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
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,
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 was 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
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
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.
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