Monday, July 08, 2024

Nothing to get excited about


Reporting the result of last month’s general election, Reuters said ‘Keir Starmer returned the Labour Party to power’. ‘Power’ is not the right word as it suggests that being the government gives its members more control than they actually have and in fact generally believe they have. It suggests that they have the power to control the economy and make it work as they want. However, the capitalist economic system operates according to economic laws which are beyond the control of governments, however resolute or well-intentioned those who compose them may be.

Of course governments are not completely powerless. There are some things they can do. They control the armed forces and other means of coercion. On the economic field they can control the issue of the currency, levy taxes, grant subsidies and impose tariffs. But they do not control and cannot control the way the economy works. They can pass laws and draw up plans about economic matters but this does not mean that these laws and plans can be implemented as envisaged nor, if they are, that they will have the intended effect. Capitalism is an economic system that operates according to its own economic laws which governments ignore at their peril.

These economic laws can be summed up as:

— the capitalist economy is an integrated world economy; there is no ‘British economy’ or ‘German economy’ or even ‘American economy’. What exists is a world capitalist economy which dominates all countries.

— since government activity does not produce any wealth, all the resources consumed by governments, whether for ‘defence’ or social reforms, have to come from the surplus over costs created in the productive sector of the economy, whether private or state.

— the private sector is motivated by the search for profits since these are its source of funds which private enterprises need to continue productive activity; in fact, making a profit is the only reason why this sector produces anything.

Given this, it is more accurate to say that when a party wins an election and gets to form the government what happens is that they come into office. Members of their party replace as ministers members of the outgoing party. It’s a replacement of decision-making personnel, but personnel without the power to make the economy work otherwise than it does.

It would be a rhetorical flourish to describe them as office boys since they do have more decision-making power than that. A better term would be that are the middle management of the world capitalist economic system. Like middle managers they are given a remit from above with some leeway as to how to implement it. In the case of governments the remit is to apply the economic laws of capitalism that dictate that priority must be given to profits and conditions for profit-making. Although the economic laws of capitalism are impersonal they are not self-enforcing but require personnel to enforce them, and this is what governments are alongside the executives of business enterprises.

All that happened on 5 July was a change of middle management. Nothing to get excited about.

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