Commentary on Political Economy

Sunday 14 August 2011


Just a quick note of explanation on what was said below about the Crook Column. Essentially, Crook is saying that central banks (mainly the Fed, the ECB and the BoE), which are unelected "technical" bodies, are having to do what politicians have not been able to do either because they are "economically" incompetent or because they are too "partisan" to do so. In other words, the "economic solutions" to the crisis are clear and ought to be taken, were it not for the fact that "politics" gets in the way!

This analysis is "interesting" because Crook "detects" the fact that something is wrong with the capitalist economy when it is central banks that run investment policy (through quantitative easing and other "inflation" announcements). But it is wrong for suggesting that there are clear solutions. Friends who read our commentary on this site will know that we agree that central banks are doing the right thing to keep capitalist economies going. But the limit to what they can do is set by the very forces that have thrust them in the spotlight.

As everybody knows by now, corporations are flush with cash - yet they will not invest it for the simple reason that they know that this investment may not be "profitable". The reason for this is that class antagonism is very high in capitalist countries the world over and profitable investment opportunities are very few, especially in the face of "mercantilist" practices from the Chinese Mafia, the German and Japanese elites and other "Asian" nations whose export-dependent model cannot be adopted by the West and, if it were, it would result in a deflationary spiral for the global capitalist economy.

That is why these central banks (even the ECB has been forced into the role!) are having to take the measures that are absolutely necessary to preserve this system and that will just as inevitably result in higher sovereign debt deficits, unless a good dose of "inflation" eats into them (reduces their "real" political cost).

This last point is one that Crook also makes - and he is again right. But there are no "technical-scientific" solutions to this crisis - because what is at stake is the very "political" decision as to what the State should do in this situation. The State is damned if it does, and damned if it does not. If it intervenes in the economy, it may well politicise it and rapidly raise inflation as the wage relation becomes more antagonistic. If it does not intervene, then the deflationary spiral will become a reality!

Our notion of "the fracture" is based on this "division" in the view of the State's role between Progressive and Reactionary elites in the US and Europe. Ultimately, the Progressives will prevail, but if they think that they will be able to resume "service as usual" for capitalism they are very much mistaken. It is up to democratic forces to transform political institutions to ensure that they further our needs rather than those of capital.

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