Wild stock market gyrations and a global financial meltdown open 2008. Around the world, old and new critics of neo-liberalism smirk and repeat “I told you so.” Neo-liberal dogma — that private enterprise is good and efficient whereas state economic interventions are bad and wasteful — suffers deepening disrepute. The private, deregulated capitalism of recent decades produced imprudent credit orgies that generated unsustainable bubbles bursting across scary headlines. The final straw broke in the world’s biggest private banks, especially those in the US. Those financial hustlers had packaged loans into securities to which they attached hyped credit ratings (purchased from other private enterprises). They then sold the securities to the gullible and greedy (often other nations’ bankers and state officials).
This latest private profit-driven bubble deflated once the reality of debts that could not be repaid revealed the inflated credit ratings. Huge financial losses and evaporating credit spread anxiety. How many businesses will fail, how many jobs will be lost, how many government programs will get cut as tax revenues fall, and how long will this last? Global capitalist efficiency is giving us yet another recession. Despite hunger, homelessness, joblessness, and poverty, businesses produce less because credit has dried up. Rising unemployment reduces purchases, which in turn deepens unemployment in a vicious cycle. Reduced state services coincide with the rising need for them. The human and material waste, the irrationality, and the inefficiency of recession proliferate. Because those with the most resources can best cushion the negative impacts, economic and social injustices worsen.
Panicked bankers and politicians around the world temporarily abandon neo-liberal beliefs. They want the government to compensate for and help to fix the economic disasters. As always, this is to be done by using public tax monies to solve the problems without constraining, let alone punishing, private capitalism for the mess it produced.
Two groups of critics focus on neo-liberalism’s troubles these days. The first group includes all the old devotees of Keynesianism, the welfare state, and the idea that government regulation can and should save capitalism from its own self-destructive excesses. They welcome the latest statements by leaders of the Federal Reserve, the Congress, and even this President as they finally recognize the current economic dangers. They applaud plans for government intervention to “correct” and “solve” the problems of private capitalism. Another New Deal is their ideal of what is needed.
The second group disagrees with the first. For them, the New Deal is a “been there, done that” to which they add, “and that was nowhere near enough.” They point out that while the New Deal imposed rules and regulations on private businesses, it always left the private capitalists in their position of receiving and disposing of profits. That position gave them the incentive and the resources to evade and eventually to undermine the New Deal government controls. They practiced evasion from the 1930s to the 1970s. After that, they and their agents (Reagan, Bush, Clinton, and Bush) openly dismantled the welfare state. They did this in the name of the superior economic efficiency, growth, and prosperity claimed to flow from free, unregulated, private capitalist enterprise.
The first group wants Clinton, Obama, McCain, or whoever wins to renew the business-regulating welfare state and thereby fix a broken private capitalism whose mass public support is dwindling. That program, they insist, is the only “realistic” solution to the current crisis. They dismiss the second group for offering programs that are socially divisive and dangerous, unrealizable utopian fantasies.
The second group mocks the “realism” of the first group. The New Deal’s “realism” left capitalists in the position to undo the New Deal, which they did. To repeat that mistake now is not realistic, they say, it is absurd. To secure society against the inefficiencies of private capitalism requires that capitalists stop occupying the position of receiver and distributer of society’s profits. Instead, this second group insists, the workers themselves must take that position.
As neo-liberalism unravels, critical opposition to capitalism’s social failures and mounting costs everywhere splits into these two groups. This replicates the critical opposition that earlier rose against slavery and feudalism when their times in history ended. On the one hand, some of those critics wanted better working and living conditions for slaves and serfs; they demanded state intervention to impose those conditions. However, other critics disagreed and said that improved treatment for slaves and serfs would never be secure so long as slavery and feudalism continued. This group said the basic problems were slavery and feudalism as intolerable social systems. So they fought for — and eventually won — their abolition.
Today, critics’ calls for a renewal of the old welfare state and for government regulation and control over private business are increasing globally. But the other group of critics is also gaining. In Germany, for example, the Left Party (Die Linke) is moving, albeit gingerly, beyond classical welfare statism toward more radical responses to neo-liberalism’s current crisis. The focus is becoming capitalism per se as the ruling social system that ought to be abolished.
The big issue for this group is what to propose in capitalism’s place. The chief lessons learned from actually existing socialisms in the twentieth century concern what not to do. The state and state economic intervention are thus no longer viewed as the solutions for the wastes and injustices of private capitalism. Instead, this group aims to change the economic base, the system of production itself. This means empowering and repositioning workers so that their jobs include receiving and distributing the profits their work yields. Their goal: to dissolve the distinction of worker and boss much as the earlier distinctions of master and slave, feudal lord and serf were overcome.
Today’s global crisis of neo-liberalism is propelling this last, radical group into the public arena. More from them will surely be heard in the years ahead.
Rick Wolff is Professor of Economics at University of Massachusetts at Amherst. He is the author of many books and articles, including (with Stephen Resnick) Class Theory and History: Capitalism and Communism in the U.S.S.R. (Routledge, 2002) and (with Stephen Resnick) New Departures in Marxian Theory (Routledge, 2006). This article first appeared in Global MacroScope (at <www.globalmacroscope.com/>).