How to avoid the next monetarist consensus II

1% Truth?

For some people ‘capitalism’ will always be a dirty word – synonymous with greed and exploitation. In more mainstream discussion the term pulses between negative and positive, in step with history: Good for the first decades of the twentieth century, bad after the depression of the thirties; resurrected by the Thatcherites at the end of the seventies, and all set to be reburied by the current financial crisis.

Notice it’s only the term ‘capitalism’ that has fluctuated in favour. Capitalism itself has remained the dominant mode of production the whole time. But the relative esteem of the term is telling in terms of what is expected of it, and how it is assumed to work. Those who use ‘capitalism’ unabashedly are most likely to be champions of free-market economics. Those squeamish about the word are far more likely to favour state intervention and regulation.

Similarly, while increasing numbers of people are calling themselves ‘anti-capitalist’ this can mean very different things. It doesn’t really matter when you’re protesting. All that matters is the knowledge that the current system is wrong. Being united in opposition is far from being united in alternatives.

‘Anti-capitalists’ vary widely, from those who simply want to rein-in corporate power to those who want complete abolition of property relations. Some fight for a class-free, property-free future, perhaps within this life – a quick revolution followed by a lasting peace. Others have a similar end goal but see it taking centuries – a quick revolution followed by slow trudge to Jerusalem. Five paces forward, four paces back, or worse.

Then there are some who see state-control as the end goal in itself. Some just want state direction of industry and commerce; others go further and want the state to be the major or even monopoly owner of production.

And some simply oppose incorporation and corporate power. They have no problem with a genuine market economy, only with the abuses that arise from conglomeration.

While the goals vary one thing that unites all these schemes is the desire for some sort of democratic control over production. Whether by regulation, intervention or full-blown nationalisation, those calling themselves anti-capitalist demand that government take responsibility for the economy. Or to put it in more positive terms, they want democracy to be extended into the economic sphere. They want business to be accountable to the electorate and the state to protect us from voracious capitalists, rather than sell us to them.

For monetarists this is the key heresy – ‘collectivism’. All evils spring from this supposedly naïve desire. As discussed in part one, the better part of this horror and indignation is in fact cynical, inconsistent and hypocritical. But for the sake of argument let’s assume an idealist monetarist and an idealised model. Here are four points monetarists employ to win hearts, minds and elections. Even if you find them repellent, you will need to have a good answer to each.

1. The Limits of Collectivism

None but the blindest monetarist (there are still a lot about) would deny that privatisation of public utilities has been a disaster. Outside the boardroom and the stock market we are all victims of this theft. Given the impending environmental crises things couldn’t be worse. At a time when it is vital for energy supplies to be in the hands of elected bodies they are instead run as cash cows for international corporations. The last thing these owners have in mind is a reduction in output, or a more equitable distribution of energy resources.

But what about the other end of the scale? How far should collectivism extend into the micro-economy? Some anti-capitalists would answer ‘all the way’, but we have to seriously consider what this might mean.

Does anti-capitalism mean the dissolution of all market relations, right down to micro-transactions? Does it mean the dissolution of even the petit-bourgeoisie? Should independent green-grocers be chased out of town by state-monopoly green-grocers? Should every window cleaner, builder and gardener be paid a set wage by the state rather than negotiate costs with the person employing them?

If your answer to this is yes, fair enough, but you have a lot of explaining to do. Aside from issues of individual freedom, the necessary bureaucracy would make the EU seem like a well-oiled machine, and the necessary monitoring and penalising of those who transgress would make the Stasi seem like the neighbourhood watch.

Then again if you do assent to this level of market relationship you also have to accept that you are in some sense pro-capitalist. Like it or not, if your politics permits this level of market economy you are advocating something on the capitalist continuum. It doesn’t mean you endorse Rockefeller, but it is an endorsement of market economics, and not a superficial one. It’s a concession with deep implications.

Complex questions become unavoidable: How widely should the free-market be allowed to operate? How big should a company be allowed to get before it is deemed antisocial, ripe for dissolution or state absorption? Is it right, sane, or even probable that the state would intervene to dissolve or break-up a business that was booming, punish it for booming?

Moreover, who is in a rightful position to make such judgements? Who is qualified to judge whether a business is still small enough to be socially safe, or has grown so large that it endangers liberty? Some medium-sized businesses are run by model employers and some small businesses are run by tyrants. Why should the moral player in these instances be penalised for their success?

Note that in the monetarist model these problems do not arise. In the idealised free market you strive to become as big as possible through any possible means. Nothing decides the size of your business other than your success in business.

2. Productivity

All capitalism is exploitation. For the self-employed this needn’t be as bad as it sounds. To exploit your own talent and labour for your own profit is respectable enough. The negative connotation only wakes-up when you employ others to labour on your behalf.

In this sense large businesses with large profits can be seen as places where large numbers of people are exploited at the same time. A thousand workers in an office or factory can be simultaneously squeezed; the surplus labour drained off for re-investment, bonuses and enhanced share-value.

Even when a company or organisation is supposedly non-profit-making the same is necessarily true. You are employed for the bit of extra value you produce on top of your wages – clearly no company would want to employ someone whose productivity only broke-even against their wages, let alone someone whose output failed to even cover their wages.

This fact gives rise to what Marxists call class struggle and monetarists call productivity. They really are the same thing. While it is in the interest of bosses to keep wages low, it is in the interest of workers to keep them high. Low unit prices and high profits are in a perpetual battle with fair pay and good working conditions.

There’s no such thing as a free lunch, as monetarists, Marxists and physicists say. Every extra day’s holiday a union secures for workers is a loss in profit for the bosses. The price of the product must rise, or wages be suppressed, or suppliers be squeezed to cover the extra cost of non-productivity. Something has to give.

Success in business is then intimately linked to success in the class struggle. Profitable companies, those that undercut and outsell their competitors, are those that squeeze their workers the hardest, or employ subcontractors who squeeze their workers the hardest. This is the hideous truth behind the astonishing bargains at Primark and Poundland. Treating people badly can be highly profitable. Paying people peanuts allows you to sell your products for peanuts, and thus bankrupt your competitors.

Given this irreconcilable class-struggle it is easy to see the monetarist case against state intervention in industry. Any government taking over control of a business will face a persistent dilemma: Whose side are you on? Whose corner are you fighting? Are you there to ensure workers’ rights at the cost of productivity, or are you there to maximise profits at the cost of workers’ rights? Or are you there to mediate between the two?

Any government assuming the role of boss will find itself torn in two – desperate to balance company books and keep the business afloat, desperate to keep the workers happy.

Workers are, after all, the majority of the electorate. Furthermore any government attempting to run business is likely to be on the left, and likely to be reliant on the votes and support of trade unions. This was certainly the case for the post war British Labour governments. Every attempt to maintain the profitability of nationalised industries was taken as a kick in the teeth by the very people who got Labour into power.

Conversely every government concession to the workforce is a loss in productivity, an increased unit price in a world where other firms and other countries are making their units cheaper, and perhaps better.

3. Quality

In a perfect world quality and demand would be intimately linked: We would desire and choose the best products to suit our needs and our pockets.

In the real world of course demand is no guarantee of quality. Advertising skews demand to sell trash. It turns mundane objects into religious icons. It manufactures false choices like Coke v Pepsi, and Daz v Persil. It encourages us to assess the quality of identical products and then feel good with ourselves for choosing the ‘better’ one.

Less cynically, perhaps, collective ownership and control of industry has its own distorting effect upon demand, and its own negative impact on quality. In both cases there is pressure to sacrifice quality for a higher goal. With advertising the higher goal is profit. With collective ownership the higher goal is social good.

Recent events in the US car industry illustrate both distortions perfectly. Over the last decade marketing was employed to sell preposterously oversized and overpowered vehicles at premium prices. The worst possible vehicles for the 21st century were transformed into sexy necessities. Now, with the economy shrinking and sales plummeting the US government is bailing-out the manufacturers. Subsidies are being injected to keep the factories open and maintain production of these beasts.

Clearly some intentions here are good. The subsidies are intended to protect jobs, stop people being thrown out of their homes. But equally clearly product quality has been compromised. Already an unwanted unit is being pushed onto the market. But more importantly, in the long term there is now less pressure for these producers to maintain standards.

While subsidies do not guarantee a drop it quality, clearly they do create room for it. If the money keeps rolling in regardless of whether a product sells there is more opportunity for quality to drop. After all, what’s the worst thing that could happen? More subsidies?

And note here that a drop in quality is not merely an inconvenience for the consumer, it’s also a very slippery slope for the producer. Outside strictly protected markets (like those once enjoyed by Lada and Trabant) it is unlikely that the fortunes of such producers will improve. If better quality is available elsewhere custom will follow it.

When a business is run for any goal other than making good quality products product quality will be at risk. If pay keeps rolling-in regardless of how well you do your job what’s the incentive to do it well? If your company stays solvent regardless of whether there is demand for its products why fret about quality? If contracts are guaranteed regardless of whether you innovate, what’s the point in innovating?

In the idealised monetarist model this is not an option. Quality is constantly maintained by the invisible hand of demand. Innovation is spurred-on by the threat of bankruptcy. The only products that get made are products that sell. If they don’t sell the business doesn’t get subsidised, it goes under.

4. Freedom

Everybody wants to be free, it seems, but both left and right claim the monopoly on achieving it.

In part this is due to the different emphasis people place on different, sometimes mutually contradictory, freedoms. One person’s liberty is often another’s bondage. An increase in the highest band of income tax is simultaneously an assault on the freedom of the wealthy and a means of liberating the poor. One person’s freedom to unionise is another’s restrictive working practices. Freedom to choose private healthcare and private education is the flipside of poorly funded social medicine and state education.

But things run deeper than interpretation. The difference between collective and individualist methods for gaining and maintaining freedom signal a profound disagreement about the relationship between production and liberty.

Left collectivists tend to see production as something that needs to be tamed, democratised, regulated, if we are to enhance freedom in other spheres of life. The belief is that if we can liberate ourselves from economic exploitation we will be free to enjoy being human.

But to the monetarist this is completely cart before horse. The attempt to introduce ‘democracy’ into economics would in fact render social liberty impossible. The logic runs as follows: The more the state intervenes in production the more power it inevitably places in its own hands. However benevolent its intentions, if the state owns and controls production it does just that. The power to decide what is made is taken away from the producer. The power to decide what to buy is taken away from the consumer. Supply and demand are divorced from human desire and handed over to experts or committees or dictators who decide for us what we want to make and buy.

Given the economic stagnation monetarists see as an inevitable consequence of state intervention, even minor attempts to steer the economy will set us on the slippery slope to serfdom. As the economy falters the collectivist government’s reflex response will be more of the same. It will further crank-up its grip on the economy and on society in general, spiralling on towards totalitarianism. Inside every Tony Benn beats the heart of Erich Honecker. Or so we are told.

Those then are the arguments. I’ll save my own answers for a third post.

How to avoid the next monetarist consensus

If capitalism survives this crash one thing is certain. The corporate classes will again lobby for the same rules that brought us here. History will be rewritten and it won’t be the unregulated market to blame but the remnants of government intervention. As always with the monetarist religion all errors boil down to the same failing – we didn’t believe hard enough. Again we will be assured that the only root to freedom and economic security is through the economic free-for-all.

Resisting this resurgence will not be easy, any more than last time. The bitter fact is that wealth usually has the power to usurp truth. While it is plain as day that privatisation and deregulation have been disastrous for democracy, liberty and security, the elites that benefit have much louder voices than those who suffer. Monetarist ideology is 99% lies, but its advocates are well connected and have endless resources at their disposal.

The other problem is the remaining 1% - the grain of monetarism that is true. The rational kernel of free-market ideology may be minuscule in comparison to the propaganda that hangs off it, but its logic is potent and appealing. Those who wish to prevent free-market madness from returning would do well to understand that logic.

99% Lies

The first point is plain enough. While monetarism is sold to us as freedom it is in fact a strategy to neuter democracy. All the talk of liberty and free competition is propaganda. The real objective is to keep politics and economics out of the hands of the citizenry and in the hands of the super rich – and it’s worked a treat.

It is bitterly comical to recall that Thatcher won power in 1979 as the champion of the small business. Thirty years on and every high street is reduced to the same cluster of national or global chains. Thirty years of ‘free competition’ culminates in us all being fed by four supermarkets; independent butchers, bakers and greengrocers outnumbered by homeopaths and palmists.

The monetarist might argue, well that’s the free market. There was a fair contest and these four won. But of course the competition never was fair. Obviously those with huge cash reserves can buy and sell cheaper, and bankrupt smaller competitors. But this shows no talent in business only a talent for ruthlessness. And the end results are the antithesis of freedom and competition.

If the consequence of a competition is four indistinguishable businesses and no real choice then clearly there was something wrong with the rules of the game. Any government truly interested in the benefits of the free market would break these behemoths up and run the competition again, with rules to protect the smaller retailers from such vast accumulations of capital (that’s any government truly interested in the benefits of the free market.....)

Similarly the privatisation of public utilities was nothing but corporate theft of public property. Such a grand heist required a thick smokescreen. The propaganda version was that this was a democratic extension of share ownership. A portion of shares were sold, undervalue, to the general public. Those lucky enough to afford a few then saw the share price rise sharply and so sold them on – to the usual suspects. So a tidy profit for those members of the public who already had a few quid handy, and a swift transfer of ownership and control to unaccountable multinational corporations. If you see Sid, tell him.

Similarly, how can a market be free when some of the competitors are lobbying government or bribing government, or actually serve in government? Corporate propaganda, or as it re-branded itself, ‘Public Relations’ is an immense industry with tentacles in every corner of business and politics. No string is left un-pulled to ensure wealth stays with the wealthy, and that democracy never poses a threat to profit.

The central plank of monetarism is that government should keep out of business. For this to have any useful meaning the opposite must also be true – business must keep out of government. Politics cannot be democratic when wealth is allowed to skew opinion and skew elections. A market cannot be free when ministers awarding contracts end up on the boards of the companies that win them. (For the whole horrific history of back-scratchers, businessmen, lobbyists and politicians see Miller and Dinan’s A Century of Spin.)

Finally, the lies that triggered the current crisis, a deceit transparent enough for a child to see through: It doesn’t matter how bad your credit record because property prices just go up and up indefinitely. And no one ever loses their job. What can possibly go wrong?

How ever did such lies and idiocy become the orthodoxy? It all comes down to self-interest, self-delusion, and a wilfully naïve interpretation of ‘laissez-faire’. This monetarist slogan roughly translates to ‘let do’, specifically, ‘let the economy do’; let business run itself, with minimal state intervention. Monetarists argue that this is the key to prosperity and security, and indeed the only way to protect individual liberty.

The validity of this belief will be the subject of part-two. To finish here, it can be seen that the lies and chaos of the past thirty years can be traced back to this naïve interpretation. To mix the Frenchisms, ‘laissez-faire economics’ was translated as ‘carte-blanche for capitalists’. Everything for sale to the highest bidder. From bin-collection to building societies, the only relevant qualification to own or run anything was money.

And should anyone query this wisdom a reflex answer was to hand: Stop interfering. The market will provide. Anything else will lead to low productivity, un-competitiveness, perhaps even lead to another Stalin or Hitler.

Although the lie was vacuous and transparent, as long as enough of the right sorts of people were doing well out of it there was nothing to stop it spreading. To the last minute government and media were still nosing it along. As calamity loomed dissenting voices were still labeled heretical, part of any problem, snuffed out.

Only when the banks failed did the expressions change. Brows once fixed in certainty now feigned surprise: Who would have thought unrestrained corporate slash-and-burn could result in economic disaster?

Overnight, heresy became necessity. Suddenly it was fine for governments to intervene in business, essential in fact. All talk turned to checks, balances, interventions and bailouts.

The monetarist ‘consensus’ was just a confidence trick. The scam held as long the economy could bear it, but the game is well and truly up. The artists and their shills are laughing on the beach. The mugs, the great mass of us, prepare to meet the costs in tax, employment, housing, public services, health, hunger, warfare, ecological breakdown and a swathe of other uncertainties.

The free market promised wealth, security, and liberty and then led us to the abyss. But all will be forgotten should the economy ever recover. We’ve been here before, after all. Monetarism will re-emerge, probably under a different name, but making the same demands. It will be advocated by the same self-interested parties and have the same financial backing. That’s the self-generating power of privatisation. It makes some people very rich. They can then use those riches to campaign for more privatisation.

Nevertheless there’s one weapon in the free-marketeers arsenal with more to it than wealth and power. Mention of it is likely to prompt more cries of heresy, this time from the left. It’s the 1% of monetarist ideology that is merits examination, and that’s the subject of part two.