Why capitalism is really being bailed out

asterix-economicsIt’s a confusing spectacle for a lot of people: $3 trillion+ being given away to banks and corporations. The various reasons being offered up to explain the giant money circus is that it is to: restart the flow of capital from banks to businesses by supplying the means to start lending again; to re-inflate the housing market (that’s supposed to be a good thing); and that old politician’s standby in hard times – putting money into the pocket-books and purses of the public. It must pain the politicians and money merchants more than a little that more and more people don’t believe it.

What you never hear in the analysis from the White House meetings is that capitalism, whether it’s the free-as-a-bird Adam Smith variety or the heavily subsidised state-corporate variety, just can’t escape downturns and recessions, they won’t admit it in public. When he was still chancellor, Britain’s current prime minister Gordon Brown banged his fist on the despatch box and declared that there would be “no more boom and bust“. He was telling his people that with him as chancellor, he could run a capitalist economy without it falling into a downturn; he was wrong. For whatever reason, whether or not he claims it was as a result of the crash in the US economy ‘pressing’ on Britain’s national economy, he was wrong. He will never admit that it was his vision of a highly marketized world, directed through a government filter, that was at fault; he’s too blind.

Milton Friedman suffered from the same disease, he got the Nobel Prize and then died before it could be demonstrated to him that his quack monetary economics, first tested in the bloodbath of Pinochet’s Chile, is a resounding and disastrous failure. The difference is Friedman is dead, it’s too late for him to revise his opinons even if he wanted to. Brown and every economist like him or worse has no excuse.

One other economist being mentioned through this bailout is John Maynard Keynes. His name crops up in the press as the analysts on the semi-left applaud or chide governments for finally having the sense to return to ‘good old’ Keynesian economics: the sort of plan that brought America out of the hungry thirties. The fact, however, is that this is a partial falsehood. Keynesianism, or the grudging variety favoured by capitalist economists, didn’t bring America out of the depression of the ’30s. As late as 1939 there was still no substantial recovery, after another downturn in mid-1938. It was the start of war expenditure  (we’ll call it ‘war Keynesianism’) that started recovery and it was the post WWII reconstruction that kept the recovery moving into the prosperity of the ’50s and ’60s, chiefly under the Marshall Plan—a plan based on large-scale government intervention into the economy and sanctioned by big business, essentially a nice little collaboration.

There are probably many people under the delusion that the banks are being pumped full of cash to help ‘the people’, to stop ‘the people’ from falling foul of bankruptcy and losing their houses. A cure for this is to re-read George Kennan’s Policy Planning Study 23 to realize that the drivers of the neo-liberal capitalist economy don’t consider the welfare of people as their responsibility. For them ‘people welfare’ is just socialism, an insult in America (as Milton Friedman ridiculously accused Nixon) or communism. The fact that Barack Obama was once a ‘community organizer’, and thus someone who tried to assist in the welfare of people, is enough for the Friedmanites, the blowhards and the drones who pick up their slogans, to call him a communist and actually believe their own ludicrous claim.

Capitalism is being bailed out because it is in one of its inescapable capitalist crises. These kinds of crises tend to make “the people” slightly more angry and less tolerant of capitalism than Friedmanites would like, this threatens the whole system, so they have to pretend to be saving it for the sake of jobs, and homes and “the future”. That’s their story anyway. A fairy story that makes Alice In Wonderland look like hard-boiled detective fiction.

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