by Michael Roberts
Last weekend, I attended a symposium hosted by CLASS, the Centre for Labour And Social Studies (clever acronym, eh?). This is a left-wing think-tank in the UK funded by various large left trade unions in Britain (http://classonline.org.uk/). It aims to promote a better analysis of the nature of the capitalist crisis in the UK and policies to defend the interests of the majority.
I have referred to the activities of CLASS before when it was first started up. See my article in Socialist Review in April 2013 (http://socialistreview.org.uk/379/whats-wrong-keynesian-answer-austerity). My main complaint then was that CLASS, in its excellent attempt to oppose the ideas and policies of mainstream economics and the right-wing UK government, relied entirely on the Keynesian ‘alternative’. For this criticism, I got some flak from the radical wing of ‘post-Keynesian’ economists in Britain (see my post, http://thenextrecession.wordpress.com/2013/04/08/meeting-keynes-meadway/).
Well, the latest conference was no different. Entitled “What Britain Needs”, the main theme was to challenge the “inequalities in wealth and power”. Inequality has become the buzzword among leftist thinking in the major economies in the recent period. That’s for two reasons.
The first is that inequality of wealth and income has risen significantly in the past 25 years in the major economies to levels not seen since the 19th century. Thomas Piketty has demonstrated this development in magisterial detail in his best-selling book, Capital in the 21st Century (see my numerous posts, http://thenextrecession.wordpress.com/2014/04/15/thomas-piketty-and-the-search-for-r/). And the recent Credit Suisse report on global wealth, among others, has shown the extreme extent of inequality globally (http://thenextrecession.wordpress.com/2014/10/15/global-wealth-1-own-48-10-own-87-and-bottom-50-own-less-than-1/).
But the other reason is that mainstream economics and much of heterodox economics, including post-Keynesians, want to see inequality of income and wealth as the contradiction in modern capitalism (http://thenextrecession.wordpress.com/2014/05/19/david-harvey-piketty-and-the-central-contradiction-of-capitalism/) and, more than that, as the main cause of the Great Recession that hit capitalism globally in 2008-9 (see my post, http://thenextrecession.wordpress.com/2014/08/13/inequality-the-mainstream-worry/).
I have dealt with these arguments in various places on my blog and in various papers (http://thenextrecession.wordpress.com/2014/03/11/is-inequality-the-cause-of-capitalist-crises/). It is my contention that, while inequality is part of all class societies and thus is also endemic to capitalism, it is not the central contradiction of the capitalist mode of production and so not the reason for recurring capitalist slumps and the failure of capitalist production to meet the needs of the majority. The central problem is not the distribution of wealth and income after it has been created by labour. Instead it is the mode of production itself: production for the profit of the owners of the means of production against the social need of the majority. A profit-making mode of production is the key contradiction, not inequality.
This Marxist view gained no voice at the CLASS symposium at all. The main speakers at the plenary session outlined the shocking state of Britain: inequality; failure to grow; falling incomes for the majority; the decimation of the welfare state and public services through privatisation and austerity etc. But what was the alternative solution?
For Professor Doreen Massey it was to get out into the streets and buses etc and combat the ruling neoliberal propaganda that dominated the minds of the public and led them to support immigration controls, reduced welfare benefits and balancing the budget. The assumption here was that we ‘left academics’ knew that neoliberal ideas were nonsense but that the media has brainwashed the masses. Yet all proper public opinion polls in Britain show overwhelming opposition to privatisation; for a defence of the national health service and state education; and even for renationalisation of transport, energy and other utilities (see my post, http://thenextrecession.wordpress.com/2013/11/05/oh-dear-what-are-the-british-people-thinking-of). It is not the British people who have been brainwashed into accepting ‘neoliberalism’, but the leaders of the labour movement.
This was confirmed when Angela Eagle, the Chair of UK’s opposition Labour Party, spoke to tell us that the rising inequality and neoliberalism of the last 29 years (since Thatcher) was appalling, quietly forgetting that since 1979, Labour had been in government for 13 out of those 29 years. Under PMs Blair and Brown, Labour governments supported deregulation of the financial sector, bringing market forces and private capital into the NHS, reducing taxes for the rich (Labour leader, Peter Mandelson: “we are intensely relaxed about people getting filthy rich. . . . as long as they pay their taxes”).
Eagle admitted that Labour had accepted the neoliberal consensus in the past, but now we must build a ‘new consensus’. You might ask: surely we must aim to break with the ruling consensus not build a new one? But there was a clear hint in what Eagle and another main speaker, Will Hutton, the former editor of the Observer and now a principal of an Oxford college, said, namely that, such are the terrible levels of inequality now in Britain, that some members of the ruling class or the establishment (that they had been talking to) were also worried. So it may be possible to form a new ‘consensus’ with them against the Tory government and neoliberal policies. Presumably this would be an alliance with ‘good-thinking’ rulers and the working class against ‘bad-thinking’ rulers.
Hutton did say that the reason for the crisis in the British economy and its failure to deliver for the needs of the majority was not so much inequality per se but the question of ‘ownership’, i.e. how companies are owned and controlled. He exclaimed that Clause 4 in the Labour Party constitution that called for a socialised economy and had been dropped by the Blairite leaders of New Labour was correct and should be restored. That sounded promising but then Hutton explained what he meant by social ownership, namely better company law so that workers and shareholders control their bosses and “designing markets for the people”. You see what was wrong was that Britain was a “dysfunctional” capitalist economy. By implication, he was saying that if we could get it ‘functioning’, capitalism would be fine. This was a familiar theme from Hutton, who had put a similar position at the recent Rethinking Economics conference in London (see my post, http://thenextrecession.wordpress.com/2014/06/30/rethinking-economics/).
In the many working papers written by various economists and others for CLASS, one by Stewart Lansley came into view (http://classonline.org.uk/pubs/item/rising-inequality-and-financial-crises). Called “Rising inequality and financial crises: why greater equality is essential for recovery”, Lansley argues that there is a strong link between rising inequality and instability in capitalism, citing the examples of rising inequality just before the Great Depression of the 1930s and now before the Great Recession. The reason Lansley presented is the classic one floated by Keynesians and even mainstream economists that, if wages are held down and all the income goes to the rich, consumer spending falls, causing a collapse in ‘effective demand’. Also households resort to borrowing more, creating debt or credit bubbles that eventually cause a financial crash. Again, I have dealt with this view of the cause of the Great Recession in several posts (http://thenextrecession.wordpress.com/2014/06/28/its-debt-stupid/).
One of the implications of this ‘inequality’ view is that each major capitalist crisis can have a different cause. As Lansley admits, the crisis of the 1970s was not due to a lack of wages, but in that case because “wages have grown too quickly”. This neo-Ricardian view of crises revolves round the idea that it is the wage/profit share that matters: so some crises are caused by workers having ‘too high’ wages. It is very much the same idea that we get more sophisticatedly from post-Keynesian economists like Ozlem Onaran, who also spoke at the CLASS symposium, namely that the Great Recession was a ‘wage-led’ crisis (i.e. wages are too low) while the 1970s crisis was ‘profit-led’ (wages too high?) – see her new paper for CLASS, (http://classonline.org.uk/pubs/item/state-intervention-for-wage-led-development). There is no mention here of the law of profitability that Marx expounded to explain recurring crises under capitalism.
The ‘wage-led’ distribution theory leads to what Lansley concludes: that if we get the ‘right’ level of wage share, then capitalism will be fine. As he puts it: “the great concentrations of income and wealth need to be broken up and the wage share restored to the post-war levels that brought equilibrium and stability”. Apparently, British capitalism was fine just after the war due to the right ‘wage share’ and level of inequality – ah, those golden years of enforced 1940s austerity.
In one of my posts on this view of inequality, I asked the question: do the proponents of inequality as the main cause of crises (or at least this crisis) think that redistributing income or wealth would be sufficient to put capitalism on the road to growth without any further catastrophic slumps? Or do they agree that only replacing the capitalist mode of production through the expropriation of the owners of capital and the establishment of a planned economy based on ownership in common can do the trick? Lansley apparently thinks the former and so do the speakers at CLASS it would seem.
The piece above is another excellent post from Mike’s blog, here.