8-12-07, 9:33 am

The press this week reported that the U.S. stock market decline related to the unstable nature of the U.S. mortgage industry (or the home mortgage department of U.S. finance capital) is spreading to other stock markets. I thought it might be valuable to look at this development more broadly and theoretically, that is, beyond Bush and his present domestic role model, Herbert Hoover.

First, major European banks are invested in major U.S. mortgage firms that are now in crisis, as such institutions, along with corporations and wealthy individuals from “New Russian” gangster-bankers to Royal Saudi real estate speculators hold significant investments in prime U.S. properties.

Furthermore, central banks in many countries, functioning in today's “capital markets” on the monetary policy principles associated with U.S. economist Milton Friedman, will be slowing the flow of credit, which will reduce investment and jobs. (This is the job of such banks, but it functions also in a global context in which such conservative policies have become a general substitute to the “liberal” fiscal policies associated in the United States and other countries with British economist John Maynard Keynes, policies of state investment in the economy to prop up mass purchasing power and prevent business cycle downturns from turning into depressions).

Finally, with the U.S, the center of a global capitalist economy both in regard to its consumption of goods produced in the world, and its share of the world's consumer and state debt (so global industrial and bank capital need it to continue to buy goods from abroad and meet the interest payments on its expanding debts, regardless of what is happening to the U.S, national economy or the American peoples quality of life), any crisis in the U.S. economy rapidly becomes a global crisis, engenders crises abroad, which they intensify crises in the U.S.

What does this have to do with Marxism, which rejects the theories of both Milton Friedman that capitalism can forget about monopoly, labor, environment and live happily ever after in a laissez-faire world with the help of some monetary tinkering and John Maynard Keynes that capitalism can at least live and prevent revolution if it enacts fiscal reforms that put enough purchasing power in the hands of the people to overcome its deepening crisis before the people overcome that crisis by abolishing capitalism (which the capitalists themselves in recent decades have rejected). Theoretically and practically, Marxism has a lot to teach all of us on these questions.

After all, it is Marxism which first made the point that “progress” in the form of the accumulation of wealth, and technological advances, is under capitalism as much a curse as a blessing. Under capitalism, such progress will last only as long as the next depression and its cost is overproduction, a crisis of “abundance” so to speak that insures that there will be a next depression. It is Marxism (and this is especially important for Americans who have been well educated by mass media not to get this point) that distinguishes between personal property, ownership of homes cars, etc., and productive property, ownership of capital in terms of stocks, bonds, commercial real estate, etc.

It is Marxism which makes the point, that political propaganda aside, there is no “middle class” anywhere on earth which does not own and live by productive property (that is a middle class owns businesses, is comprised self-employed professionals, and lives on investments, and goes into debt to increase productive property). It does not live from paycheck to paycheck and go into debt to pay for personal property and meet the expenses of daily life, however high its wages and salaries and however much personal property it owns. A working class does that, lives that way, whatever illusions its ruling class sows within it.

It is Marxism which makes the point that capitalism in the form of great trusts is still about speculation, price fixing, “planned” reduction and sometimes destruction of productive capacity to maintain profit margins, a violent, chaotic political economy which gets bigger and bigger but not better and, in so far as it continues, more destructive for more and more people.

Adam Smith's self regulating market and its “Hidden Hand,” Milton Friedman's Federal Reserve Board policies of raising or lowering interest rates to speed up or slow down the flow of capital, and even John Maynard Keynes state investments in the economy to maintain enough mass purchasing power and demand for goods and services to keep the economy at or near a full employment level can't change that.

We should remember that for much of the 20th century, particularly from the period of the Russian Revolution to the 1970s, much of the serious thinking, including those who wished to save the capitalist system from being abolished and replaced with socialism, came to accept what in the U.S. after WWII was called either the “New Economics” or even the “Keynesian Revolution.”

Such theorists and policy planners remembered that in the 19th century, when those “classical” economists were erecting alters to “free trade” and a “self-correcting” market while the “statesmen” building empires and their publicists were trying to convince both their citizens at home and their subjects abroad that all of this was being carried out as part of the inevitable advance of “civilization and progress,” Marx and Engels were pointing out the every advance of the capitalist world market and capitalist science and technology intensified the crisis that distinguished capitalism from all over modes of production, namely too much goods and too much capital.

Overproduction shut down factories, foreclosed farms, left the people who had built the new buildings, railroads, canals, steamships, telegraphs, but who owned or controlled none of what they had built with less security than a serf-peasant working and reworking the land for a lifetime for the benefit of landlords.

Like Keynes himself, they learned from Marx and Engels in order to save the capitalist system, realizing as Keynes noted in a famous comment to his “classical” critics who contended that “in the long run” the market always corrected itself, “in the long run everyone is dead” (which was seen at the time as a warning that if governments did nothing to fight economic crisis except protect immediate capitalist profits, the working class which didn't exist for the “classical economists” would rise up and overthrow capitalism).

Capitalist “progress” produced inequality and interdependency, Marx and Engels contended, and made the economic abundance the capitalist mode of production created a curse to both the workers who produced the wealth and the capitalists themselves who owned the wealth and saw it evaporate over and over again in depressions that became more extensive as the capitalist world market expanded across the earth.

Keynes saw capitalism as moving from one life stage to another, the way a person ages. In order to continue to live, the capitalist system as it “matured” would need the equivalent of “life supports” in the form of state intervention in the economy, taxation, regulation, and public investment to counter and/or ameliorate depressions, which should become the foundation of government economic policy, not merely providing aid to business and pretending that the working class was invisible.

Marx and Engels of course saw no “solution” to capitalist crisis of overproduction, which was both chronic and structural, except the eventual abolition of capitalism and establishment of socialism, both nationally and internationally, through the organization of the working class and the leadership of the working class in transforming society.

For the working class, Marx and Engels contended, this was ultimately a question of life and death, since deepening capitalist crises in the form of depressions, was and would continue to produce a larger and larger class of working people whose daily material lives, work, food, clothing, housing, personal possessions, and sense of personal worth, was and would continue to be swept away in economic storms that later came to be called depressions. For Keynes state intervention in the economy, state subsidies to the working class to reduce the cost of necessities, housing, health care, transportation, education, would make it more productive and more importantly give it the purchasing power to counteract the crisis of overproduction, to keep the economic storms of “depressions” from destroying the capitalist system itself.

The Great Depression of the 1930s was the greatest “economic storm” that global industrial capitalism has experienced. The Great Depression was in reality ended globally by World War II, the greatest war in human history, (Keynes himself noted in a famous article shortly before the U.S. entered the war that the war was showing that governments were only ready to enact the policies that he had long advocated in wartime, a fact that he wasn't happy about).

Keynes died in 1945, a year after he head the British delegation to the Bretton Woods Conference, which created the International Monetary Fund and the World Bank, and looked on as the United States in effect won pretty much everything it wanted from the British and liquidated economically the British Empire.

After WWII, the fact that the Great Depression has not been equaled or even approached in the leading capitalist countries (economic crises are now routinely called recessions) has encouraged most theorists and virtually all propagandists for capitalism to contend that Marx was wrong, that a “reformed” capitalism could be immortal, so to speak, assuming that the major capitalist states could prevent socialist revolutions from triumphing in former colonial and semi-colonial regions as the Chinese revolution had triumphed by fighting the cold war.

In effect, the major “Keynesian” fiscal policy became military spending, which the distinguished U.S. historian Richard Hofstadter had the wisdom to call “military Keynesianism” as early as the 1950s. Military “Keynesianism” over decades created the imbalance in the economy that Keynes sought to prevent, became a policy to expand business profits, and make the working class “invisible” once more, however capitalist propagandists would point to its ownership of homes, autos, tvs, later even microwave ovens, to proclaim that it had become a “middle class.”

By the late 1970s though, what was by then a thirty years cold war against revolutionary movements of the left, the Soviet Union and its allies, and explicitly socialist ideas and policies combined with slow but steady economic stagnation in the leading capitalist centers to undercut those who in the name of the “Keynesian Revolution” had advanced “Reform Capitalism” in terms of “welfare state” social protections to limit poverty and unemployment, state taxation and regulation of business to either prevent or at the very least ameliorate economic crisis, to protect societies from recessions and keep recessions from becoming depressions.

Now, Milton Friedman's time as a theorist had come. It was possible to go back to “Orthodox “beliefs in “the market” again, with the help of monetary engineering to raise and contract interest rates in order to “regulate” the flow of credit rather than regulating industry, taxing capital, using state taxation to raise the living standards of the working class through education, housing, health care, transportation subsidies and social welfare legislation, in short, all those nasty,”

“Reform Capitalist” fiscal policies implemented by a wide variety of governments in the capitalist world, from Franklin Roosevelt's New Deal government in the U.S. to various labor led and/or influenced governments in many other countries to “save” capitalism were now seen as blocking the path of capitalist development, which was back to the 19h century.

From the 1930s to the 1970s, there was an understanding, even a consensus, in the leading capitalist centers that capitalist market relations had to be supplemented by social protections, public sector infrastructure development, and national and international forms of regulation were necessary, Adam Smith's and John D. Rockefeller's capitalism need to be reformed through state actions if great economic crises and their possible revolutionary consequences was to be avoided. That consensus collapsed by the end of the 1970s, symbolized by the political victories of Margaret Thatcher in Britain and Ronald Reagan in the U.S, and there establishment of governments that literally sought to eliminate or roll back the policies of “Reform Capitalism” and remove its key concepts from public discourse, that is, there was no such thing as a “mixed economy,” social welfare and welfare states were the problem and were an absolute evil, and “free markets” were along with monetary manipulation the solution.

In the past, Marxists and “Reform Capitalists” or Keynesians agreed on specific policies such as support for labor unions, legislation to provide minimum wages for workers, public employment for the unemployed able to work, and public assistance for those unable to work, along with serious regulation and taxation of capital, but for different reasons. The “Reform Capitalists” wanted to manage the system to sustain capitalism over the long haul, to sustain mass consumer purchasing power, limit capitalist speculation hoarding, and parasitic conspicuous consumption that reduced productive job creation, and the “free market” insecurities that led large sections of the working class to lead stress ridden insecure lives that undermined “social harmony,” that is, their willing to accept the existing capitalist system without even thinking about it.

While it isn't so easy to find “Reform Capitalists” today advocating such policies, hundreds of millions of working people in the developed countries are continuing to struggle to hold onto and even advance the health care, pension, public education, public housing and other structural components of welfare states. Movements to revive progressive taxation of capital exist in the U.S. and many countries.

It has long been obvious that both the “Free Market Orthodoxy” and monetarist state policy associated and Milton Friedman globally and in the U.S. with politicians like Ronald Reagan and GW Bush, are escalating disasters for the people of the world. It is also clear that military Keynesian, which has been the silent partner of “free market orthodoxy,” the foundation of state spending and deficit formation in the United States, has become central to the economic crisis, not a part even in the short run of any solution to that crisis.

Marxism and Marxists have to play a leading role, not in competition with those who continue to advocate Keynesian solutions to the present crisis, but in cooperation with them to forge a real “new economics” which will give the working class job security, security in its ability improve its quality of life, not merely the quantity of its consumer possessions, and the security that will allow it to act politically to make the economy serve its class interests.

In the present crisis, it is difficult to find either Marxist or Keynesian voices (at least in mass media) that is, those who do not explicitly or implicitly see “markets” ruling over them, the way primitive people saw spirits ruling over them. Marxists should begin to step forward in this crisis, not simply to condemn the crisis, but to advocate solutions to it and seek allies to advance those solutions, not to “save capitalism” from itself, because that is impossible, but to advance the working class in its understanding, never forgetting that it is the working class, as Marx and Engels began to write 160 years ago, which must end capitalism to save itself

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