Monday, 11 June 2012

The Marxist view

"... One tentative conclusion that can be drawn from the events of the past half-decade is that in the west we have been experiencing a genuine crisis of capitalism of the sort that Marx talked about. The Marxist interpretation of the crisis goes as follows. By the 1970s, the post-war mixed economy model of capitalism had run out of steam. The long boom led to a lower rate of profit for capital as full employment meant workers received a bigger slice of the cake.
Unemployment coupled with the free-market reforms of the late 1970s and 1980s broke the power of industrial labour and shifted the focus of western economies from manufacturing to finance. Financial capitalism delivered higher profits, but only by suppressing wages. But since market economies can only function if there is sufficient demand for goods and services, a way had to be found to boost consumption. That was achieved through higher levels of personal debt, cheerfully provided by the newly liberalised financial services sector. Growth rates were kept artificially high, and the tax revenues thereby generated allowed governments to spend more than they could actually afford. To complete the picture, the debt was shifted across national borders by globalisation, so China would lend America the money to buy the cheap industrial products being made in the factories of east Asia, and Germany would do the same for the less competitive members of the eurozone, such as Greece and Spain...."

Again Larry Elliot shows that he has a good grasp of the situation and has the flair to explain it succinctly.  See the full article

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