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MARXIAN CRITIQUE OF THE NEOLIBERAL ECONOMIC
AGENDA
by Joma Sison on Saturday, March 12, 2011 at 12:31am
MARXIAN CRITIQUE OF THE NEOLIBERAL ECONOMIC AGENDA
Remarks to the Marxian Study Group, Institute of Social Studies, The
Hague, Little AULA, 9 March 2011, 1630 HRS
By Prof. Jose Maria Sison
Thank you for inviting me to speak on the Marxian critique of the
neoliberal economic agenda.
1. Let me begin by reviewing briefly with you basic concepts in the
Marxist critique of the capitalist political economy.
a. There is the contradiction between the social character of production
in large scale machine production by collective labor in factories on the
one hand and the private appropriation of the product of labor due to
private ownership of the means of production on the other hand. A small
part of the new material values created by the workers goes to them as
wages for their subsistence. The surplus value is divided among the
capitalists as profit, the banks as interest on loans and the landlord as
rent.
b. To maximize profits, the capitalists keep on enlarging the constant
capital for equipment and raw materials and keeping down the variable
capital for wages. Every commodity contains the old material values
(previously congealed labor) from the use of the raw materials and
depreciation of equipment and new material values that only living labor
power (expressible in average socially necessary labor time) can create.
c. The drive of the capitalists to maximize profits by enlarging constant
capital and pushing down wages is that it results in the crisis of
relative overproduction. It becomes more difficult for workers to buy what
they produce as the capitalist profit rises and their real purchasing
power declines. The rising ratio of constant capital to variable capital
also results in the tendency of the profit rate to fall.
d. Expanding the money supply and credit can be used to stimulate
production, trade and consumption of the goods. But it has also been
increasingly used by the capitalists to accelerate capital accumulation,
overvalue assets and rake in higher profits not only from production but
more so from the financial markets in an effort to counter the crisis of
overproduction and the tendency of the profit rate to fall. Ultimately the
boom goes bust, with economic and financial crisis breaking out.
e. In the development of the free market economy of the 19th century to
the monopoly capitalism or modern imperialism of the 20th and thereafter,
the role of finance capital has become dominant and decisive upon the
merger of industrial capital and bank capital and the higher importance of
the export of surplus capital over the export of ccmmodities.
2. The state always plays a necessary role in the running of the modern
economy, be it industrial capitalist, socialist or semi-feudal. It
accounts for a large chunk of the economy and its policies can shape the
economy one way or the other.
a. In opposition to the capitalist system, the Marxists or the scientific
socialists advocate the overthrow of the bourgeois state, the
socialization of the private ownership of the means of production and the
adoption of state economic planning to ensure the balanced functioning and
development of the economy and prevent the economic and financial crises
that have afflicted capitalist society. Socialist societies have in fact
arisen and developed until undermined and destroyed by modern revisionism
and restoration of capitalism.
b. In a capitalist economy, at any level of development, the state
accounts for a large part of the economy as the biggest single employer
and as the collector and spender of tax revenues. It can shape the economy
through monetary and fiscal policies. It can play a pivotal role in
further developing an economy. It can use the power of taxation to
reallocate resources and provide social services. It can cause economic
and financial crisis through misallocation of resources. And when economic
and financial crisis strikes, state intervention is called for to counter
or solve the crisis.
c. During the Great Depression, state intervention was deemed necessary as
an instrument for countering crisis and reviving demand, production and
employment. The Roosevelt administration proclaimed the New Deal and
created the Works Progress Administration in order to reemploy large
numbers of the unemployed in public works projects intended to pumpprime
the economy. Subsequently, the use of fiscal policy and public works
projects would become known as Keynesianism under Keynes' theory of
general equilibrium.
d. The use of Keynesianism in civil construction projects did not solve
the crisis but it did salve the social and economic situation where
fascism did not take over the capitalist state and society. In Hitlerite
Germany, the use of public works to stimulate the economy glided into
feverish military production. The worst consequences of the Great
Depression were fascism and World War II. In the United States, expanded
and intensified civil and military production for the war effort overcame
the crisis and stagnation brought about by the Great Depression.
3. Let us now look at neoliberalism arising and holding sway in the
capitalist world as a reaction to Keynesianism and State Intervention
a. Up to the 1970s, Keynesianism was touted as the economic policy of
state intervention that countered the Great Depression, strengthened the
US as bulwark of capitalism, guided the reconstruction of the
war-devastated capitalist economies under the Marshall Plan and maintained
equilibrium in capitalist economies. But the reconstruction and revival of
the countries defeated in World War II would bring up once more the crisis
of overproduction and the oft recurrent bouts with recession, despite the
frantic efforts of the now united imperialist countries to arrange and
rearrange the market in the world and global regions.
b. The phenomenon of stagflation became starkly clear. When the economic
policy makers deployed monetary and fiscal measures to stimulate the
stagnant economy inflation would surge and when they applied the measures
to dampen inflation stagnation would further deepen. Dogmatic exponents of
the “free market” based in the University of Chicago School of Economics
took the lead in attacking Keynesianism and state intervention in the
economy. They blamed wage inflation and social spending as the product of
state interventionism and the cause of stagflation. They conveniently
obscured the demand pull inflation caused by the rising levels of military
production and expenditures, massive overseas deployment of US military
forces, wars of aggression in Korea and Indochina and space research and
development.
c. The exponents of neoliberal economic policy stressed that the market
must be given free rein and that the state must limit itself to the
monetarist policy of adjusting the money supply and interest rates in
order to cope with fluctuations in the market. They demanded the pushing
down of wages and the cutback on social spending by government and making
more capital available to the capitalists for investment by reducing taxes
on them and giving all opportunities to raise capital and profits through
trade and investment liberalization, privatization of state assets,
deregulation and the denationalization of the economies of client-states.
The neoliberal policy was also used as an offensive weapon against the
vestiges of socialism and public ownership of the means of production in
the countries already ruled by revisionist cliques.
d. The neoliberal economic policy started to become dominant in the world
capitalist system in the years of 1979 to 1981, with Thatcher and Reagan
touting it and using it against the working class. They claimed that the
more savings or capital in the hands of the monopoly capitalists
translates automatically into productive investment in the so-called free
market. In the next three decades, it was made to appear that there was no
economic problem that could not be solved by helicoptering and pouring
unlimited money and credit on it firstly on the so-called supply side of
the monopoly bourgeoisie and secondly on the demand side of the consumers.
4. Let us look at how the neoliberal economic policy went bankrupt,
inflicting great suffering on the people and devastating entire economies
in both developed and underdeveloped countries.
a. The US started raising the interest rates in 1979, practically calling
in the loans from the third world and causing the so-called Latin American
debt crisis in 1982. Reagan went into high speed spending for the
production of high tech weaponry in 1980s. This could not generate any
significant amount of employment. The US slowed down on the manufacture of
consumer goods and started to import these at an escalating rate in the
hope that the suppliers of these (Europe and East Asia) would become
buyers of big items from the US. In less than a decade, the US would incur
huge trade deficits and become the No. 1 debtor of the world.
b. Clinton tried to revive US manufacturing in the 1990s by allowing the
commercial production of electronic technology that used to be restricted
to the military for national security reasons. But the US corporations,
especially in the military industrial complex, opted to produce and export
the more profitable big items. China became the big supplier of consumer
goods to the US and the US proceeded to incur trade deficits far bigger
than ever before. US manufacturing further declined. The US went further
into the the financialization of its economy and at a maddening speed
after the repeal of the Glass Steagall Act and the liberalization of
finance, removing the difference between the banks and investment
companies and allowing both the privilege of unrestricted generation of
the money supply, credit and derivatives.
c. Job security was attacked. Part time jobs in service sector replaced
secure jobs in the manufacturing sector. The real income of workers
declined. Social insurance and social services were subjected to
privatization and higher fees. The trade union rights and social benefits
were eroded in the imperialist countries and much more so elsewhere. But
still through offers of debt financing, portions of the working class were
pushed to engage in consumerist credit card spending, buy shares of stocks
in the years of the high tech bubble from 1995 to 2000 and acquire houses
on mortgage that they could not really afford during the housing bubble of
2002 to 2007.
d. Above them, the finance oligarchy and the monopoly bourgeoisie made
profits rapidly, continued to overvalue their assets and went berserk with
the most fantastic and incomprehensible kinds of derivatives, like
mortgage backed securities, collateralized debt obligations and credit
default swaps, until the moment of truth came in September 2008, when the
crisis of overproduction became so severe and the financial markets
collapsed. The worthlessness of the derivatives became exposed when the
increasing unemployed could not pay for their mortgages.
e. In the less developed economies of the world, particularly the
so-called emerging markets, the neoliberal economic policy was already
exposed as unsustainable during the so-called Asian financial crisis in
1997. But even then debt financing continued to be used to support booms
of private construction and importation of consumer goods in countries
that produced for export raw materials and a few semi-manufactures. In the
ongoing crisis, such countries are suffering from the falling prices of
their exports, the rising prices of imports, widening trade deficits and a
mounting debt burden. These spell economic and social devastation.
5. The global economic and financial crisis has protracted and worsened
since 2008. There seems to be no end in sight. Before the current crisis
can be solved or modulated, another bigger crisis is anticipated in 2016.
a. That is because the political and business leaders in the imperialist
countries stick to the dogma of neoliberalism and dictate upon their
client states. Summit after summit has been held by the rulers of the
major capitalist countries but to no avail. Conference after conference
has been held by the IMF, World Bank and WTO but to no avail. The monopoly
bourgeoisie, especially the financial oligarchy, does not want to give up
the rapid accumulation of capital and easy profits under the neoliberal
economic policy.
b. The big banks and firms that created the economic and financial crisis
have been bailed out by public money to cover their losses and make book
profits. Thus, there are sporadic claims to recovery, especially in the
stock market. But public money that is supposed to be earmarked for
generating production and employment in infrastructure, social services
and green energy is subject to labor-cost saving and profit-making by the
private corporations under the continuing neoliberal policy. Thus, there
is no real economic recovery, no expansion of production and employment.
c. Public deficits and public debt have mounted to aggravate and deepen
the economic and financial crisis as a result of the bailouts, tax
benefits and other forms of bonanza for the banks, corporations and the
upper class. Now, the rulers of the capitalist states are adopting
austerity measures and raising taxes and fees in order to shift more
burden of the crisis to the people. Public sector employees are being
thrown out of jobs or their salaries and pensions are being reduced.
Social services are being reduced and made more expensive than ever
before. The toiling masses of workers and peasants and the middle class
are being deprived of their jobs, homes, livelihood and basic social
services. They are being subjected to worse forms of exploitation and
oppression.
d. There is therefore widespread discontent in the world, in both the
developed and underdeveloped countries. In certain parts of the world, the
broad masses of the people have begun to rise up against the US-directed
neoliberal economic policy and its extremely exploitative and oppressive
features and consequences. It is our duty to further arouse, organize and
mobilize the people to repudiate this policy and to demand their national
and social liberation from those who exploit and oppress them under the
slogan and dogma of the so-called free market.###
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