What it's all about. posted by Richard Seymour

"We stand against the cuts, in solidarity with all the poor, elderly, disabled and working people affected. We are against all cuts and the marketisation of education. We are occupying the roof of Tory HQ to show we are against the Tory system of attacking the poor and helping the rich. This is only the beginning."

Labels: 'free markets', capitalism, education, neoliberalism, socialism, students, tories, tuition fees

NHS shock doctrine posted by Richard Seymour

The NHS support federation has a statement on, and petition against, the government's NHS white paper. Here's a video that roughly explains what it's all about:

Labels: 'free markets', capitalism, health care, neoliberalism, new labour, NHS, socialism, tories

David Harvey on the crisis posted by Richard Seymour

Labels: 'free markets', capitalism, capitalist crisis, finance capital, neoliberalism, recession, ruling class

The capitalist calculation problem posted by Richard Seymour

Explanations for the global financial and economic meltdowns generally focused on a few particulars. For the right, poor people caused the crisis through reckless borrowing, while the subsequent deficit was made worse by reckless spending on the poor. Worse than the poor themselves are the socialistic legislators who introduce ridiculous laws forcing companies to cease practises such as 'red-lining'. For the centre-left, the power of a barely regulated financial sector allowed the banks to make irresponsible decisions, and speculators to wreak havoc with economic stability by blowing bubbles then bursting them and making off with the dough. Though more sociologically realistic than its rightist competitors, this account neglects the reason for the financial turn in the first place, which was the otherwise intractable crisis of capitalist profitability.

The underlying problem is the impossibility of rational economic calculation in a capitalist system. Decisions have to be made by competing private firms which consistently misrepresent themselves to one another, to their workers, to their creditors, and to their consumers. As we usually discover in the middle of a crisis, misrepresenting one's assets and rate of return is normal practise for a capitalist entity. Not only that, but they consistently undermine any basis for predictability, and thus for rational calculation by revising the terms of their production, by downsizing, by cutting wages, tossing aside worker-management agreements, etc. etc. The only mechanism for calculation within the sphere of private accumulation is competitive market pricing. To see this as a secure basis for economic calculation, one has to also accept a number of philosophical and normative commitments that are quite eccentric: extreme methodological individualism, subjective value theory, the Kantian epistemology of the Austrian school, etc. These are not ideas one subscribes to lightly, or without a delight in perversity.

In fact, market pricing can tell us a thing or two. It can tell us something about the range of options available to us, with our cash, as private consumers or entrepreneurs. It can tell you what each purchase or investment will cost you. About the social effects of market transactions, however, it can't tell us a thing. This is no small matter. A system that persistently closes off fields of information to us, disclosing only that which pertains to our individual aggrandisement, is one that rewards behaviour that, while beneficial to the individual capitalist or consumer, is socially destructive and irrational for the economy as a whole. As to the information relevant to investment decisions, market pricing discloses surprisingly little. Suppose you are a capitalist. What will be rational to invest in tomorrow depends on what other capitalists are planning today. But whether what they are planning will work depends on what you are planning. And being capitalists, you don't share information around willy-nilly. It isn't the done thing. More to the point, you would need some sort of aggregate information about projected social needs, long-term developments, demographic changes, etc. Market pricing will tell you something about what was in demand yesterday, but it can't tell you what will be in demand thirty years from now.

So much the worse if you aren't a capitalist. If you're a capitalist, your only problem is how to improve returns on investment, usually in the short-term. Beyond that predatory social role, a whole series of problems enter one's vista. The question of how to rationally allocate investment, and structure social consumption in a rational manner, involves prioritising needs and wants in a way that requires information that market prices don't provide. Do you build social housing, raise incomes, or invest in a new marina? If you're a capitalist, it's easy - the marina offers more returns, hence more money for future investment and accumulation. If you're not a capitalist, other considerations hove into view. Or take pensions: how much of the social product should be set aside for future consumption? Should this be a fixed amount, or does justice demand that it increases as social production increases in the future? And what sort of infrastructure and public goods will future generations need? What about 'green' development? The only way market prices will help anyone make such decisions is by alerting investors and consumers as to what such decisions will cost them in the immediate term - hence, the attempt to meet such challenges through engineering market-driven, financialised measures such as carbon trading, pensions linked to the stock markets, etc.

In the real world, rational economic decision making is only possible to a limited extent due to the existence of an extensive non-market sphere, socialised public bureaucracies, national statistics agencies, offices for public planning and development, local authorities with oversight, etc etc. Tellingly, their behaviour becomes more irrational, wasteful and incompetent the more they are penetrated by marketised logic, the more they attempt to behave like corporations. They accumulate high overhead costs, duplicate capacity, fail to collect relevant information, and undermine the very rationalising aspects of service delivery that they are there to provide.

The core of the capitalist calculation problem is this: as a system of competitive accumulation, it involves individual capitalists in attempting to extract surplus value from the unique commodity known as labour-power; but to realise that surplus value, they must be able to occupy more of the market than their competitors, and engage in labour-saving innovation and rationalisation; but while this may be rational for individual investors on the basis of current market prices, in the aggregate it results in less labour-power being employed across the industry, thus a reduction in the total surplus value produced*; so while individual capitalists can increase their share of total surplus value, the aggregate tendency will be for the rate of return on investment to decrease, thus for investment itself to decrease, and in the long run for capitalism to enter into repeated crises and contractions. Irrational and anarchic, crisis-prone, with no means of rational planning and prediction, and ultimately bailed out by governments who socialise its losses, capitalism has one hell of a calculation problem.

Meanwhile, I hear tell there's a socialist calculation problem...?

*Update. Rick Kuhn points out that there is a mistake here: "This says that there is a fall in the absolute amount of labour-power employed and sv produced. In fact the organic composition of capital can (and often does) rise as the employment of labour power expands and the absolute mass of surplus value created rises. The issue is that new investment is more capital intensive so there is less labour power (and, given a constant rate of exploitation, surplus value) relative to total capitalist outlays on labour power and constant capital. The decline in the rate of profit may choke off investment before a decline in employment which is then a consequence of the crisis. Conversely, boom phases during which there is both rapid investment can be accompanied by both falls in the organic composition of capital and rises in employment."

Labels: 'free markets', capitalism, hayek, market metaphysic, menger, mises, neoclassical economics, neoliberalism, prices, rate of profit, wages

easyBritain posted by Richard Seymour

Labels: 'free markets', cuts, david cameron, local councils, public spending, tories, trade unions

How the socialistic collectivist totalitarian NHS ate my hamster posted by Richard Seymour

Labels: 'free markets', capitalism, health care, NHS, profits, socialism

Does a bear market shit in the woods? posted by Richard Seymour

Alan Greenspan: I was wrong about the 'free market'.

Labels: 'free markets', alan greenspan, libertarianism, neoliberalism

A heroic defense of markets posted by Richard Seymour

There is an interesting debate between Eamonn Butler of the Bernard Mandeville Adam Smith Institute - which was originally established as Britain's own version of the Heritage Foundation - and Chris Harman in this week's Socialist Worker. It is an odd moment when Butler says: "I don't defend capitalism. I defend free markets." Moreover, said free markets are a force for peace: "Business people want to see goods moving across borders, not soldiers". Harman is brisk in reply: "markets have always been bound up with national states that seek to protect and promote the interests of firms based in their national economy. This is why the market system is so unstable and prone to war as economic competition spills over into military competition between states." Butler's argument, related elegantly enough in its way, is an astonishing case of fetish-worship. It is difficult not to be temporarily stunned by the palpable reverence for perfectly ordinary commerce: with amazing efficiency, markets are held to connect billions of people in voluntary arrangements to exchange surplus product, allowing one to savour dates from Tehran and wear Chinese-made footwear; they unite peoples in pacific relations, abhorring war, compelling peace; they 'enable' the world's poorest to work more productively... And who would not be seduced by such a lavish vision of free market virtue?

Aside from the fact that Dr Butler does actually "defend capitalism" (as his Twittering suggests), it is at base disingenuous to argue for 'free markets' and claim not to be defending capitalism - unless Dr Butler is arguing for the suppression of the market in human labour? And then if, as I infer, he is not so arguing, what becomes of the force necessary to ensure that labour is a reliable and pliable commodity? What becomes of the state intervention required: to produce the labour market out of a mass of small producers and peasants; secondly to determine at what rate and for how many hours labour will be put to work (an odd sort of commodity, this, that has an interest in being less productive for the owner); thirdly to prevent labour from aggregating its power in a way that free market ideology holds distorts markets and amounts to a form of extortion; finally, to circumvent and repress radicalisation of a kind that threatens the very longevity of market institutions? I have by no means been comprehensive here, but this is enough to indicate the range of state activities without which there might not be a labour market to speak of. These activities include, but are not restricted to, mass terrorism (however one romanticises the enclosure process as essentially a form of liberation of the land from outmoded communal tillage, the violence that produced this process is hardly in doubt). And one would gather that, whatever Dr Butler's views on enclosure, he certainly has no problem with extra-economic coercion if it is to tame the unions. And if this is right, what justice is there in the epithet 'free market'? It is clearly an arrangement that is highly structured and protected by the state, a politically managed one, and one in which most of the key actors are themselves - and this is particularly true of the billions of poorest workers whose cause Butler ostensibly serves - prodigiously unfree.

On the other side of the argument, even the Smithians are not so absurd as to advocate the complete removal of all forms of distorting influences on the market. They admit that some form of welfare state is necessary, but always kept in check, and always balanced against the 'perverse incentives' it is reported to produce in the labour market (workers with decent welfare systems are liable to drive up the wage bill). And this doesn't have to be seen as a politically expedient evasion, provided Smithians are willing to acknowledge that markets have an innate tendency to fail and that without substantial state intervention, there would be a social catastrophe that might physically destroy much of the labour market. But if states do intervene, and tax profits to ensure that they can pay for such intervention, what becomes of the freedom of capital - its freedom to move, to engage in free contracts, to dispose of its surplus according to the wishes of shareholders? The Smithians acknowledge that every such intervention is, according to their - to be frank - brutal ideology constitutes a curtailment of freedom, but equally hold that this curtailment is indispensable to the effective functioning of markets. The 'free market', then, is a chimera. The legend of market efficiency collapses under the weight of its own qualifications.

As to the pacifying influence of markets, one doesn't need any clairvoyant insight into "what business people want" to notice that many of them are actually sending soldiers across borders as commodities. They're also sending the guns and ammo. Global military spending is worth a trillion dollars a year, and I defy any Smithian to tell me he doesn't want a cut of that action. We know they'll take big tobacco's cash, and do so moreover while acting as an interface between private capital and the state in a way that, arguably at least, 'distorts' markets. They will also happily accept £7m out of the foreign aid budget to advise New Labour on privatization "public sector reform" in Afghanistan and Palestine - two countries where, it seems to me, the role of military force in preparing the ground for 'free markets' speaks for itself. One could also meditate on the relationship between markets, capital, the state and war, but I fear it would be somewhat beside the point. After all, if the reality fails to live up to the idealized fetish-object, so much the worse for reality.

Part of the reason for this astounding lack of sociological realism is - has to be - disavowal. It is the presumed technical virtuosity of market institutions that 'free market' panegyrics typically emphasise, rather than their deep social implications. (In a slightly analogous fashion, the lean years for workers in the 1990s was accompanied by a slavering technophilia - yes, yes, low wages, job insecurity, poverty, but look at the technology that this new economy is unleashing!) One such implication, clearly, is the tendency for wealth to polarize - and with it, everything that wealth affords from educational opportunity to political clout. This perceptibly operative tendency has been met with some suspiciously slight generalities. These include the argument from meritocracy, that wealth is allocated rationally, according to the relative inputs of different market actors (an argument which has a tendency to degenerate rapidly into circularity). Or that from supply side economics, that wealth accumulated at the top will eventually trickle down as elite expenditure and investment creates markets and jobs (to which the rather obvious retort is that such expenditure by the working class would also create markets and jobs). Realistically, it is the former argument that matters most to the apologists for 'free markets': the people at the top are uniquely entitled, and their very success is indicative of that entitlement. Market allocation just is rational allocation in this doctrine, just as feudal tribute was divinely ordained. In this sense, every system is a meritocracy, since every ruling class claims to possess what it does on account of some rare and invaluable merit, whose existence can be inferred from the fact that the ruling class possesses what it does. The idolatry of the market is simply the modern version of this superstition.

Labels: 'free markets', capitalism, imperialism, neoliberalism, socialism

A breviary on socialist planning posted by Richard Seymour

Markets, if not an expression of aspirations implicit in human nature, are supposedly indispensable to any happy human prospect. Free market ideology has it that markets are the most efficient delivery system for goods; that competition will drive innovation and flexibility; that consumer-led demand will ensure that people get what they want (within their means); and that waged labour will incentivize hard work and thus produce growth. This fabular conception advises the most rudimentary assumptions of policymakers (who then go on to violate their own assumptions in practise) and a great majority of the intelligentsia. And, within its own terms, it has a certain allure. It is not obviously utopian, and doesn't assume basic human goodness. In fact, it states quite bluntly that what humans had often considered the main source of evil, the accumulation of wealth, was the progenerator of unprecedented good. Adam Smith thus famously argued: "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own neccessities but of their advantages." Moreover, in the context in which the classical liberal economists were writing, it made a great deal of sense. The absence of that context makes any attempt to apply such precepts to today's reality absurd.

For, we are hardly living in an economy characterised overwhelmingly by small producers, responding to consumer-led demand in a largely anarchic, unplanned, and highly competitive fashion, in which the main impediment to growth is the appropriative practises of largely parasitic feudal remnants. We are familiar with a high degree of capital concentration and centralisation, with systemic pressures toward price-fixing, the concealment of vital knowledge, the suppression of competitors, lobbying against potentially ruinous innovations, bribery, and so on. We are long inured to an economy based on the production and shaping of demand by corporations, in the form of advertising, and in which consumer-led demand is increasingly marginal to economic growth. We are used to planned obsolescence and to corporations transferring massive externalities to people in their capacity as workers, consumers and residents. And we are more than acquainted with the way that the purveyors of killer products, from pollutants to carcinogens, act covertly to seduce us into seeing their cause as one of freedom and enlightenment versus ignorance, censorship and nannying regulation. Of course, one would like to think that by appealing to the self-interest of the capitalist class, we could ultimately get what we want. (This would vindicate over a century of reformist socialism). And we would like to think that our tastes and preferences are ultimately registered and transmitted through price signals, though anyone who has worked in the music industry can tell you that the next sensation has already been decided on two years in advance (perhaps a slight exaggeration, but not enough of an exaggeration to vitiate the point that it is often the corporation's productive activities that dictate our tastes rather than the other way around). Enlightened self-interest is, however, no longer a plausible alibi - we just know too much. And, as a matter of fact, bourgeois ideology often tells us bluntly that the alibi is a fraud - as when game theorists concocted the "prisoners' dilemma" and proved that social solidarity of some sort could be far more effective in delivering a net good than a narrowly conceived self-interest.

Paradoxically, the capitalist economy is both a highly planned environment and a highly chaotic one. Significant resources are devoted to planning within corporations, and it can work due to a certain amount of predictability in, and manipulability of, demand. The demand for core goods such as bread is relatively stable, and inelastic. In contrast, the demand for iPods isn't so stable, and is liable to fall off if they don't come up with something better than the 120GB classic - hence, the need to shape demand, and to stage the introduction of better models in a process of planned obsolescence. But this substantial economic planning takes place in a context that is highly unstable, not to mention obviously undemocratic on account of the class relations embedded in production, and in a way that ensures large amounts of waste (hundreds of billions invested in PR, advertising, market research, lobbying etc). Overseeing this process is the state, whose enormous productive activities are equally planned, in a way that is slightly more democratic to the extent that it registers demands for social justice, and more stable to the extent that its access to knowledge is greater, its scope larger than any single corporation operating in its domain (this is true at least of advanced capitalist economies), and its functions insulated from the profit imperative. Planning is very much a part of the system, and it would be chaotic without it. And we now have a situation where right-wing newspapers like the Telegraph, who have hated the state precisely on account of its limited democratic potential, are carrying articles arguing for the nationalisation of the banks as a prudential response to the crisis. They want massive state planning, in other words.

So, it is no secret that planning is already with us, that substantial sectors of the economy that work quite efficiently are exempt from the profit motive, and that markets working in hypothetically good conditions produce largely negative social results. It is because of the fact that planning has been confined to individual units of capital, and conducted in the interests of a minority ruling class, that socialist planning has been proposed as a corrective. It involves, not the complete suppression of markets, but their active supercession. Markets are to be subordinated to imperatives arrived at democratically and implemented democratically. And because the limitations of representative democracy in the liberal capitalist state are obvious, because it can all too easily assume the regnant functions of capital (often simply by hiring capitalist managers and placing them in charge of recently nationalised institutions), socialist planning requires a different kind of polity. It has been called "workers' democracy" because it takes planning from the boardroom to the shop floor - elected workers' councils, deliberating under the advice of technical advisers who were previously subordinate to capital, take decisions in place of cabals of appointed executives and shareholders. Moreover, democratic organs built in each particular workplace are aggregated into local, regional and national structures, in which delegates are subject to instant recall. In such a scenario, there is a direct and continuous line of authority that exerts itself from the bottom up rather than the top down. For this reason, it has also been called 'direct democracy'. And because it aims to undermine the logic of 'scarcity' - so crucial to market economics - it is necessary to create such a superabundance of goods that some kinds of commodities would be treated more or less as if free, and thus delivered essentially as free services. This is quite distinct from the logic of a market economy in which goods are regularly destroyed or dumped in order to maintain the necessary scarcity of goods and ensure that they remain profitable to produce and sell.

Socialist planning is a remarkably simple idea, therefore. Its propositions do not depend on theoretical arcanum. It just happens to be the most radical extension of the democratic idea available. We now have a situation where we feel powerless, where a crisis driven by factors seemingly beyond our control, imposed on us as if by a natural force that we have yet to understand or master, threatens to destroy millions of livelihoods. We are the mercy of those whom we know don't share our interests. That could not be the case if the decisions about production, its character, conditions, and rate, were under our direct command. We would still face all kinds of problems, and conflicts, but we would do so as the rulers of our own society with the werewithal to manage it. But such an idea, though simple, has only been asserted in revolutionary conditions: in Russia and much of Europe during the interim after WWI, for example, as well as in France after 1936, in Chile after 1970, and Iran during 1978-9. It is impossible to imagine such a transformation, though simple and obviously just, taking place in a normal political situation. It is just as impossible to see it happening unless based on a powerful experience of solidarity and collective action. As a start, then, the experience of grassroots democracy would need to be routinised in workplaces across the country, in order to offset the pressures of competition, careerism and atomisation. Such is one of the many uses of trade unionism and rank-and-file organisation. The collective defense of jobs and living conditions against the inevitable attempts to force us to bear the costs of this crisis can be the basis for establishing such solidarity. Defying the logic of capital and the priorities of those who presently rule may be one crucial step in preparing us unruly natives for authentic self-government.

Labels: 'free markets', capitalism, neoliberalism, planning, socialism

Faith posted by Richard Seymour

Labels: 'free markets', bush administration, capitalism, stephen colbert

Gilding the lily posted by Richard Seymour

The rich are beautiful people. They never set a foot wrong, and yet everyone is constantly out to get them: the haters, the whiners, the terrorists, the jealous, the hippies, the lefties, the liberals, the protesters, the welfare queens, the quakers, the bakers, the candlestick makers etc. You, hypocrite lecteur, have never actually tried to live their lives, yet you persist in finding them at fault for some putative flaws. You're just jealous of their freedom. The latest challenge faced by the rich is that their mega-welfare-handout might not be processed through the system as rapidly as they had anticipated. The reason is that there might actually be some slight reflex in the state that still demands legislative review and judicial oversight.

Apparently, there are some little flaws to the proposed bail-out that cynics might carp about. For one thing it really does look like a parachute for the empire, in that it will bail out any global financial institution that happens to have what Paulson deems 'significant' investments in the US economy, whether they are in deep trouble already or not. This looks like a move to consolidate America's faltering command of the financial system and to ensure that the global appropriation of labour continues to operate overwhelmingly in the interests of US capital. Secondly, there are no protections for homeowners or taxpayers, no limits on executive remuneration, no plans to stimulate the economy, and no demands for reciprocity (ie, we give you $700bn, you give us...). This is just throwing money at the ruling class. So, as one might have predicted, the crisis is being used to shore up the class power of the rich through a massive act of expropriation. Thirdly, so it seems, the legislation includes a clause ruling out executive or judicial oversight of any part of this wealth transfer. So, the state is taking the opportunity to enhance its ability to act on behalf of capital without accountability.

Obama initially backed the Bush administration, but is offering some opposition to the current plans. A slew of right-wing commentators are also opposed, on the grounds that they thought all this bullshit about the 'free market' and 'moral hazard' and 'accountability' was in some sense meaningful. Only the reactionary statists of the Bush administration could force 'fiscal conservatives' into the same corner as liberals and leftists. No wonder the markets rallied on hearing of the Bush administration's plans: the owners saw a naked attempt to restore profitability by jacking the taxpayer further, thus ensuring a future 'belt-tightening' period of restricted income for Americans workers. And now we have an interesting bit of blackmail to deal with: if the legislation doesn't pass very quickly and without amendment, the markets may tumble again, thus threatening jobs, growth and trade.

Labels: 'free markets', financial sector, george w bush, neoliberalism, us economy