007-08 crisis and maintain liquidity in the system. This is an electronic version of “printing money.” As the crisis continued to deepen the treasury began buying distressed debt instruments connected to the housing market from banks and other financial institutions as well.

In normal circumstances printing money on this scale would result in the devaluation of the currency and an inflationary surge. This did not happen this time because the crisis had advanced to the point where money markets had already gone on a flight to safety into the US dollar. The 1% were happy to hold onto cash or retire debt rather than spending it more broadly. Inevitably this hoard did leak out into new financial bubbles in real estate and the sharemarket though.

But the US Fed had promised to stop the quantitative easing and begin to withdraw the extra dollars from the system as soon as normality was restored. A return to orthodoxy was considered inevitable. But every time they moved in that direction the market reacted by deflating the stock market and threatening a new recession. 

US President Trump also reacted by trying to browbeat the Fed to maintain an upturn through to his re-election in November this year. 

The end result was the longest but weakest post-war recovery ever in a business cycle. Industrial production at the end of the recovery was at 80% of capacity which was the number associated with the bottom of the downturn, not the peak of the boom, in the first three decades after World War Two.

This partial “recovery” had also needed the re-emergence of massive new levels of third-world debt, corporate debt, household debt. Government debt had also radically expanded to finance the 2007-08 bailout in the US, Japan and across Europe. Trump also doubled down by also providing new tax concessions to the super-rich in the US which drove up the ongoing deficit in government spending. 

But before the corona-virus pandemic hit in March the world was already entering a new recession with durable sales like automobiles down significantly. Then in September 2019 and March 2020 what is called the “Repo market” froze up. This market is never meant to freeze. Howver, it did in 2008 and twice more recently. The Repo market is an overnight settling of accounts between banks, financial institutions, and major players that uses only the safest instruments like government bonds. If this market freezes it is saying that no one trusts each other anymore – even for 24-hours. 

So the US Fed simply guaranteed every transaction in these markets to ensure “confidence” was restored and the market didn’t collapse altogether and take down a whole series of debt-laden companies unable to refinance even short-term debt as needed. 

Trillions of dollars were poured into markets in the US and extended in credit to central banks across the globe to do the same in their countries. New Zealand soon followed suit with guarantees for government and city council bond purchases as our own form of quantitative easing. This was not required in 2008 in New Zealand because the banking system was less exposed to some of the financial chicanery perpetrated elsewhere and the recession less severe because of export support from China and Australia.

The Pandemic accelerated the impacts of the recession, required closedowns, blew up various bubbles (at least temporarily), and threatened to bring the whole house of debt cards tumbling down. 

This time the US bailout of the system required gargantuan sums of money for all sorts of markets. Essentially any form of debt would be guaranteed by the US treasury. Initially, all US government debt instruments were guaranteed and purchasing them undertaken by the Fed to keep interest rates low and drive them lower if possible. This was followed by promising to buy almost any debt instrument, even private corporate debt. Printing money is becoming privatised.

The 2020 crisis of capitalism has resulted in the socialisation of all risks for the capitalists. Markets are not being allowed to “work their magic” in terms of allocating risk and rewards according to any economic rules.

There are laws that capitalism must obey. The first great economic thinkers associated with the birth of this system were Adam Smith and David Ricardo. They explained how the system worked. Smith coined the term of the “invisible hand” that guided the system and made it so revolutionary. As the pro-capitalist site Investopeadia explains:

“The invisible hand is a metaphor for the unseen forces that move the free market economy. Through individual self-interest and freedom of production as well as consumption, the best interest of society, as a whole, are fulfilled. The constant interplay of individual pressures on market supply and demand causes the natural movement of prices and the flow of trade.”

This invisible hand is based on the law of labour value that Smith and Ricardo both accepted and that Marx incorporated into his writings and took to their final most scientifically developed form.

Marx showed in Capital that prices (exchange-values) are the form that labour values take. But as always there’s a contradiction between appearance and essence. Aggregate market prices can diverge from aggregate labour values (or at least what they would be if they accurately represented labour values). During a boom, prices drift above values.

Marx corrected the classical labour theory of value to show that a commodity’s price did not oscillate around a ‘natural price’ based upon actual labour time, but around a ‘price of production’ that took account of the ratio of labour and capital relative to the average, and the turnover time. An individual commodity goes to the market to see what claim it can make on society’s finite amount of labour time. In total aggregate values equal aggregate production prices, however, the credit system divorces the act of purchase from the act of paying. 

Lenders can lend more than they have – they leverage. This pushes up aggregate market prices above their labour values. Claims are being made on future labour time that may never be realised. In a boom everything appears to be going swell, leverage continues to increase until the ‘Minsky Moment’ when some lenders start to panic they may not get their money back. We then get credit crunch, financial crisis and recession. The law of value acts.

Marx’s theory contrary to myth, fully integrates the market, as the value of a commodity cannot be known until it comes to the market. That is, it isn’t the actual amount of labour time inherent in the commodity that gives it value, rather the amount of society’s finite labour time it can claim in the marketplace. 

Before fiat money, the capital devaluation was obvious in price deflation. With fiat money, we get currency devaluation, as in the 1970s and 2008. In both periods currency prices in gold rocketed. In ‘gold price’ terms there was deflation. And the reason gold still features in financial markets is it takes a certain amount of labour time to produce an ounce of it. It is still a measure of value, as distorted as it may be due to speculation.

The point of capitalism’s recurrent crises is to bring aggregate market prices back into line with aggregate values. Prices that have been inflated by leverage. Before 1971 crises took the form of price deflation. Since the decoupling with gold, currency prices can increase, but capital still gets devalued in terms of ‘gold prices’ as the currency itself depreciates. The 2007/08 deleveraging was short-lived, as the ruling class bailed themselves out and passed austerity onto everyone else. The debt bubble, and so the discrepancy between aggregate market prices and aggregate values remains.

Pro-capitalist economists can’t understand capitalism’s recurrent crises when they have the wrong, subjective, marginalist theory of value. Price and value are always equal in marginalist theory.

The operation of the law of value under capitalism leads to industrial cycles of boom and bust that ultimately produced a larger and more powerful system of production that conquered the globe.  The system would rebound more strongly during periods of recovery if the laws of motion governing that system are allowed to do their magic. 

That continued to be true after World war Two for three decades because of the depth of the Great Depression and the suppressed demand for consumer goods as a consequence of the War itself.

Since then, both the Keynesians and the Monetarists have attempted to stop the law of value operating with full force by using fiscal or monetary policies to stop a deep recession happening that would clean out the least productive capitalists (industrial or financial) and reward the most efficient and productive capitalists.

The only results possible have been either an inflationary crisis or an explosion of debt that can never be repaid. Protecting that debt from the operation of the market to reveal its true value, drags the entire system towards permanent stagnation and depression.

The current combination of policies to combat the pandemic and associated economic crisis – which involves both a monetary and fiscal explosion – will sooner or later lead to an implosion of the entire credit and monetary system and along with it the system of capitalist production itself. 

The alternative is not to let capitalism operate without any limits in terms of subjecting all labour and the planet to its uncontrolled passion to exploit all and everything for the private benefit of a tiny class of owners. The planet cannot survive another few decades of the same old shit.

Working people need to put forward solutions in the here and now that protect our class and the planet we live on in an immediate sense. Those immediate demands can form part of a Green New Deal to transform the way we produce and live with each other. But we should do so with our eyes open to the fact that this system cannot accommodate what we need without generating new forms of crises. We must be prepared to go beyond a system based on private greed towards one based on human needs. 

Two ways forward are being contested today. A road towards nationalism, fascism, and war or a road towards peace, solidarity, and internationalism.

In the words of Rosa Luxemburg, it is “Socialism or Barbarism”

I know my choice.

 

12 COMMENTS

  1. great piece Mike,
    You hit the ail on the head here; “The deep recessions alongside shifting production in key industries to China and other Third World countries also helped break the back of the insurgent labour movements in the advanced capitalist world.”

    That was a slippery slope NZ has entered into also with the loss of our raw products and our premier industries akll going to China to be manufactured and sent back to us for sale.

    Logs, wool, white-ware industries, wool carpeting manufacturers and a host of all others are now being made in China and is sucking the life blood out of NZ so we are our own worst enemy.

    Winston said wisely, “we need to re-nationalise our industries again to make NZ prosperous again”.

  2. The inflation of the 1970’s is often presented as caused by demands for higher pay by unionised labour and used as an explanation for the “necessary” rise of monetrist policy in the 80’s and 90’s and the decimation of productive industries. In fact the inflation was caused by the Oil shocks implemented by OPEC as a form of economic and political leverage in response to policies of the West. The decoupling of the gold standard from the dollar increased the leverage OPEC had and possibly made the oil shock policy more likely. The primary energy and manufacturing input feedstock was now suddenly many multiples of its former price. As prices rose Unions responded with more industrial action to try and keep wages at parity with those prices. The cost increases caused by the higher oil prices were a much greater contributor to the high inflation than the pay rises, as given the scale of the oil price increase the cost of production and transportation was now so much higher. The decrease in spending power and the high interest rates bought in to control inflation led to the recessions at the end of the 1970’s. Fast forward, we now have a situation in the West where the rates of pay bear no relation to the cost of living. A manifestion of the distortion of the law of value mentioned. Value added manufacturing has been replaced with the nebulous concept of services. We have enthusiastically embraced globalisation, ironically at a time where the US is returning jobs home and pullng up the drawbridge. We seem to be heading for an economic dead end. I fear politicians and economists would quite happily let people starve rather than change the system to make it work.

  3. So let me see if I understand this correctly:
    Before 1971 crises took the form of deflation. After the decoupling from gold crises took the form of currency devaluation and/or inflation. Since monetarism came along sucking money from the working class propped things up for a while but then the crisis has taken the form of insane levels of debt leading to economic crashes. This has partially been resolved by printing money – but only until the next crisis arrives.

  4. “Re-nationalising our industries” is certainly a strong consideration but nothing will happen unless condictions for the industries to be re-established are made possible or incentivised.
    The Cooperative model for small industries is a very overlooked but important structure. Small groups of Kiwis founding a cooperative may need govt guidance to have the base structure robust and with some government backing for a period. The UK look3ed seriously at this recently.
    The Kiwi based cooperatives would not require transnational finance and so could control their own operation without interf4erence. Coop members and coop employees are very similar in as much as decisions on workplace operations and goals are set by consensus so a large degree of democracy is inherent in the operation and workers are incentivised by the sharing of any profits at the end a an agreed period. Any money placed into the cooperative by members is acknowledged with a small accumulation from the profits but the contributing workers also have a voice in the financial decisions of the coop.
    A well proven model with high numbers of cooperatives in Parts of Italy and Spain, and the presence of these very popular cooperatives modifies the rest of the business community’s attitude and regard to profit taking as they will become un competitive with the highly defective cooperative structure around them..

    But a second very important focus has to be laying down aims and a pathway to living more simply with less transport necessary. less junk and unnecessary stuff that fills our homes and landfills.
    The present situation is market driven and the market bears no responsibility for the wastage and ultimate costs to society, the environment and the limiting of our future options.

    Govt must set up a think-tank of independent scientific experts to look at this and provide goals. The business world should have no influence on this process and Business is a large part of the problem.

    The nation has to be educated as to why we have to change and what are out priorities are.

    • For any of that to succeed students need to be determined and bright. Ever since the signing of the treaty traditional kiwi culture has valued first the farmer, second is the worker, third is the merchant and fourth and last is Anglo-Saxon superiority. This is New Zealand’s social hierarchy in an agricultural setting and it has not changed much during the twentieth century. Anglo-Saxon superiority did not enjoy much success until it arrived in New Zealand, not only was their economic role to serve the aristocracy but also because they were also considered less than human.

      Pre-Treaty New Zealand was highly sustainable under the stewardship of maori largely because they lacked the political will to industialise. Had Maori industrialized it is difficult to imagine how they could have outperformed the likes of Chinese staggering industrialization with all the mantraps to boot, it wasn’t perfect.

      Based on a closed economy that is not open or willing to make changes could not possibly spark of the revolution that JohnW outlined above, nor can it give rise to capitalism replacement. For generations, kiwi’s have chosen the path of farming or work, and so many of our top students go for jobs in government or on the farm rather than start the businesses needed to spark JohnW’s revolution. The result is New Zealand lacks the entrepreneurial zeal to pull off such a feat. So firstly our top graduates must not be allowed to join top corporations, they must be given a higher calling. With the borders closed we can not import ready-made entrepreneurs so the government must build industries starting with clean textiles and plastics that can be recirculated back into the system with 97% efficiency and sounded by toys and businesses like shipping and banking.

      The Government has the last of New Zealand’s experienced entrepreneurs and they must spawn this 4th digital to market industrial revolution or displaced people from around the world will flood into New Zealand uncontrollably. The government must employ a jobs guarantee but then the government must leave them alone to start there own carbon businesses. The National Party will see what these so-called jobs guarantee workers and they will have to change their own mind up about the social hierarchy of New Zealand and whether or not they see themselves a part of this future.

      There used to be something inside the National Party that encouraged many to succeed in business but they’ve snookered themselves behind the bureaucracy, the police and the military and it is they who must be advised to rejoin New Zealand’s cultural and economic dynamism.

      • Bankers and loan companies combined with seed merchants have dictated to rural NZ for at least four generations within our wider family.
        We do not need or should not look to off shore so called “entrepreneurs.” Kiwis often just lack confidence because of the bankers harsh regime of managing mortgage holders to commit themselves even further in debt.
        The old story goes…….. before we can renew your mortgage an assessment of your farm shows you need a new tractor $XXXX spent on drains and fencing plus a new roof for the house. The farm equipment will also have to be assessed…….. and so on.
        The farmer can manage all the farms needs in time but banks want a larger debt and hold a farmer to ransom.

        The European settlers came from cultures that were deeply divided and ruled by wealthy power brokers aligned with so called royalty which controlled finance.
        Britain already had poverty and a rigid class system. Debtors prison for poor and a master slave relationship between industrialists and workers. Children were sent down into mines and had short working lives. Disease was prevalent and much of it related to working and living conditions of the “lower” classes while the wealthy lived in grandeur with servant staff who were paid little.

        AO/NZ was not the only place to be taken over by Britain who had expanded its empire to collect revenue from all continents.
        India gives a glimpse of the ruthlessness of British thought and action.

        https://www.thoughtco.com/the-british-raj-in-india-195275

        The British culture had metal and generations of metal dependent industrialisation so weaponry was well developed and comparatively cheap. Sailing ships similarly.

        Maori were divided into tribes which had competing interests so Britain used this in manipulating many of its deals with tribes.
        Setting up settlements grew from whalers trading to more permanent bases with missionaries. The missionaries did a major job of capture when it came to a European foothold. Maori were further divided by beliefs and then the various churches.

        Maori anger at European annexation of land and mistreatment resulted in retribution which gave the British excuse to engage their military against Maori, then confiscation of land (which was transferred to European individuals in power), leading eventually to Maori numbers declining. By early 20th century it was postulated that Maori would not survive.
        https://www.newsroom.co.nz/pete-mckenzie-on-the-ethnic-wealth-gap

        Any cooperation with the British cost Maori dearly and any opposition was an excuse for British to use force. Maori could have cooperated across tribes and driven Europeans out in the early stages but that did not happen.

        Land was steadily taken from Maori and that process is still active today in spite of concerns.

        There was a period where most of the coastal shipping and trade was conducted by tribes who traded with Europeans and other tribes. So tribes adapted to some extent but still the erosion of their lands continued.

        There needs to be a greater appreciation of how land and wealth is mainly held by a small group in NZ today as Kiwis from many backgrounds struggle to raise families or even just find enough food each day to live.
        From a race war which Maori lost, we now have a class war that involves everyone.
        Still greed and power are accepted by many as legitimate arbitrators of outcomes.

        To change that we need a new understanding about equality and accumulation of wealth that becomes the root of power..
        Kiwis who reject the monarchies and all they stands for are on the right track.
        While transnational money and foreign banks and corporations rule NZ then even good governments have little change of making effective change as was done in NZ in the 1930s.
        John A Lee has been denigrated as his legacy is feared, but it was John who was the outspoken agitant who had a major part in pushing Labour to achieve what it did in the 1930s and 40s. He was kicked out of the party as forces amassed to get him out of politics. He gave them an excuse to sack him when he wrote about Savage’s inaction which had become more evident. A prolific writer and whistleblower.

        The treaty settlements cannot and do not compensate for the great loss of Maori land, belief system, culture and community.

        But as young Kiwis grow up together the equity issue will not be resolved by family wealth, Maori or Tau Iwi. Inherited wealth or land just cannot be expected to make for a more even playing field for young Kiwis.
        A change in system is needed and not based on the old or present system but new thinking.
        Revolution is not likely but a change of aims publicly held may be a way to guide the system without invoking the wrath of the bankers and capitalist puppet masters.

        As conditions grow worse with civid19 we have a chance as long as we are not divided by business NZ scrambling all power available to open borders

        We need to facilitate opinion against that happening and open out the individual basic income option for all, resource the health system to include dentistry, get public housing much more established and rejig the Overseas Investment Office to work for Kiwis not business.
        Land in NZ should be converted to NZ ownership with a grace period of say up to 10 years for owners to find Kiwi buyers with the most expensive parcels and less time for smaller holdings and homes.

      • That’s all very true partly because of the relative instability and then stability and now instability from the 40 years before the fall of the Berlin Wall and then the expansion of NATO in Europe and now the Pandemic which is really a teeny tremor in The Great Anthropocene Extinction which I know you know is just a fancy word for Climate Change is going to Kill a lot of people. But as far as all the proxy wars that were fought during the cold war except for the people fighting, it didn’t have a great impact on the stability at home. This has all been a very different experience for those born after the fall of the Berlin wall, Windows95 in conjunction with the internet has speeded everything up dramatically. In the 3 decades till now there’s been incredible change and I could not imagine anyone person or nation not even as powerful as China or America ever controlling the change. They gave controlling global forces ago and while America almost gained ultimate power over Russia, China grew up while America wasn’t looking.

        The Challenge for people like you and I who grew during the last 30 years and are from the cold war days, the challenge for us cold war babies, because we experienced the cold war in real-time, and there’s an increasing amount of the population that don’t have our real-time perspective of the cold war and we need to remind the people who’ve lived through it of the things that they might have forgotten. So just click on this short 2-minute YouTube link of the moments just after the wall came down then come back and continue on reading: https://youtu.be/zmRPP2WXX0U

        So that clip might give viewers a little of the experience of the shock and jubilation the world experienced as the wall fell. All throughout Europe, it was clear to all but the CIA that there was huge resistance towards the USSR totalitarian control and of course there was the exception in China. But democracy was on the rise throughout the former soviet states and in South Africa, they too ended their bitter conflict with the indigenous inhabitants and democratized there so the democratization of institutions is nothing new. Northern Island settled and in New Zealand Maori also settled their grievances even though online conspiracy theorist would rather keep that gravy train going. I just think it is really difficult to overstate the enthusiasm for change and as Hellen Clark would say we were headed towards a benign strategic environment which was her end of conflict idea.

        So, let’s fast forward to now and we have the upcoming marijuana referendum and the end of life referendum that also seeks to end the war against the woman, the poor, the minorities and now we have very different walls that we want to tear down. So now we have to stitch together a parliamentary consensus out of Labour (business as usual) National (small government) Greens want radical green policy and Act wants a liberal business environment ie survival of the fittest so I’d probably stop smoking and start running if I was them. But this is the broad outline in which we have to stitch together a parliamentary consensus to end the war on poverty so have some kindness for the job Jacinda has undertaken for herself because it will be difficult for rightwing politics to resist wheeling that old drug war out again, all in 4 weeks while under corona conditions which is a massive undertaking for Jacinda, you go girl.

        Dr Shane Reti has healing hands that Judith Collins is forcing into the slimy cow patties of dirty politics and Reti is not having it because fundamentally Dr Reti is a good man understands that millennials are not snowflakes; any good man will readily admit that students today have to carry the cross of society on their back, wear the crucifix of debt around their neck and we say to them oi, you three have to work while you wear all that so you can look after all these old people which as an economic policy is absolute garbage so we must not think of Dr Reti as the enemy but someone who can repair The National so they don’t walk back the legalization of marijuana and build fake walls.

    • Any money placed into the cooperative by members

      You actually don’t want members putting money into the coop as that encourages capitalism and capitalist attitudes. Better to make any money put into the endeavour a government loan at 0% interest. The loan would only start to be paid back once the enterprise starts making a profit. There are, of course, also time limits. If the enterprise doesn’t start making a profit in a reasonable time frame and still doesn’t look like it will ever make a profit then it is wound up and closed and the loan written off.

      A UBI could be used to ensure that the members of the coop always have enough to live upon until the coop starts making a profit.

      The present situation is market driven and the market bears no responsibility for the wastage and ultimate costs to society, the environment and the limiting of our future options.

      And that’s why we need regulation – to ensure that all costs are properly accounted for in the end price. Then, and only then, will a pricing mechanism in a market system actually bring about a rational distribution of resources.

      Why is it cheaper to import from China rather than make a product here? Because the pricing system has been manipulated to make it so.

  5. A long post covering decades of history, but explaining little as to why things went as they did. All those economic and financial developments had some causes, and one instrument was used to mend what others failed to address or stuffed up. It is easy to list historic events and occurrences, but explaining them in a qualified manner is something else. Maybe ideological thinking comes before the rationale?

    • Yip. In short Mike, we’re fuck’d. A Orr the Reserve Bank Gov was given the green light to print another $40b, making it $100b of quantitative easing available
      Grants run out of ideas and so he thinks feeding the machine is gunnah fix it. What a dickhead.

      Shortermism and more debt. Orr suggests that at the current churn rate of a billion dollars a week, and if things remain the same, the RBNZ has got enough for 18 months to two years worth of borrowing/quantitative easing left. After that, it gets trickier.
      In summary, we’re fucked.
      C19 aint going away in a hurry and a vaccine is still years away and the GFCMK2.0 is just around the corner.

  6. The US and therefore the world went off the gold standard altogether during 1971-73.

    Which should have been the end of the US$ as the Reserve Currency. After all, the whole premise of the Reserve Currency was that there would be one currency that was fixed that other nations currencies could then ‘float’ against as determined by those nations governments.

    Once the US$ floated then there was no Reserve Currency.

    But, still, all the other nations went on acting as if it was allowing the US to print money out the waazoo. Its what made the USA ‘rich’.

    Printing money is becoming privatised.

    It was privatised a long time ago. Centuries in fact. There’s just been a few times where, because the private sector always creates too much money, the governments have had to step in and reign in the private banks. But the private banks just buy their way into doing it again. Our massive house price inflation that has seen so many without a home is due, almost solely, to the private banks creating money.

    The first great economic thinkers associated with the birth of this system were Adam Smith and David Ricardo. They explained how the system worked.

    No, they explained how they thought it worked. There’s a subtle difference that’s quite important.

    The problem is that people act as if the economy works the way that they explained. Although there’s this rather interesting essay about the Loss from Trade

    and reward the most efficient and productive capitalists.

    No such thing. Capitalists are the bludgers that destroy society.

    Two ways forward are being contested today. A road towards nationalism, fascism, and war or a road towards peace, solidarity, and internationalism.

    The capitalists will choose war – as they always have done. The question is: Will we stop them this time or let them get away with it again as we did in 2003, 1974, 1965, 1953, 1950, 1919 and all the other times.

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