Obviously, the commentators are right. Spending cuts transfer the costs of economic failure from the agents principally responsible for it onto the majority who did nothing to cause it, while also threatening a 'double dip' recession. Destroying half a million public sector jobs is an excellent way to suck demand out of the economy and ensure that investment grinds to a halt again.

This obvious absurdity is one reason why the parties went into this election refusing to be straight with voters as to just exactly what the cuts entailed. The Lib-Con coalition that has emerged has subsequently tried to hedge its cuts announcements with charming little gestures of solidarity, such as reducing ministerial pay by 5%. (They feel our pain.) Now, as cuts are announced, there is a tendency to frame the matter as an issue of good husbandry and fiduciary integrity - a framing assisted in no small measure by push-polls asking people questions about which party or leader would be most effective at 'cutting the deficit'. Moreover, the government has been talking down the public finances, attempting to insinuate - so far with little real foundation - that the last government indulged in wildly profligate spending commitments and covered up the dire state of public finances. This feels like an attempt to create panic in the markets, and thus add urgency to the alleged need for spending cuts. It would not be the first time.

There is an obvious question that arises here: in what way are these cuts good for capitalism? After all, what is being proposed here is that approximately £150bn should be taken from the public sector over the next four or five years, and redistributed to the financial sector. This could be regarded as an example of what David Harvey has called "accumulation by dispossession", since the assumption of the government is that reduced public sector investment will be matched by increased private sector investment. In an economic landscape increasingly marked by the dearth of profitable investment opportunities, the privatization of public wealth and industries have facilitated some of the few opportunities for growth that have manifested themselves. But this particular act of redistribution is different in the sense that it does not of itself produce the investment opportunities that, say, the privatization of the utilities and public transport did. And it is highly unlikely that it will actually stimulate any new productive investment; rather, it is likely to be reinvested in debt, property speculation, and currency trading. The net effect would actually be to deprive capital of a substantial portion of its army of consumers, thereby removing its ability to realise the surplus value produced by its investments, and thus deterring further investment. It is, though, a cardinal rule of neoliberalism to protect the financial system at all costs - those who mistook the bank nationalizations and bail-outs for a break with neoliberalism missed this basic point.

So why, given a deeper crisis than any capitalism has experienced for decades, threatening to outdo the Great Depression, does neoliberalism persist? Some theorists posit a "social structure of accumulation" (SSA) theory to explain alternating periods of growth and stagnation in capitalist economies. In this view, political and economic elites contrive a set of institutions favourable for capital accumulation, setting off a period of sustained growth until such time as they exhaust themselves, and an intractable crisis results in a paradigm shift. This is said to account for long cycles of capital accumulation and by shifts between "liberal" and "regulatory" paradigms. Neoliberalism, then, would be just such a SSA, a coherent institutional structure that facilitates rapid capital accumulation. However, neoliberalism has been very poor at facilitating capital accumulation, with world growth sluggish by historical standards. Its durability calls into question this conception of long cycles of capital accumulation enabled by SSAs.

Another approach treats neoliberalism as the hegemonic doctrine of one fraction of capital: thus, neoliberalism has been defined as "the ideological expression of the reassertion of the power of finance". (Duménil & Lévy) This might seem to reduce neoliberalism to one of its aspects, but it does point to the specific class character of the project. The neoliberal period has, after all, done nothing to restore the robustness of non-financial corporations. It has produced a balance of trade deficit in those nation-states where finance is dominant, as investment has remained sluggish, and manufacturing has entered precipitous decline. It has left national states serially indebted, and raised private sector borrowing to perpetual crisis proportions. Growth has been poor, and instability the rule, as demand is systematically weakened and counter-cyclical public investment renounced. In many ways, neoliberalism would seem to be dysfunctional for all but a narrow sector of capital. This raises the question of why there has never been serious resistance to financialisation on the part of other sectors of capital, and why there has never been a party of industry to oppose the party of finance - why, in other words, neoliberalism is a hegemonic doctrine.

Finance has enjoyed hegemony in the past partially on account of its role in the British empire. Britain's overseas trading companies such as the East India Company or the Hudson Bay Company were based in the City of London, and it was the City's activities which financed the planters and traders. The capital's financial centre was the nexus between domestic producers and the colonies. Undoubtedly, finance has a similar role in today's imperialism, the mechanism by which surplus extracted in the 'periphery' is transferred to ruling classes in the 'metropole'. In fact, one of the reasons why the British government started to take a keen interest in consolidating the City's global role in the late 1960s was due to the loss of the colonies and the need to take on rising financial competitors, not least Wall Street. But - then as now - a more pressing factor in the hegemony of finance is the growing integration between finance and industry. For sure, the City of London was once an oppositional bastion of support for, in Polanyian terms, 'market liberalism' as opposed to 'embedded liberalism', and its assertion of dominance . Financialisation has not just meant that one fraction of capital is dominant: it has meant that all other sectors of capital increasingly turn to financial instruments to bolster their profits. David Harvey writes:

"Since 1980 or so it has not been uncommon for corporations to report losses in production offset by gains from financial operations (everything from credit and insurance operations to speculating in volatile currency and futures markets). Mergers across sectors conjoined production, merchanting, real estate, and financial interests in new ways to produce diversified conglomerates. When US Steel changed its name to USX (purchasing strong stakes in insurance) the chairman of the board, James Roderick, replied to the question 'What is X?' with the simple answer 'X stands for money.'" (A Brief History of Neoliberalism, OUP, 2005, p. 32)

So it continues today. Look at the manufacturing giants Ford and GM, who have made a great deal of their profits from rentier activities, not least their credit divisions which offer loans to dealers and buyers. GM lost its credit division in the recent financial crisis, but 40% of Ford's recent quarterly profit came from credit. The fact of the matter is that there often hasn't been enough profit to be had in productive investment, while high-risk speculation has consistently delivered, and will continue to do so as long as the public bails the bankers out at moments of crisis. Just how much neoliberalism has delivered is suggested by the fact that by 2006, two fifths of all corporate profits in the US were accumulated in the financial sector - more than double the ratio at the height of 'Reagonomics' two decades before.

If the government pays off the bonds traders and consolidates the power of finance, it will also be bolstering those sectors of capital with extensive investments in financial institutions - and, I might add, those state agencies that have turned to financialisation in order to raise money for service delivery. It will be supporting the incomes of a significant layer of the middle class that derives some of its income from investments and rentier activity - whether they own property or have private pensions. Obviously, this pay off cannot be accomplished by expropriating the very financial sector it is intended to benefit, ie by means of a windfall tax on speculation. In just the same way, higher taxes on corporate profits would be counter to its ends - indeed, the idea is to further relieve downward pressure on profits by cutting corporation taxes, as the new government is indeed in the business of doing. It doesn't matter how much misery this produces, how many social pathologies such policies produce, and how much real economic stagnation it results in. Until the neoliberal accumulation model is threatened by a class insurgency, or is consumed in a war of such a magnitude as to destroy much existing capital and re-open currently closed investment opportunities, the ruling class will not part with it.