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Monday, March 30, 2009

Capitalism is working!

Your eyes are not deceiving you - read on!

The Times (9 March) carried an article by Eamonn Butler, the director of the Adam Smith Institute. Yes, they are still around, even if it might be thought that they would be keeping a low profile these days, given that the pursuit of profit has yet again led to overproduction and a financial and economic crisis, a really big one this time.

Butler began by quoting a speech by an American professor called Boettke at a recent gathering of Mad Marketeers in New York:

“If you bound the arms and legs of gold-medal swimmer Michael Phelps, weighed him down with chains, threw him in a pool and he sank, you wouldn't call it a ‘failure of swimming'. So, when markets have been weighted down by inept and excessive regulation, why call this a ‘failure of capitalism'?”

That depends on what you mean by capitalism. Boettke seems to mean the spontaneous operation of production for profit and the market. But that’s not really capitalism; it’s just a policy that some capitalists (and their paid and unpaid publicists) have favoured at some times.

Capitalism is a system of production for sale on a market with a view to profit. Ideologists such as Butler and Boettke are assuming that there is some irreconcilable conflict between the profit system and government intervention. But there isn’t. Capitalism has never existed without government intervention and never will. For a start, it is based on the exclusion of the majority from the ownership and control of the means of production, which are monopolised by a profit-seeking minority. A state is needed to maintain this exclusion. This has to be paid for, so taxes have to be levied. Capitalists in one country are in competition with capitalists from other countries, and governments have always intervened to help “their” capitalists with tariffs and subsidies and, if need be, by military action.

So, capitalism and the state are not incompatibles. They go together. What is true is that the consensus of capitalist opinion varies at times as to the desirable degree of government intervention. What seems to be annoying the Adam Smith Institute today is that their ideological rivals, the Keynesians, who have no qualms about government intervention in the capitalist economy, are making a come-back because of the present crisis.

“Up to now”, Butler wrote, “the Keynesians have made the running. Greed, they say, has brought down the world economy. Only massive public spending can revive it”. If by “greed” Butler means the pursuit of profits, the Keynesians are not against that, even if they certainly are in favour of trying to spend the way of the crisis. But that’s just an alternative policy for the profit system to the one favoured by the Adam Smith Institute. It’s not a negation of capitalism.

Butler proffers his own explanation for the crisis: “excessive regulation” (of course). This assumes that, without this, the crisis would not have occurred. He rather undermines this approach by concluding his article by saying that “occasional crises are the cost of the prosperity that entrepreneurial capitalism brings”.

So, crises are going to occur anyway, even in his ideal, unregulated capitalist world! And what, without excessive regulation to blame, would they be caused by if not by the pursuit of profits leading to overproduction in some sector in relation to the market, from which the only way out is a crisis to eliminate the lame ducks and the deadwood, as capitalists like to refer to their inefficient colleagues? In this sense, Boettke is right. This and other crises don’t represent the “failure of capitalism”, but capitalism working normally.

(Socialist Standard, April 2009)

4 comments:

  1. Anonymous4:40 pm

    These "libertarian freedom lovers" certainly, as you perfectly demonstrate, have enough contradictions to fill even the biggest of notepads.

    At least they don't have the public on their side. Only a non-existent God could save us otherwise. I would seriously question the sanity of any proletarian who joint their ranks, the same way I would question a slave who, with the prospect of equal rights, fought against his emancipation.

    With the Ron Paul "revolution" I seriously worry for the future of the working class.

    Well described indeed; the state functions merely to keep the product of Capitalism, namely; inequality.

    Anyway, thanks for a great article.

    ReplyDelete
  2. "These "libertarian freedom lovers" certainly, as you perfectly demonstrate, have enough contradictions to fill even the biggest of notepads."

    Nope. Socialists have so many contradictions. Like...
    FREEDOM IS SLAVERY

    "I would seriously question the sanity of any proletarian who joint their ranks, the same way I would question a slave who, with the prospect of equal rights, fought against his emancipation. "

    Actually, I am saying this to you.

    "With the Ron Paul "revolution" I seriously worry for the future of the working class. "

    Ironically, such a prospect would actually benefit the laborers.

    "the product of Capitalism, namely; inequality."

    But inequality is a good thing! Unless its garnered by illegitemate force, such as THE STATE!

    ReplyDelete
  3. Anonymous1:43 pm

    "Nope. Socialists have so many contradictions. Like...
    FREEDOM IS SLAVERY"

    Where am I advocating slavery? I understand that by definition freedom can only exist in a stateless classless society - hence I am a communist.

    "Actually, I am saying this to you."
    What such emancipation am I opposing?

    "Ironically, such a prospect would actually benefit the laborers."
    How? By allowing corporations to act exactly how they wish in the infinite quest for profits?

    "But inequality is a good thing! Unless its garnered by illegitemate force, such as THE STATE!"
    In a capitalist mode of production it is the state which keeps the inequality. Capitalism can exist if and only if there exists a state.

    ReplyDelete
  4. "Where am I advocating slavery? I understand that by definition freedom can only exist in a stateless classless society - hence I am a communist."

    Actually, communism, in order to exist, requires coercion and enslavement, unless everyone magically agrees with it. Otherwise, people will be free to do what they wish, trading at will and such.

    "What such emancipation am I opposing?"

    The emancipation of ending the state.

    "How? By allowing corporations to act exactly how they wish in the infinite quest for profits?"
    It is good because it stops hampering the restrictions on the laborers by laws, and allows laborers to benefit from increased productivity once the state is gone.

    "Capitalism can exist if and only if there exists a state."

    Actually, trade (the requirement for capitalism) can exist independent from a state.

    ReplyDelete