Quack doctors selling snake-oil and other supposedly effective remedies were popularised in US Cowboy adventures on the silver screen when I was a youngster. They rolled into town and offered bottles of the stuff to naïve citizens claiming it had qualities which would cure any ill that the human condition might suffer. Now we have a similar situation with regard to so-called contemporary ‘experts’ in curing the economic woes of capitalism. Each expert has his or her own brand of economic snake-oil and show up on our TV screens offering remedies that they insist are sure to be part of the cure for the sick system of capitalism. Some of these prescriptions have been covered in previous articles, particularly ‘Q3: Bailouts and Banks; and ‘Bonds and Bubbles’. This article will outline some more of them touted in the media as means of solving the ‘five-fold crisis. It will hopefully become clear from analysing them that the system cannot be saved by reforming various aspects of it.
1. Saving Capitalism by boosting spending.
As a way of trying to create economic growth, there have been a few suggestions recently by so-called economic experts that the government should not just print more money and give it to the banks, but give every adult a few hundred pounds to spend. The suggestion includes conditions which should be placed upon it; to be spent on sensible commodity items and within a set period of time – for example one or two months. The idea is that people will spend the money, shops will take on more staff, sell their stocks and re-order from manufacturers who will take on more staff and increase production. Whilst it ‘appears’ on the surface to make sense and have its attractions, economically it is a nonsense proposal for the following reasons.
Let us assume, for example, that the UK government gives out £200 to 40 million adults (a total handout of £8 billion) with the above conditions stipulated. In the first months shops are busy, take on temporary staff, have a bonanza and order more goods. The manufacturers, increase production, through overtime and/or temporary staff. Are new factories going to be built? No! Are high levels of permanent jobs going to appear? No! After the months are over, trade drops back at least to previous levels, shops order less, manufacturers cut-back production again. Temporary staff are laid off and the situation is back to its previous condition.
Or is it? Of course not – for at least 3 reasons! 1. Forty million people do not have to buy the things they have just purchased. 2. Retails capitalists have gained a share of the £8 billion. 3.Manufacturing capitalists have got a share. 4. The government is now £8 billion (minus the VAT they get back) further in debt. And so in the months after, the economic level may go further down than before and the government must raise taxes or cut expenditure. And all the above is assuming the very best scenario, for it is by no means certain that all the retail shops will increase the orders from UK based manufacturers. It is more likely the case that they will find ways to purchase cheaper supplies from the global market.
It only sounds a good idea if you don’t stop to think about it, but now more than ever we need to stop to think about things the elite are suggesting. This is not to suggest that giving people some of the money back which the capitalists and government have previously extracted from their labour, is not a good thing in itself, but it is not a cure (or even a partial cure) for the massive contradictions within the capitalist mode of production. And of course as a policy objective it would act as a distraction. A similar process would occur with any country which adopted such a suggestion and that is exactly why it is unlikely to be adopted anywhere.
Another allied scheme for saving the system by boosting spending, is the idea of payment of a ‘living-wage’. The idea that a certain level of wage is necessary to live and that the government-set minimum-wage is insufficient, pre-supposes wage-slavery and the continuation of capitalism. Of course a higher-wage, whilst the system persists is something to campaign for, but the idea of certain local authorities and private companies paying a ‘living-wage’, on a voluntary basis, leaves out of consideration those who are not so employed and those who are unemployed. Since under austerity, the former are getting less numerous and the latter more so, this will do nothing to seriously stimulate the economic activities of a country or region. Nor will it solve the problem of a satisfactory existence for the bulk of society – those who will not get a ‘living-wage‘.
For the sake of brevity, this is an extract from a longer analysis of six ‘remedies’ suggested by various schools of political and economic thought. The other snake-oil remedies are as follows.
2. Saving Capitalism by increased taxation.
3. Saving Capitalism by more/better regulation.
4. Saving Capitalism by increasing competitiveness.
5. Saving Capitalism by economic growth.
6. Saving Capitalism by further privatisations.
The full article discussing the five above suggestions appears with the title ‘Snake-oil for Capitalism’ in the black strip below the picture banner at the head of this page, or by clicking on the following link.
Roy Ratcliffe (October 2012.0