The Long Way Down

Structural problems of capitalism

Can the system be “put right”? What would it take?

Again the Marxist critique is invaluable here – there are attempts to stabilise the system by forcing people to pay a heavy price. We’re going to see this particularly in 2010 with the threatened public sector cuts. This is not “putting it right”. This is a short-term set of policy initiatives, a stopgap if you like, in the face of a long-term structural crisis. Ultimately to be put right it has to be dealt with politically.

People with vested interests are digging in deep to preserve their position. This is illustrated by the way the media have used the rise in the government deficit as an excuse to argue for an attack on public sector workers. We’ve got an enormous deficit, which has clearly been caused by the credit crunch and the collapse of tax revenues, but the conclusion we get from the right wing media is that we’ve got to cut public spending because it’s out of control. There’s no connection between the two, but politically they’re seizing their moment. This is an outrageous position and shows that the left has a lot of work to do.

One of the things I touch on in the book is this issue of wages being cut. We may find that cutting wages will not lead to the economic recovery that people on the right assume it will. Their traditional argument has been that if you cut wages, profits go up, the stock market goes up and the economy recovers. History shows that this only works if central banks are able to keep cutting interest rates. What happens if the central banks have used up all their policy options and you’ve already got zero rates yet wages keep going down?

We haven’t actually been in that situation before, not even in the 1930s. So I think the right are going to be in for a shock at some point. If you keep cutting wages, how can you expect company revenues to go up? Without wages going up, and with consumer credit contracting now at a rapid pace in the US, Britain and much of Europe, there’s going to be no increase in demand. The right’s policies are self-defeating.

He’s not talking specifically about Ireland, but the caubeen certainly fits here too, not least as I bask in the sickly glow of the latest ESRI report calling for further public sector pay cuts (alongside slashing child benefit by 20%) and the latest raft of uncorrugated stupid from yer one for equality on the way down, whatever the hell that means. The book looks interesting. I will get it one day, once I crawl out from under the inglorious pile under which I find myself buried.
 
A successful campaign to drive wages down in the public sector will also help drive wages down in the private sector and raise productivity. This is said to make the economy more ‘competitive’ because the cost of buying labour power becomes lower relative to other economic entities. However, nothing competes for anything on its own: other economies compete too, and will therefore seek to drive down and depress wages in order to continue competing. Business leaders -known in antiquity as ‘bosses’- will take their cue from the state and justify slashing their own wage bills, regardless of whether their firm is profitable or not, on account of the general dire straits of the economy as outlined by the government.

They will also take their cue from the government with regard to solidarity. Just as the government makes a call to the people in the interests of national solidarity, the business leader -normally male- will echo that call among his ‘people’, i.e. his subordinates, whom, in warm fuzzy moments, he may even address as his ‘family’, as I witnessed recently. But whereas a citizen is unlikely to be punished for seeking to oppose government actions in this regard, at least in this part of the world, there are real risks in the private firm -particularly in the absence of collective bargaining arrangements- usually so real they do no not even need to be considered, for people who would actively oppose pay cuts. Even when no pay cuts are put in place, fear is still an excellent motivator for raising productivity by forcing workers to put in longer hours and, when possible, compete against one another for the prospect of a more secure existence. It’s all good.

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