A Future That Works

A Future That Works
NO2aTory/Liberal coalition - Vote with your feet for an alternative to a neo-liberal economy and neo-conservative state Yes2aLeftFront and a Red/Green Left Alliance

Saturday, 29 January 2011

Theories and practice of capitalism


The laissez-faire economic ideology that opposes any governmental regulation or interference in the market beyond a minimum necessary for a free-enterprise to operate according to the laws of the free-market, Darwinism is used by the neo-liberal capitalist theory to justify free competition and the ‘survival of the fittest’ being applied to capitalism.


Liberals and conservatives oppose socialism and social-democracy and the collapse of the Soviet Union has been used as a validation of neo-conservative ideology. The Neo-conservative agenda has been dismantling the compromise between capital and labour and welfare-capitalism, with the capitalist state protecting capitalism from the threat of socialist and social-democratic movements and socialist states.


Keynes saw a need for governments to manage the economy after the Depression of the 1930’s, the Golden Age of welfare-capitalism existed from 1945 up to 1975. This period came to a close with economic stagflation of the mid 1970s. And gave rise to the resurgence of classical laissez-faire economic theory with the Reagan and Thatcher governments in the 1980’s. The global financial crisis of the 21st century has brought a revival of neo-Keynesian economics theories which have been adopted by the Obama and Brown governments to rescue international finance capitalism from collapse.


  1. Adam Smith’s Invisible Hand

    A man pursuing his own self-interest is 'led by an invisible
    hand to promote an end which was not part of his intention.
    Nor is it always the worse for the society that it was no part of
    it. By pursuing his own interest he frequently promotes that of
    the society more effectually than when he really intends to
    promote it.'

    (The Wealth of Nations, 1776)

  2. Rational choice theory

    Is a framework for modelling social and economic behaviour, Scientific modelling is the process of generating abstract, conceptual, graphical and mathematical models.

  3. Milton Friedman (31/07/1912 –16/11/2006) His neo-liberal/neo-conservative methodological was accepted by mainstream economists and politicians in the late 1970’s, and his monetary policy, privatization and deregulation formed the policy of both Reagan in the USA and the Thatcher conservative government and later accepted by the Blairite New-labour government in Britain. Has this been a success or is there a better theoretical model for capitalism?

  4. Your Money or Your Life! The Tyranny of Global Finance (Pluto Press)

    Marxist Eric Toussaint's proposes a Tobin and wealth tax. He also argues that greater democratisation is needed so that workers can set the political and economic agenda plus democratic control of money and credit.

    CADTM Belgium (Committee for the Abolition of Third World Debt

  5. http://www.cadtm.org/The-1930s-to-the-1970s-liberalism



  6. 18 October 2009
    Milton Friedman
    The video "You Tube" censored… AGAIN

    Brussels, 18.10.2009 - Far beyond being compulsorily promoted eminent scientists, winners of Nobel prizes or pioneers of any real civilization breakthrough for the better, certain personalities serve in each epoch no other than the ideological construction that dominant forces always need as a background to impose their paradigms. More

    Let’s revisit the neocons' guru and Nobel Prize Milton Friedman in times of economic crisis. Fortunately we kept a copy of the clip and challenge any "illegality" about putting it online again.
    That’s a short clip about:
    "Other people's money" and "carefully" spending it...

    (Remember bank’s collapse?)


  7. Let’s revisit the neocons' guru and Nobel Prize Milton Friedman in times of economic crisis. Fortunately we kept a copy of the clip and challenge any "illegality" about putting it online again.

    That’s a short clip about:
    "Other people's money" and "carefully" spending it...



  8. (1) declining real wages for most workers and other austerity measures, as well as exporting the crisis into the 3d world, and

    (2) a mountain of debt – mortgage, consumer, government, corporate – to paper over the sluggishness and mitigate the effects of the declining real wages.

    Thus there have been persistent debt crises, and these will continue until:

    (a) sufficient capital is destroyed (in value terms and physically) to once again make investment truly profitable – the present crisis may well end up being this moment, or

    (b) there’s such a panic (“liquidity lock,” as a Fed official recently called it) that lending stops and the economy crashes, ushering in chaos or fascism or warlordism or whatever, or

    (c) capitalism is replaced by a new human, socialist society.






  9. UN warns of 'double-dip' recession Thursday 3rd December 2009

    The United Nations warned on Wednesday that the world could suffer a double-dip recession if governments prematurely withdraw stimulus measures.
    In the run up to the launch next month of the World Economic Situation and Prospects 2010 (WESP) report, top UN official Rob Vos stressed that "we're not out of the woods yet."
    Mr Vos said that any recovery in the second half of 2009 was largely due to the hefty stimulus packages and that winding these up due to concerns about mounting fiscal deficits and levels of public indebtedness could lead to a "double dip recession."
    "At this point, there is no other source of demand to keep the economies going," he argued.
    The WESP report notes that while an increasing number of countries showed positive growth since the second quarter of 2009 and the recovery momentum continued to build in the third quarter, "because of the steep downturn in the beginning of the year, world gross product is estimated to fall by 2.2 per cent for the year 2009."
    The report warned that "the recovery is uneven and conditions for sustained growth remain fragile."
    It noted that firms have mainly begun to restock inventories, rather than respond to stronger consumer or investor demand.
    The report also cautioned against potential risks from a widening United States deficit and mounting external debt, which could cause a "hard landing of the US dollar and a new wave of financial instability."
    "We're not so much concerned if the dollar weakens further," Mr Vos declared.
    "What we're concerned with is the volatility. That's bound to upset markets and will make markets more reluctant to supply credit," he added.


  10. If the V is a 'double-dip' W recession it could turn out to be a VW or WW and if this happens and the Tories get back into power in 2010 we can expect class war against the working class of Britain not seen since the 1930’s then we will need Left Unity to fight and defend the working and living conditions of the people in Britain against exploitation and falling standards of health care, education and public services.

  11. UK economy still vulnerable to outside shocks, Bank of England warns 23rd December 2009

    The Bank of England today issued a stern reminder that Britain remains vulnerable to shocks from other markets such as last month's Dubai debt crisis that badly dented fragile investor confidence in an economic recovery.

    Figures for American GDP were revised down for a second time today. Originally, Washington said the world's biggest economy grew at an annual rate of 3.5% in the third quarter but last month cut the estimate to 2.8%. And officials announced that the economy grew at an annual rate of 2.2%.

  12. Con-Dem economics

    David Cameron says ‘setting out the coalition strategy for economic growth that will turn our economy around. That task begins with the budget deficit’ It’s estimated that cuts will reduce employment by between 50,000 and 100,000.
    Reducing expenditure by £5.7bn doesn’t reduce the budget deficit by an equal amount because taxes on income and expenditure of people who have lost jobs are lost to the treasury plus the government has to pay the unemployed benefits to survive so the probable saving is about £2bn.

    If every country in Europe reduces its budget deficit by cutting expenditure it will not cut the actual budget deficit much but will increase unemployment across Europe and therefore reduce economic demand for goods as employment and incomes fall, budget deficits will get worse not better because lower tax revenue. This is what happened in the 1930’s and 1980’s, its purpose is to reduce the political and economic power of the working class and further the power and wealth of the capitalist elite.

    The left needs to unite against the neo-liberal and neo-conservative capitalist attack on the working class and lower middle class. The capitalist elite understand the class basis of political economy, the working class need to relearn the politics of class struggle to protect working conditions, living standards and their democratic freedom.

  13. The Enigma of Capital


    The Crises of Capitalism


    Economic Crisis


    Class and Class Struggle


  14. Naomi Klein – Disaster Capitalism


    Naomi Klein – The Shock Doctrine







  15. Does capitalism suck? If you are part of the rich minority – no, if you are part of the worlds majority – Yes it sucks, if you are part of the labour aristocracy in the developed western world it was ok, but wait when the neo-liberals and neo-conservatives are finished their project it’s going to suck for you too.

  16. G20 summit: Rifts in Toronto as US warns EU of double-dip recession risk

    'Cameron tried to avoid the appearance of lecturing other states on economic policy'

    'Obama said that he wanted to see the G20 recognise that the world economy was inextricably linked, and that the task was to promote growth'


  17. 21st century depression

    Keynesian economist Paul Krugman writes

    ‘We are now, I fear, in the early stages of a third depression’ following those of the late 19th century and of the 1930s


  18. The Great American Bubble Machine as seen through the eyes of Rolling Stone Magazine


  19. Keynes Versus Hayek, 1932


    Paul Krugman

    A spectacular find: dueling letters from Keynes and associates, on one side, and Hayek and associates, on the other.


    Three reactions

    First, Hayek was as bad on the Depression as I thought. The claim that “many of the troubles of the world at the present time are due to imprudent borrowing and spending on the part of the public authorities” — in 1932! — is bizarre. The claim that barriers to trade and capital movement were what was preventing recovery is as crazy as … as .. claiming that we’re in a slump because workers decided to take a break in the face of prospective Obama tax hikes.

    Second, Keynes pretty much had the policy implications of the General Theory down long before he actually worked out the detailed analysis. I’m especially struck by the way he grasped, right from the start, the point that if higher private spending expands employment in a slump, so does higher public spending.

    Third, it’s deeply tragic that we’re having to have this debate all over again, as the world economy slides into deflation and stagnation.


  20. David Harvey BBC Hardtalk interview, 2010




  21. It’s fairly obvious that a growth rate of 3% for global capitalism is no longer sustainable, the market, new areas and resources and workers to exploit or the environment on planet earth are all now putting limits on the possibilities for capital accumulation.

    In the 1980’s and 1990’s fictitious capital based on property speculation along with privatization of state assets were used to hide the need for greater debt to finance the growth required to sustain the capitalist system.

    When the system crashed in 2008 the capitalist elites solution as always was to make the working class take on the burden of debt, so that the capitalist class can maintain and even increase its wealth and power. Now that the banks and capitalist class are making huge profits again there is no talk of reducing the burden on the working class.

    What is the Left-Wing response? People are angry they see a corrupt broken system, bankrupt both financially and morally, only socialists can offer a solution for the people of Britain, Europe and globally to the social, political, economic and environmental crisis that has been created by capitalism. We have a straight choice between the collapses of capitalist system into continual wars for limited resources so that a minority can maintain their elite position at the expense of the majority on planet Earth. This is the right-wing conservative and liberal solution to the crisis of global capitalism, gated communities for the rich, increasing state, police and military power over the majority of the world’s population. We have had the classical liberal and conservative phase of capitalist development then in response to the socialist project in the 20th century we had the Keynesian phase of welfare capitalism and since the slow collapse of the socialist states started in the 1980’s we have seen the rise of liberal and conservative ideological theory and practice with increasing intensity of neo-liberal and neo-conservative solutions to the crisis of capitalism since the collapse of the Soviet Union. The capitalist class will never willingly give up its power and wealth from exploitation of the Earth’s resources and the majority of the world’s population, so what has to be done?

    Only a coalition of the left will have the social, economic and political power to replace capitalism with a sustainable socialist system based on production for human needs rather than production for profit.

  22. It was Karl Marx who said Capital needs a reserve of labour power that is flexible and docile so it can be manipulated, and that labour power is a commodity just the same as a raw material, machinery or energy. The working classes have to sell their labour in order to live. Over the last thirty years it’s estimated that an extra 2 billion people have become waged labourers, for capitalism to grow all the factors of production need to grow raw materials, machinery, plant, energy and labour. At the moment there is a global surplus of labour but the other factors aren’t growing equally or are becoming more difficult to maintain so that capitalism can expand. Mass unemployment in the developed world over the last thirty years has made the working class more flexible and lowered real wages when inflation is taken into account. Once the effect of globalization has increased the labour force capital will require other means of increasing the labour supply such as increasing the retirement age from 65 to 70 or 75, this along puts more workers in competition with each other both globally and locally. So for the foreseeable future there is an abundance of labour supply locally and globally what will restrict economic growth for capital will be the limits set by the Earth itself for raw materials and energy. This has been called the ‘second contradiction of capitalism ‘capital-nature’ relationship, the first contradiction being the ‘capital-labour’ relationship.

    The second contradiction constitutes the natural limits on exponential accumulation of capital. Energy requirements grew from the 1750’s as the capitalist system and industrialization developed. Firstly coal replaced wood and water as the source of energy with increase mechanical power from the steam engine in the 19th century then in the 20th century we saw oil, gas and electrical energy and power replace coal and steam power. These energy sources allowed the land to be used to greater efficiency for food production as well as increasing the productive capacity of manufacturing. In the 21st century we have a conflict between the supply of energy, raw materials and food as the oil and gas supply runs out or gets harder to obtain. If the energy supply comes from bio-mass to produce ethanol this will reduce the land available for food production (450 pounds of corn are required to produce 25 gallons of ethanol). Therefore the contradiction between the need for energy and the need for food will put physical limits on the ability for capital accumulation and profit bringing the needs of capitalism increasingly into conflict with the needs of humanity.

  23. The Crisis - Where did it come from? Whats the solution? - James Meadway Counterfire


  24. Joel Kovel on Eco-Socialism




  25. Signals flashing red by Michael Meacher

    The chances of a double-dip recession are growing every day, and are now more than 50-50 likely. The ONS has just announced that the 2008-9 meltdown drained £22bn out of the economy, forced up unemployment by hundreds of thousands, and with a 6.4% slump in UK output was far worse than 5.3% in the Eurozone and 3.8% in the US. The 2.6% pre-budget growth forecast for 2011 was cut post-budget by the OBR to 2.3%, and now has been lowered further still by the IMF to just 2.1%. The faltering rise in UK output in the spring seems to have halted, and the rise in house prices has petered out or even fallen. The key engines of growth – household spending (even before the rise in VAT) and exports – are both down. So what is Osborne’s response?

    On top of all this, net bank lending continues to be negative. Alistair Darling lent hundreds of billions of pounds to the banks so that they could onward lend to private businesses at the level, as Gordon Brown said at the time, before the 2007 downturn (i.e. an M4 money supply rate growing at 20% a year). That lending is now at the lowest rate since records began, and clearly shows the banks are pulling down the hatches ready for a renewed and deeper recession whilst pocketing the enormous public subsidies (thank you, taxpayer) to tide them over the worst.

    The Tories are now hoist on their own petard. They and their quisling OBR have been asserting that the space created by the vanishing public sector jobs will be more than filled by an upsurge in private sector job creation. Don’t they get the basic Keynesian insight that business doesn’t invest unless the level of demand indicates the prospect of profitability? It is a deep irony that with the private sector flat or falling back, the Tories are now determined to decimate the one element of relative buoyancy in the economy on which the private sector depends for 40% of its contracts. The public sector is about to be hit not only by a big rise in VAT, but also by a 25% cut in the Government’s £650bn a year public expenditure, with possible cuts in some cases up to 40%. If this isn’t cutting off your nose to spite your face, I don’t know what is.
    So what is plan B? Slasher Osborne doesn’t have one because he thinks it’s unnecessary. But simply concentrating on an imagined supply side revival whilst at the same time hammering the demand side in both the public and private sectors is not a recipe for recovery, but a sure sign of a double dip.

  26. If we needed more proof of the crisis that British capitalism is in here it is as a fall in service sector orders increases the evidence that we are heading for a double-dip recession


  27. More evidence from the IMF for a double dip in Britain's property market ‘housing demand fell and prices receded after the recent expiry of these incentives’ and that demand in the British housing market has slackened off and remains half what it was before the financial crash. The IMF has also stated that debts stopped growing in 2009 in Britain and the USA but debt ratios remain too high.

  28. After the Second World War the capitalist democracies adopted Keynesian economic strategies which along with what have come to be known as welfare capitalism seemed to resolve the contradictions between capital and labour within a social-democratic compromise between the capitalist elite and the working classes. By the 1970’s the compromise began to break down and the physical limits of economic expansion started to put limits on the prospects for capital accumulation within the advanced capitalist states.

    The Cuban economist Osvaldo Martinez has said that we have a global economic crisis of overproduction and insufficient demand and combined with the financial crisis of global capitalism this has created a social and ecological crisis which can only be solved by adopting a socialist mode of production. The growth of the virtual economy concealed the limits of expansion in the real economy what Marx called the crisis of overproduction. In the 1980’s the real world economy was in recession, the way out of this for the capitalist elite was to expand the virtual economy by deregulation of the financial markets. By end of the 20th century this was insufficient to disguise the contradictions within capitalism and its need for exponential growth to maintain the system.

    The sub-prime mortgage crisis of 2008 in the USA triggered the global financial crisis, unregulated debt-consumption inevitably lead to a financial crisis in fictitious capital accumulation with virtual economy out of balance with the real economy creating excessive financial market liquidity and increased instability in the financial markets so the root cause of the current crisis can be said to be neo-liberal deregulation of the financial markets. As governments no longer have macro-economic control of economic and financial systems, so the root causes of the current crisis is free market capitalism.

    Also the financial crisis in the global economy coincided with the downward cycle of a Kondratiev long wave, as it did in the 1930’s Depression so the real economy and virtual economy together created a deep recessionary period as it did after the Wall Street crash of 1929. Marxist analysis points to financial speculation facilitating economic expansion and excessive credit expansion causing overproduction. Marx said that products and overproduction of goods are different things because one is the limits of capitalist production for profit the other is the production things that satisfy human needs. A classic example is the demand for housing that exceeds supply but a lack of demand caused by contradictions between the real need for housing and the need for profit within capitalism.

    What is needed is for a system based on production that satisfies human needs not a system that requires exponential economic growth to satisfy the need for profit within capitalism. If the Ed Miliband effect [Ed M (E)] can create a real shift from neo-liberal/neo-conservative ideology in the Labour Party the broad left could see the prospects for a Left-Labour government in 2014 or 15. If this is the case Ed M (E) will not just equal No2ConDem’s but Ed Miliband effect [Ed M (E)] will equal both a qualitative and quantitative change in the prospects for a left alternative strategy for Britain when the next election comes. The cuts proposed by the Conservative/Liberal government will only make the people of Britain bare the cost of the economic crisis, but cannot solve the crisis financial crisis of the virtual economy or the crisis overproduction within capitalism.

    This government seeks to solve the crisis of capitalism in the same way that the national government of the 1930’s did, it didn’t work then and it won’t work now, all it will achieve is to make the recession more prolonged. What is needed is a Left Alternative Strategy.

  29. The millionaire heir to the baronetcy of Ballentaylor will announce cuts of £83bn from government spending but where?

    who rips off the system most, he claims that £1.5 billion is swindle from the £180bn spent on welfare which is peanuts compared with the estimated £75bn Britain's rich and corporations fiddle from the system in tax avoidance each year, not far from the £83bn of cuts planned by George Osborne.

    Possible savings

    Charging patients £20 to visit their GP would raise £1.1bn

    Cut winter fuel payments to wealthier pensioners: £1.3bn

    Stop using management consultants would save £2bn

    Withdraw from Afghanistan immediately would save £2.6bn a year

    Scrap Trident would save up to £34bn

    Abolish the Royal Family would save £38m a year

    Which of these will he actually do?

    My guess is charging patients £20 to visit their GP and cut winter fuel payments to wealthier pensioners

  30. ‘We are desperately in danger of a double dip and the last thing you do in a recession is make things worse’ (David Blanchflower Mon 18 Oct 2010)

    David Blanchflower has said that the British economy is in ‘desperate danger’ of going back into recession and the Conservative/Liberal governments spending cuts will make it not just more likely but worse. Marks & Spencer chairman Sir Stuart Rose and BT’s Ian Livingston have given their support to the cuts proposed by Tory Chancellor George Osborne saying there is ‘no reason to believe’ the chancellor's plan to eliminate the structural deficit within four years will undermine the economic recovery. David Blanchflower has said that business leaders ‘are not economists, it's a terrible, terrible mistake’ describing the public spending cuts as the ‘greatest macro-economic mistake in a century’ adding ‘the last thing you do in a recession is make things worse’ and that the Tory/Lib-Dem governments backup plan appears to be quantitative easing by the Bank of England if we get into a deep recession, but David Blanchflower says additional quantitative easing may not help the economy fast enough this time.

    Labour Shadow chancellor Alan Johnson has said the Banks should pay extra £3.5bn towards deficit and that the government's plans for a bank levy were ‘inadequate’ compared with the pain being inflicted on children and families through public spending cuts. At the same time as the people of Britain are being asked to take a cut in help from the government the Banks may pocket £19 billion of taxpayers' money by exploiting generous British tax relief laws the TUC warned last night. According to the TUC the HSBC, Royal Bank of Scotland, Barclays, Lloyds TSB and HBOS (Lloyds banking group) are carrying forward billions of tax losses they incurred during the financial crisis to avoid paying tax on future profits. At the same time the Conservative/Liberal government plans to reduce corporation tax.

    It’s estimated that £75bn is lost through tax avoidance and evasion. TUC general secretary Brendan Barber said: ‘Not only did they take almost a trillion pounds from taxpayers to bail them out, they are now using the losses caused by their irresponsibility to cut their tax bills for years to come….It's double-bubble for the banks, but huge cuts, job losses and VAT increases for ordinary families’. The TUC said the government's newly introduced bank levy, expected to raise £8bn over four years ‘will make little difference to the overall contribution these banks will make to the cost of remedying the mess they caused’.

    Chancellor George Osborne says there are people fiddle £1.5 billion from the welfare system, compared to the £75bn Britain's rich and corporations steal every year through tax avoidance the figure of £1.5 billion taken by the poorest in society is peanuts. Whereas the £75bn fiddled by the richest in society would nearly cover the planned £83bn cuts by the Chancellor.

  31. The credit crunch has shattered America's 'neoliberal dream'


  32. Limits to Capital

    David Harvey discusses world markets today and analyses "fictitious capital" and "uneven geographical development" going through Marx's argument concerning the falling rate of profit, moving through crises of credit and finance, and closing with a timely analysis of geo-political and Time for some theoretical analysis of capitalism.


Note: only a member of this blog may post a comment.