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Thank you for inviting me to speak on the Marxian critique of the neoliberal economic agenda.
1. Let me begin by reviewing briefly with you basic concepts in the Marxist critique of the capitalist political economy.
a. There is the contradiction between the social character of production in large scale machine production by collective labor in factories on the one hand and the private appropriation of the product of labor due to private ownership of the means of production on the other hand. A small part of the new material values created by the workers goes to them as wages for their subsistence. The surplus value is divided among the capitalists as profit, the banks as interest on loans and the landlord as rent.
b. To maximize profits, the capitalists keep on enlarging the constant capital for equipment and raw materials and keeping down the variable capital for wages. Every commodity contains the old material values (previously congealed labor) from the use of the raw materials and depreciation of equipment and new material values that only living labor power (expressible in average socially necessary labor time) can create.
c. The drive of the capitalists to maximize profits by enlarging constant capital and pushing down wages is that it results in the crisis of relative overproduction. It becomes more difficult for workers to buy what they produce as the capitalist profit rises and their real purchasing power declines. The rising ratio of constant capital to variable capital also results in the tendency of the profit rate to fall.
d. Expanding the money supply and credit can be used to stimulate production, trade and consumption of the goods. But it has also been increasingly used by the capitalists to accelerate capital accumulation, overvalue assets and rake in higher profits not only from production but more so from the financial markets in an effort to counter the crisis of overproduction and the tendency of the profit rate to fall. Ultimately the boom goes bust, with economic and financial crisis breaking out.
e. In the development of the free market economy of the 19th century to the monopoly capitalism or modern imperialism of the 20th and thereafter, the role of finance capital has become dominant and decisive upon the merger of industrial capital and bank capital and the higher importance of the export of surplus capital over the export of ccmmodities.
2. The state always plays a necessary role in the running of the modern economy, be it industrial capitalist, socialist or semi-feudal. It accounts for a large chunk of the economy and its policies can shape the economy one way or the other.
a. In opposition to the capitalist system, the Marxists or the scientific socialists advocate the overthrow of the bourgeois state, the socialization of the private ownership of the means of production and the adoption of state economic planning to ensure the balanced functioning and development of the economy and prevent the economic and financial crises that have afflicted capitalist society. Socialist societies have in fact arisen and developed until undermined and destroyed by modern revisionism and restoration of capitalism.
b. In a capitalist economy, at any level of development, the state accounts for a large part of the economy as the biggest single employer and as the collector and spender of tax revenues. It can shape the economy through monetary and fiscal policies. It can play a pivotal role in further developing an economy. It can use the power of taxation to reallocate resources and provide social services. It can cause economic and financial crisis through misallocation of resources. And when economic and financial crisis strikes, state intervention is called for to counter or solve the crisis.
c. During the Great Depression, state intervention was deemed necessary as an instrument for countering crisis and reviving demand, production and employment. The Roosevelt administration proclaimed the New Deal and created the Works Progress Administration in order to reemploy large numbers of the unemployed in public works projects intended to pumpprime the economy. Subsequently, the use of fiscal policy and public works projects would become known as Keynesianism under Keynes’ theory of general equilibrium.
d. The use of Keynesianism in civil construction projects did not solve the crisis but it did salve the social and economic situation where fascism did not take over the capitalist state and society. In Hitlerite Germany, the use of public works to stimulate the economy glided into feverish military production. The worst consequences of the Great Depression were fascism and World War II. In the United States, expanded and intensified civil and military production for the war effort overcame the crisis and stagnation brought about by the Great Depression.
3. Let us now look at neoliberalism arising and holding sway in the capitalist world as a reaction to Keynesianism and State Intervention
a. Up to the 1970s, Keynesianism was touted as the economic policy of state intervention that countered the Great Depression, strengthened the US as bulwark of capitalism, guided the reconstruction of the war-devastated capitalist economies under the Marshall Plan and maintained equilibrium in capitalist economies. But the reconstruction and revival of the countries defeated in World War II would bring up once more the crisis of overproduction and the oft recurrent bouts with recession, despite the frantic efforts of the now united imperialist countries to arrange and rearrange the market in the world and global regions.
b. The phenomenon of stagflation became starkly clear. When the economic policy makers deployed monetary and fiscal measures to stimulate the stagnant economy inflation would surge and when they applied the measures to dampen inflation stagnation would further deepen. Dogmatic exponents of the “free market” based in the University of Chicago School of Economics took the lead in attacking Keynesianism and state intervention in the economy. They blamed wage inflation and social spending as the product of state interventionism and the cause of stagflation. They conveniently obscured the demand pull inflation caused by the rising levels of military production and expenditures, massive overseas deployment of US military forces, wars of aggression in Korea and Indochina and space research and development.
c. The exponents of neoliberal economic policy stressed that the market must be given free rein and that the state must limit itself to the monetarist policy of adjusting the money supply and interest rates in order to cope with fluctuations in the market. They demanded the pushing down of wages and the cutback on social spending by government and making more capital available to the capitalists for investment by reducing taxes on them and giving all opportunities to raise capital and profits through trade and investment liberalization, privatization of state assets, deregulation and the denationalization of the economies of client-states. The neoliberal policy was also used as an offensive weapon against the vestiges of socialism and public ownership of the means of production in the countries already ruled by revisionist cliques.
d. The neoliberal economic policy started to become dominant in the world capitalist system in the years of 1979 to 1981, with Thatcher and Reagan touting it and using it against the working class. They claimed that the more savings or capital in the hands of the monopoly capitalists translates automatically into productive investment in the so-called free market. In the next three decades, it was made to appear that there was no economic problem that could not be solved by helicoptering and pouring unlimited money and credit on it firstly on the so-called supply side of the monopoly bourgeoisie and secondly on the demand side of the consumers.
4. Let us look at how the neoliberal economic policy went bankrupt, inflicting great suffering on the people and devastating entire economies in both developed and underdeveloped countries.
a. The US started raising the interest rates in 1979, practically calling in the loans from the third world and causing the so-called Latin American debt crisis in 1982. Reagan went into high speed spending for the production of high tech weaponry in 1980s. This could not generate any significant amount of employment. The US slowed down on the manufacture of consumer goods and started to import these at an escalating rate in the hope that the suppliers of these (Europe and East Asia) would become buyers of big items from the US. In less than a decade, the US would incur huge trade deficits and become the No. 1 debtor of the world.
b. Clinton tried to revive US manufacturing in the 1990s by allowing the commercial production of electronic technology that used to be restricted to the military for national security reasons. But the US corporations, especially in the military industrial complex, opted to produce and export the more profitable big items. China became the big supplier of consumer goods to the US and the US proceeded to incur trade deficits far bigger than ever before. US manufacturing further declined. The US went further into the the financialization of its economy and at a maddening speed after the repeal of the Glass Steagall Act and the liberalization of finance, removing the difference between the banks and investment companies and allowing both the privilege of unrestricted generation of the money supply, credit and derivatives.
c. Job security was attacked. Part time jobs in service sector replaced secure jobs in the manufacturing sector. The real income of workers declined. Social insurance and social services were subjected to privatization and higher fees. The trade union rights and social benefits were eroded in the imperialist countries and much more so elsewhere. But still through offers of debt financing, portions of the working class were pushed to engage in consumerist credit card spending, buy shares of stocks in the years of the high tech bubble from 1995 to 2000 and acquire houses on mortgage that they could not really afford during the housing bubble of 2002 to 2007.
d. Above them, the finance oligarchy and the monopoly bourgeoisie made profits rapidly, continued to overvalue their assets and went berserk with the most fantastic and incomprehensible kinds of derivatives, like mortgage backed securities, collateralized debt obligations and credit default swaps, until the moment of truth came in September 2008, when the crisis of overproduction became so severe and the financial markets collapsed. The worthlessness of the derivatives became exposed when the increasing unemployed could not pay for their mortgages.
e. In the less developed economies of the world, particularly the so-called emerging markets, the neoliberal economic policy was already exposed as unsustainable during the so-called Asian financial crisis in 1997. But even then debt financing continued to be used to support booms of private construction and importation of consumer goods in countries that produced for export raw materials and a few semi-manufactures. In the ongoing crisis, such countries are suffering from the falling prices of their exports, the rising prices of imports, widening trade deficits and a mounting debt burden. These spell economic and social devastation.
5. The global economic and financial crisis has protracted and worsened since 2008. There seems to be no end in sight. Before the current crisis can be solved or modulated, another bigger crisis is anticipated in 2016.
a. That is because the political and business leaders in the imperialist countries stick to the dogma of neoliberalism and dictate upon their client states. Summit after summit has been held by the rulers of the major capitalist countries but to no avail. Conference after conference has been held by the IMF, World Bank and WTO but to no avail. The monopoly bourgeoisie, especially the financial oligarchy, does not want to give up the rapid accumulation of capital and easy profits under the neoliberal economic policy.
b. The big banks and firms that created the economic and financial crisis have been bailed out by public money to cover their losses and make book profits. Thus, there are sporadic claims to recovery, especially in the stock market. But public money that is supposed to be earmarked for generating production and employment in infrastructure, social services and green energy is subject to labor-cost saving and profit-making by the private corporations under the continuing neoliberal policy. Thus, there is no real economic recovery, no expansion of production and employment.
c. Public deficits and public debt have mounted to aggravate and deepen the economic and financial crisis as a result of the bailouts, tax benefits and other forms of bonanza for the banks, corporations and the upper class. Now, the rulers of the capitalist states are adopting austerity measures and raising taxes and fees in order to shift more burden of the crisis to the people. Public sector employees are being thrown out of jobs or their salaries and pensions are being reduced. Social services are being reduced and made more expensive than ever before. The toiling masses of workers and peasants and the middle class are being deprived of their jobs, homes, livelihood and basic social services. They are being subjected to worse forms of exploitation and oppression.
d. There is therefore widespread discontent in the world, in both the developed and underdeveloped countries. In certain parts of the world, the broad masses of the people have begun to rise up against the US-directed neoliberal economic policy and its extremely exploitative and oppressive features and consequences. It is our duty to further arouse, organize and mobilize the people to repudiate this policy and to demand their national and social liberation from those who exploit and oppress them under the slogan and dogma of the so-called free market.