As the pace of the intractable crisis of world capitalism speeds up and deepens, so the frantic rush to find solutions gathers pace. In place of the paeans of praise for globalised capitalism, the 'hidden hand of the market', free market 'superiority', etc, it can be predicted that an avalanche of books, rejecting these and the neo-liberal ideas that went with them, will now appear. Keynesian or neo-Keynesian ideas - state solutions to solve economic problems - are back on the agenda.
Paul Krugman is better placed than many to lead the way. He has systematically demolished the neo-liberal project of the 'Bushies' in the columns of the New York Times in order, as he sees it, to provide solutions which are 'liberal' and 'humane'. But he restricts himself to the limits of the capitalist system.
He rejects 'supply-side', monetarist economics - controlling the money supply or tax cuts for the rich, allegedly to boost investment in industry. He favours 'demand side', maintaining and boosting incomes in order to alleviate the looming crisis.
He is, in other words, from the Keynesian school of capitalist economists, broadly committed to 'priming the pump', boosting demand in straitened economic circumstances. He has been joined by a growing band of economists, clamouring for state intervention to bail out their system, at a considerable cost to the rest of us in tax increases.
Krugman draws heavily on the example of the 'New Deal' of the 1930s under US President Franklin D Roosevelt (FDR), which is pictured as laying the foundations for the mighty economic upswing in the US that developed at the end of the thirties right through until 1973-74. He prettifies what actually took place during this period and romanticises in particular the role of Roosevelt, a shrewd and, if necessary, brutal capitalist politician.
For Krugman, US history is compartmentalised into distinctive phases. There was the long 'gilded age' of the 1870s, similar to the present period, following the American Civil War, which lasted until the New Deal of the 1930s.
In 1900 there were 22 billionaires; by 1925, 32. Yet, allegedly because of Roosevelt's 'New Deal', in 1957 there were only 16 billionaires. There are 160 billionaires in the US today.
In the 'gilded age', capitalist parties exercised ruthless political control through measures which included the disenfranchisement of many American workers. Millions were unable to vote because they were 'non-naturalised immigrants'.
In the 'dollar democracy', expenditure of huge sums in elections and, of course, the use of the methods of divide and rule were deployed to keep different ethnic and religious groups at each others throats.
Even Roosevelt's National Industrial Recovery Act (NIRA), enacted in June 1933, in effect only sought to guarantee the status quo of worker and employer, "one in possession of little, the other in control of much", in order to restore industrial stability.
True, the labour movement correctly used this legislation to prosecute their own interests. The leader of the mineworkers' union, John Lewis, in 1933 sent an army of union organisers into the coalfields shouting: "The President wants you to join the union." Roosevelt himself was the last to subscribe to such sentiments!
It was the independent, magnificent movement, prompted by the beginnings of a boom in 1933-34, which swept almost four million new workers into the unions and created the colossal Congress of Industrial Organisations (CIO).
It was no conscious policy of Roosevelt, but the beginnings of natural revival after the worst slump in capitalist history, reinforced by increased arms production, both before and during the Second World War, that laid the basis for the post-1945 economic upswing, particularly in the 1950s, 1960s and early 1970s.
MANY OF the fundamental problems facing workers today, from the economic crisis to planet-threatening climate change, cannot be solved in one country alone.
With capitalism being a global system it cannot be tackled in one country alone.
This economic persistence of the nation state is linked to its political role. As even capitalist governments don't control their economic destiny - when faced with the 'hidden hand' of the market making workers redundant, for example - they have to find other ways to maintain a social and political base within their respective nation states.
Free market capitalism is based on the idea that “the invisible hand” of the market will create the best possible outcome for the most people.
But , the man who came up with idea of the invisible hand did not believe in unrestrained free market capitalism:
Free market capitalists have traditionally believed that the “invisible hand of the market” means that capitalism will benefit us all without requiring any oversight. However, as the New York Times reminds us , the real Adam Smith did not believe in a magically benevolent market which operates for the benefit of all without any checks and balances:
Smith railed against monopolies and the political influence that accompanies economic power Smith worried about the encroachment of government on economic activity, but his concerns were directed at least as much toward parish councils, church wardens, big corporations, guilds and religious institutions as to the national government; these institutions were part and parcel of 18th-century government…
Smith was sometimes tolerant of government intervention, ”especially when the object is to reduce poverty.” Smith passionately argued, ”When the regulation, therefore, is in support of the workman, it is always just and equitable; but it is sometimes otherwise when in favour of the masters.” He saw a tacit conspiracy on the part of employers ”always and everywhere” to keep wages as low as possible.
Karl Marx still to this day the only person to fully crack capitalism and explain it understood the drive for capitalists to reduce wages and keep wages low as they can be he theorized this in his works on the working day where a workman never receives his true value of his labour, He works half the time for himself and the other half for the capitalist that other half is known as surplus labour value which the capitalist uses to exploit him and gain extra profits out of.
So ultimately capitalism is controlled by the hidden hand of the market when even capitalists themselves do not understand their system they are effectively riding a tiger out of control not knowing where it’ll turn next. This frightens capitalists and they look to temper this where they can in forms of regulation but this does not even trim the finger nails of a global system based on exploitation. The invisible hand was a interesting theory and was right in many ways that each government doesn’t really have full control of their economy. As a video out the other month reported to be a hoax showed the real government is goldman sachs the market in other words. Governments are pawns in a global market system which is unstable at the best of times. It can go up aswell as down just as fast.
Capitalism cannot meet the needs of everyone as the capitalists only see profit as their driving factor.
It is said US business’s are sitting on 1.7 trillion of uninvested capital as they see no way of making a profit in this economic downturn they hoard it. This leads to a complete glut in the market of no investment and hardship for the rest of us.
It is time people understood capitalism for what it really is and expose its systemic risk and dangers.