2020s >> 2021 >> no-1402-june-2021

Cooking the Books 1

What the market does

‘No politician’, John Kerry told a virtual climate summit called by the US President, ‘no matter how demagogic or how potent and capable they are, is going to be able to change what that market is doing’ (i paper, 24 April).

As Biden’s climate envoy he was expressing the view that investment in technologies to combat global over-warming had now become so profitable for capitalist enterprises that no government would be able to stop it happening. He may have been over-optimistic or premature but his reasoning was based on a more general assumption – that no government can change what the market is doing.

Applied more generally, it is what socialists say. It’s even the basis of our case against trying to make capitalism work for the benefit of all instead of, as it does, as a system geared to making and accumulating profits. So it is rather strange that a long-standing reformist politician – Kerry was the Democratic Party candidate for President in 2004 – should be saying this.

He could come back and say that he only meant it to apply to the particular case of investment in anti-climate-change technologies. But why would governments not be able to change what the market is doing in this case but would in others? Such as when market conditions mean building luxury flats rather than decent homes for those who need one; or not producing food for malnourished people who can’t pay for it; or cutting back on the production of needed useful things when there’s an economic depression?

Capitalism is an economic system based on the ownership of productive resources by rich individuals, capitalist enterprises or states, where production is carried on for sale on a market with a view to profit. It is driven by the economic imperative not just to make profits but to accumulate them as more capital invested in production for profit. This imperative is enforced via the market.

A capitalist enterprise won’t make a profit unless it can sell what it produces. To do this, it needs to keep its costs down. This involves keeping up with the latest methods of production, installing technologically more advanced plant and machinery. The market obliges capitalist enterprises to do this just to stay in the game. If they don’t, they will be out-competed by rival enterprises and eventually go out of business, either through bankruptcy or being taken over.

This is the context within which governments have to operate and which constrains what they can do. The main constraint is that they don’t have resources of their own and have to get them, directly or indirectly, from the profit-making sector. They must take care not to kill the goose that lays the golden eggs. Or even discourage it. Just the opposite; they have to positively encourage it, by maintaining or creating favourable conditions for making profits.

How much they can take from the profit sector depends on how that sector is doing, whether it is expanding, contracting or stagnant. They can’t stop the boom/slump cycle that is built into capitalism, so they can’t do much more than navigate by sight. They can’t control capitalism but are at the mercy of its vagaries.

Kerry is right. No politician can successfully buck the market. As he said, they have to go with its flow.

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