Before the world-wide financial crash of 2008 the popular refrain had seemed to be ‘there is really no longer any reason for the old arguments between left and right in the new global economy of today’.
Yet weren’t the wheels of the “…new global economy…” already visibly falling off well before the crash of 2008?
The Bank of England, the neoliberal Tories, ‘neo-neoliberal’ New Labour, the IMF, the TUC, the research departments of most of our trade unions, and most of our orthodox university academics, didn’t seem to see it coming. Yet there had been well understood ‘dress-rehearsals’.
After the great slump of 1929, the western world’s banking and finance gamblers were already heading for more of the same – interrupted only by Hitler’s war and the decades of reconstruction following it.
After those post war boom years, the western world’s economies expanded exponentially, sailing unseeingly to prosperity – on a sea of public and private debt. The political leaders of the West thought they had ‘learned the lessons of the past’ and were glibly confident there would never be another world-wide crash. They were deaf to the warnings.
Not only the ‘orthodox’ economists of the political right, but also our right-revisionist New Labour leaders seemed not to grasp what earlier generations of mainstream Labour Party leaders, and ‘Left’ economists, always understood. To his credit Gordon Brown discovered (albeit the hard way, rather after the event) that an ounce of experience is worth a ton of theory. For all New Labour’s economic myopia, he rose to the challenge more readily than almost any other world leaders. (There is, of course, the argument that he only ‘saved capitalism’ but that’s a discussion for another day.)
Far from being ‘totally unpredictable’ the inevitability of a further crash was entirely predictable. There were many who saw it coming. But they had very little public voice in an Establishment grown fat on the proceeds of a world-wide exponential expansion of unregulated private and public debt. No longer regulated, the looming crash was fuelled by ‘financial instruments’ so complex that even their architects and practitioners could not understand them.
The voices of Herbert Marcuse -1940s; Harry Braverman – 1970s; Ernest Mandel – 1970s; Brian Burkitt – 1980s; US Professor Ravi Batra – 1980s; and so many (mostly Left) economists were widely ignored. Many of them were dismissed as ‘Marxist economic dinosaurs’.
But were they wrong? Is the problem of unregulated finance gambling and financial crises, every decade or so, now a thing of the past, never to recur?
Or were the ‘Left dinosaurs’ right all along?
Italy seems currently to have taken over from Greece as the likeliest ‘flash point’ for a renewed world crash; Turkey is in economic and political turmoil; Trump seems hell-bent on trade-war and the UK’s exit from the European Union all tend towards slower economic growth.
But most dangerous of all is, still, the continued bank gambling and renewed acceleration of leveraged support for firms already deeply in debt. ‘Leveraged’ support means firms must borrow at heavily inflated interest rates to stay in business at all. The effect of this, on the lenders, is likely to be as damaging as the sub-prime mortgage crisis in North America that tipped the world’s banks and finance houses in the lead-up to the crash of 2008.
But surely any repetition could now, with the experience of 2008, be easily be managed?
Far from it. All the signs are that it will be worse, far worse, this time. But why can’t central banks come to the rescue again? That is highly questionable. According, for example, to professor Richard Portes, of the London Business School, they may not be able to repeat a rescue in the manner led by Gordon Brown.
Unlike the crisis of 2008 they dare not, not this time again, lend more than the risk they can ordinarily bear in good times. To claw back the economic world from the meltdown of 2008 they used up far more of their resources, then, than they can dare risk today – and central banks will now be wary of deficit finance, or the ‘quantitative easing’ that means lending imaginary money, money they do not have in the first place, in the expectation of a timely return. It all points to the likelihood that a new meltdown is very much on the cards and that it will be far harder to cope with today than it was then.
Referring to the president of the European Central Bank Mr Portes said: ‘It would be very difficult for Mario Draghi to think of another way to get out of the mess’.
This time would the people of the world face another recession – or, now, would it be a full-scale slump? We can already see the rapid growth of populism and far right resurgences across Europe in particular. Would the world be plunged, by the recurrent crises of finance capital, once again into the manner of social breakdown that gave birth to fascism in Italy and Nazism in Germany?
Is it time for our Labour Party to devote more time to the lessons of history that a previous generation of Party members studied so diligently before Hayek took over from Keynes who, in turn, had seduced so many in our party away from our ‘Clause Four’ socialist economics?
Whatever happened to political education?
There is a greater case now, than for a generation, to renew Labour’s former culture of political education; in particular the study of political economy that was always its backbone. Our Party has made admirable success with improved training to get MPs and councillors elected. But the age of political ‘managerialism’ is past. It’s rather a good idea – and never more so than now, with a Tory Party more reactionary than any since Arthur Wellesley’s, to also spend time considering why we want to be elected. Is it merely to manage capitalism? Or is it to recall the mainstream economic approach of Hardie, Wilkinson, Attlee, Bevan, Soskice, Wilson and Castle in the days of mainstream Labour governments – whose policies are today every bit as necessary as they then were?
The tremendous energy with which the British Establishment, through its lap-dog media, has tried to vilify Corbyn reflects its fear of the infinitely fairer society that would emerge following a general election.