Cooking the Books 2

Capitalism is working

The Times (9 March) carried an article by Eamonn Butler, the director of the Adam Smith Institute. Yes, they are still around, even if it might be thought that they would be keeping a low profile these days, given that the pursuit of profit has yet again led to overproduction and a financial and economic crisis, a really big one this time.

Butler began by quoting a speech by an American professor called Boettke at a recent gathering of Mad Marketeers in New York:

“If you bound the arms and legs of gold-medal swimmer Michael Phelps, weighed him down with chains, threw him in a pool and he sank, you wouldn't call it a ‘failure of swimming'. So, when markets have been weighted down by inept and excessive regulation, why call this a ‘failure of capitalism'?”

That depends on what you mean by capitalism. Boettke seems to mean the spontaneous operation of production for profit and the market. But that’s not really capitalism; it’s just a policy that some capitalists (and their paid and unpaid publicists) have favoured at some times.

Capitalism is a system of production for sale on a market with a view to profit. Ideologists such as Butler and Boettke are assuming that there is some irreconcilable conflict between the profit system and government intervention. But there isn’t. Capitalism has never existed without government intervention and never will. For a start, it is based on the exclusion of the majority from the ownership and control of the means of production, which are monopolised by a profit-seeking minority. A state is needed to maintain this exclusion. This has to be paid for, so taxes have to be levied. Capitalists in one country are in competition with capitalists from other countries, and governments have always intervened to help “their” capitalists with tariffs and subsidies and, if need be, by military action.

So, capitalism and the state are not incompatibles. They go together. What is true is that the consensus of capitalist opinion varies at times as to the desirable degree of government intervention. What seems to be annoying the Adam Smith Institute today is that their ideological rivals, the Keynesians, who have no qualms about government intervention in the capitalist economy, are making a come-back because of the present crisis.

“Up to now”, Butler wrote, “the Keynesians have made the running. Greed, they say, has brought down the world economy. Only massive public spending can revive it”. If by “greed” Butler means the pursuit of profits, the Keynesians are not against that, even if they certainly are in favour of trying to spend the way of the crisis. But that’s just an alternative policy for the profit system to the one favoured by the Adam Smith Institute. It’s not a negation of capitalism.

Butler proffers his own explanation for the crisis: “excessive regulation” (of course). This assumes that, without this, the crisis would not have occurred. He rather undermines this approach by concluding his article by saying that “occasional crises are the cost of the prosperity that entrepreneurial capitalism brings”.

So, crises are going to occur anyway, even in his ideal, unregulated capitalist world! And what, without excessive regulation to blame, would they be caused by if not by the pursuit of profits leading to overproduction in some sector in relation to the market, from which the only way out is a crisis to eliminate the lame ducks and the deadwood, as capitalists like to refer to their inefficient colleagues? In this sense, Boettke is right. This and other crises don’t represent the “failure of capitalism”, but capitalism working normally.

Contents

  • Banks, who needs them?
    If there was production directly for use we wouldn’t need banks.

  • What is to be done?
    As capitalism loses some of its legitimacy, what should those who want to get rid of capitalism be doing?

  • Northern Ireland: a return to violence?
    Violence will not make people into socialists.

  • Capitalism’s reserve army of labour
    Full employment is not the normal state of capitalism.

  • Food: commodity or need?
    Enough calories are already produced in the world today to avoid anyone having to starve. It’s just that millions can’t afford to buy the food containing them.

  • Socialism: an open source society
    A socialist describes his personal experience of open source software - and its socialist implications.


    • Editorial
    What is socialism?

    Letters

    Contact Details
    		Pathfinders

    Material World
    The South China Sea

    Pieces Together
    Cooking the Books 1
    Saved by the slump?

    Cooking the Books 2
    Capitalism is working
    		Book Reviews
     The Credit Crunch;
     A Good Childhood;
     Selling Your Father’s Bones;

    Exhibition
      Rank.
    Cartoons
    The Irate Itinerant
    Free Lunch
    		50 Years Ago
    More trouble in Africa

    Greasy Pole
    The rise and rise of Harperson

    Voice from the Back






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     Socialist Standard online - edition                                            April 2009