Can Capitalism Survive?
Collapse of the banks demonstrates that capitalism can no longer function successfully. State involvement in the economy, along socialist lines, is inevitable.
Alistair Darling’s objection to this strategy is that he does not want to “run banks”. But we do not expect him to be behind the counter, or even on the boards of trustees. We would not expect ministers to be involved in day-to-day operations; any more than they are involved in the operation of existing government quangos.
Not that we would want the People’s Bank to operate like the quangos. It is not difficult to devise a structure which delegates management functions in a context where there is ultimate democratic accountability.
Free Market, or State, Capitalism?
The Western version of capitalism, concentrated in the USA and Europe, is usually regarded as “free market capitalism”. The markets have clearly been too free. Because they have not been properly regulated, many banks took ridiculous risks – especially in granting loans which the recipients had no chance of repaying.
Particularly in the context of globalisation, it is unlikely that sufficient regulation could be applied. The solution is nationalisation but with a structure that ensures ultimate democratic accountability.
A sensible approach would be a Board of Trustees with 15 members: 1/3 nominated by the government; 1/3 elected by management; 1/3 elected through the trade unions. Management would be required to provide the Boards with full information, which clearly did not occur with the banks now in trouble.
Whatever objections may be raised to this proposal, the outcome could not possibly result is a system worse than that which resulted in the 2008 collapse – of banks and, as a consequence, economies.
This element of democracy would be the distinguishing factor in comparison with the state capitalism as practised in, for example, China and Russia. The banking system would be publicly controlled, and accountable, through a democratically operating process.
Implications for Policy
It is clear that this kind of “democratic solution” must extend beyond the banks. It will need to be applied to the utilities – water, gas, electricity – and to what Aneurin Bevan (the founder of UK’s National Health Service) described as “the commanding heights of the economy”.
State control must be applied to the large oil companies and other companies which have an important part to play in the development of government strategy. Their freedom to act against the national interest must be removed.
Such measures amount, in effect, to a socialist solution. However, it does not follow that all companies should be nationalised. There is no objection to a “mixed” economy, providing the private sector is not allowed to undermine government policies – as currently happens with, for example, tax avoidance schemes.
The key factors, to be determined by legislation and regulation, are that:
- companies do not have the freedom to act against the national interest;
- all employees are properly represented (usually through trade unions) when decisions affecting the future of companies are under consideration
Although the focus here is on the United Kingdom, the kind of solution advocated in this article is relevant worldwide. Although it would be an exaggeration to describe him as a socialist, there are already signs that the new USA President, Barack Obama, recognises the necessity for much more extensive involvement of the state in the economy.
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Post CommentYo
On February 26, 2009 at 3:51 pm
You simple can’t nationalize all this stuff. You would wipe out too much exchangable value. Also, you mentioned that 200 million pounds will be made available for mortgages, where would this money come from? If the answer is to simply print it well that would just cause inflation. Markets are the only way we know how to produce value, which can then be exchanged in various capacities. Without the market mechanisms, we would have considerably less value (or wealth if I may) to exchange. The exchanging process allows value to be put to its best uses. What you have proposed would serve to destroy value rather than produce it. No one in their right mind would ever say that there are problems that can be created, even in the use of free markets, but socialized nations are afflicted by many problems as well, and much more aggregious ones at that. But markets give us the best mechanism to fix those problems by allowing us to more properly understand the economic conditions around us, i.e. the pricing mechanism.
Fabian C
On December 5, 2009 at 6:21 am
I find this article somewhat disagreeable, but for different reasons to Yo. I agree that deprivatisation of services ESSENTIAL to the stability of a societal model of human coexistence and the market alike bears some logical rationale. Goods and services produced for human needs should be supplied on a needs basis (what greater form of market forces are there than the democratic fulfilment of needs; i.e. demands?)
However, I question the merit of placing this burden on the source of the public trust: national government. When we consider the multitude of overspanning arms of globalisation, that affect not only the economic, but also cultural, and hence social life, a national approach to economic security falls far short of our economic climate’s global reality. Think here of international investors who own large portions of these essential services. What single national authority can safely claim sovereignty over its own soil in this climate? I’m sure the Murdocks would have much to say.
The other problem about deprivatisation is where to draw the line. Banks are clearly essential to economic stability, but so many services fall into the grey area: utilities, and more controversially, necessities (food, healthcare and shelter). Having grown up midway between industrial and agricultural southern Australia (amidst the “coalfields”), I’ve experienced the aftermath of a generation of Keynesian housing that spawned town after town of fire-wood houses. At the time of construction, these were low-income labourer’s dens, but are now passed off as overpriced health-hazards.
All said though, your neo-Keynesian view is heartening; further integration and less competing will be vital to the future survival of this leviathan known as society. Here’s how my argument goes:
1) More integration (spiritual, cultural and economic) tends towards less violence.
2) Less violence encourages less war, fragmentation and competition.
3) The calming of everyday life tends towards greater harmony, less reproduction (and less strain on natural resources) and therefore a greater change at human longevity.
Of course, there will always be repercussion of less competition in the marketplace, but when the alternative is an eternity of economic depression and emotional aggravation, are these luxuries so much to lose? Time will tell.
Work For Crown
On December 7, 2010 at 10:18 pm
@ Fabian C.
You have no idea what your talking about. More integration? The calming of everyday life tends towards greater harmony?
Dude what are you, A communist? Read 1984. In your world you speak of, Trust me you would be one of the first to be hung, shot, or placed in a working camp. because that what a world like will bring about. People need to go back to the Bible, or they will end up back in the jungle. But people need to do this of their own free will, not because of some government rule. People need to tern away from greed and start caring of their fellow man. This country grew so fast and became the greatest country in the world because it had Gods blessing on it. People cared for one an other, loved God and prayed about how to run a business, and focused on the family and prepared for the future and future generations. No one cares about inheritance anymore. It’a all about numbers and how much more money they can make at the expense of others. What a said state our world is in. And it’s all because of you atheist communist heathens.