Austerity: The madness of a dying system
The ruling class has no alternative to austerity and the drive to create a pristine capitalism. Not only is that impossible, but, as shown by South Africa, the working class is beginning to revolt. This is an edited version a speech by Hillel Ticktin, editor of Critique, on November 17
Capital will kill and destroy: that is its nature
one looks at the current situation, one would have to conclude not
that we are coming out of a crisis, but that the ruling class is
becoming more and more afraid. Mervyn King, the governor of the Bank
of England, says that the real position is getting worse. Why is he
saying that? One could say, of course, that he is coming to the end
of his term, and that he has to say how bad everything is. But it is
clearly more than that. There really is a degree of pessimism now
within the ruling class itself, which he is expressing.
second aspect of the situation is that austerity has more or less
become the dominant mode of discourse. Barack Obama represents the
left wing of the ruling class, and even he frames his policy within
it. Except that his austerity is not the same as the Tea Party
austerity, which seems to rule in the Republican Party and would have
been the policy if Romney had won. Nevertheless, there will be a form
of austerity, whichever side you take in mainstream politics at the
this country it is obvious that Ed Miliband has more or less accepted
that line as well. In fact it is the line that was set in the 1930s -
the Austrian line, as it was called. Paul Krugman has said that
austerity is in effect a means of control. Behind the word
‘austerity’ one can hide the form of control, hide the
fact that there is a ruling class that is doing very well, and that
society is, if anything, becoming more unequal, not less so. That can
be hidden behind the word ‘austerity’ - that is what Keynes said
and what Krugman has been saying.
might have expected Keynes to have said that if he had been a
reformist. But he was nowhere near the left, and was strongly
anti-working class. However, one has to accept that the ruling class,
in order to survive, has to make concessions at certain times. And in
order to make concessions they have to recognise their own real
position, and make it clear that by making concessions they are
retaining control. It amounts to removing the veil of commodity
fetishism and saying, ‘Yes, we are here in control, despite these
the austerity line is the reverse: it amounts to a refusal to accept
what is real. Yet it is the dominant viewpoint now. In 2007 I
attempted to analyse the different forms of capitalist control - both
those that are inherent in the nature of capital itself and the
substitutes employed at this time - and see how far they could be
maintained. Austerity is part of that.
the present time no alternative policy is being put forward. Krugman
is isolated and the Keynesian approach is not being advocated, except
in a very limited sense. Obviously, it was used in 2008-09 to pump
money into the system, and it did save the world economy from going
into a bottomless slump. Without that taking place the system really
would have collapsed. What would have happened afterwards we do not
know. But they simply had to act, but, having done so, they are now
reversing the line.
are not prepared to countenance the Keynesian solution, and so the
only place left is austerity. Various people, including Krugman, are
saying that the policy is mad. It is mad because it is impossible.
Welfare cannot simply be abolished, which is what it requires. Apart
from anything else it would mean a collapse in demand, and at a
technical level it would mean reintroducing debtors’ prisons. How
else do you deal with a situation where millions of people are near
to starving and where there would be riots? So, it is impossible,
simply because the population would not accept it. Of course, the
ruling class understands that, and a number of economists who
advocate austerity are not that stupid either. But I have to say many
of them are - much of what has appeared in the press is simply
attempting to balance the budget, they are actually restoring the
reserve army of labour. In other words, they are returning to a
classic form of capitalism, as outlined in Capital volume 1.
This is particularly prominent in volume 3, where Marx examines
the nature of crisis, although it is also present in volume 2 of
Theories of surplus value.
there are at least some sections of the ruling class who see that it
is impossible to actually do it. That if they try to do it, it will
increase the momentum towards change, or cause riots; as in South
Africa. The trade unions and working class may start to act as a
unified class and that would be highly dangerous. This is the
contradiction at the heart of capitalism itself.
was not like that in 2007. They had not yet got to this point, and
nobody knew people were quite so mad. That the Tea Party is mad is
obvious, but that the mainstream ruling class would actually proceed
in this manner - the Conservative Party in the UK and the CDU in
Germany - was totally unexpected. That is a paradox and, of course, a
weakness. It does serve the purpose of providing a cover, as it puts
forward a false enemy. It appears to be a policy which can be
reversed, but they do not want the alternative policy: that is to
say, they cannot re-inflate the economy; they ruled that out from the
was there a shift towards finance capital at that time? Some people
argue in terms of the falling rate of profit, but there are many
arguments against that viewpoint. I think that they simply ruled out
reflation because it would lead back to the 70s. If the working class
got back to anywhere near full employment, it would start being able
to act collectively as a class again; it would become far too
powerful. So it is not that they cannot do it: they will not do it.
They simply will not take the Keynesian road.
can also look at the question more generally. I am thinking in
particular of what was said in 2007 by Bill Gross, head of Pacific
Investment Management, which holds more than $1 trillion in
government bonds. It may only be half of what the Chinese hold, but
it is still pretty important. It was he who declared that British
bonds were toxic, and it was this that justified the government’s
policies of austerity. The influential viewpoint of that company was
one of the reasons that the US credit rating was downgraded.
at the 2007 annual general meeting of his company, he said that it
was “far better to recognise that only twice before during the last
century has such a high percentage of national income gone to the top
0.1% of American families”. This was long before Occupy, and not
from a person on the left. It was “far better to understand”, he
continued, “that society should place an initial emphasis on
abundance, and the state should continually strive to distribute the
abundance more equitably”. One might think that the following might
perhaps be a quote from Skidelsky, in his phase as a leftwinger, but
it is still Gross: “… when the fruits of society’s labour
becomes maldistributed, when the rich get richer, and the middle and
lower classes struggle to keep their heads above water, as is clearly
the case today, then the system ultimately breaks down”. He
continues: “… boats do not rise equally with the tide; the centre
from a member of the Republican Party who has to be considered an
integral and central figure in the ruling class. But that was in
2007. The situation is clearly much worse today, in terms of income
distribution, for example.
most important aspect of the crisis is the fact that money is not
capital. That is to say, there has been a build-up of money which
cannot be invested, and when that happens value does not create more
value. There is no self-expanding value and money which does not
self-expand is not capital. This build-up of trillions around the
world is obviously the problem today - the reason why things are
getting so desperate and people are starting to demand the government
adopts a different policy.
the level of unemployment has not risen in the way it did during the
great depression. In America it may not be wonderful, but it is a lot
better than it was in 1933. That is so precisely because of the
policies adopted, which in part has meant that around the world,
particularly western Europe and the United States, companies have
tended to keep workers on, while effectively decreasing their wages,
or have allowed workers to retire early.
effect is that, although unemployment has risen, it has not done so
as fast as it did in the great depression. That is why most
economists do not refer to the current situation as a depression,
although it does constitute one from Marx’s point of view - a point
also made by Krugman. A depression is not a matter of one or two
quarters without growth, but long-term stagnation, in which there are
ups and downs.
point is that in the recent period the capitalist class has been
doing very well: profits have actually gone up during a depression.
Well, that cannot last, but it is actually what has happened. So if
Bill Gross were to repeat his remarks today (although I am not sure
he would) he would have to go even further.
affluence does not just apply to the top of the capitalist class; it
also applies to managers. The income of the top percentile in
Britain, the top 11,000 earners, has increased by 50%. As a result,
top managers who were previously receiving, say, £2.5 million a year
are now getting five million. Not bad. So for some people it has been
a rather good depression.
is increasing antagonism towards people who pocket so much money,
although it is not class antagonism as such. Yet the whole argument
around companies that are avoiding tax is really a blind alley. That
is the nature of capitalism - companies and individuals must always
strive to minimise their tax bill. Instead of making a big deal about
a managing director who is making 10 million, why not just tax them
at say 95% or even 99%? They would still be doing very well compared
to most of us.
reason that will not happen can be explained by the nature of
capitalism itself. Obviously, the logic would not just be to tax the
capitalist class, but for the state to redistribute their entire
wealth to the working class. But that would not be capitalism. So
campaigning on the basis of this or that company, or this or that
terrible capitalist who does not pay their taxes is really just a way
of avoiding fighting the system.
that is the kind of form that resistance has taken, and that clearly
is where we are today. But the left just seems to go along with this
miseducation of the population. In fact why is it ‘responsible’
to pay tax? Why do we want to pay for more wars?
interesting aspect of this is that in the third world we can see
control beginning to fray. There is an obvious case of this in South
Africa, and I would like to say a few words about that. A central
question is the crucial role of Stalinism in maintaining the system.
Now obviously, the Soviet system no longer exists, and the Chinese
Communist Party is a kind of afterlife - market Stalinism, Stalinist
capitalism, or whatever one calls it. It is a form of derived
South Africa, Stalinism is still playing a key role. The fact is -
and I have to say this because people do not generally understand it
- in 1994, the capitalist class preferred to put in a non-racist
government. The whole concept of racial capitalism is simply wrong.
The theory was that, in order for capitalism to develop in South
Africa, the capitalist class had to use racial discrimination.
do not intend to go on about this, as I have written a book about the
but it does appear to me to be simply wrong. But it was the basis of
the South African Communist Party’s ideology that took a
nationalist line rather than a line against capitalism, putting off
the day that capitalism could be overthrown to some time in the
future. That, as you know, is the hallmark of Stalinism - there is
always some reason why communism is always something for the day
South Africa the SACP adopted the line that the essential thing was
to end racial discrimination, but the capitalist class would be
unwilling to do so. In fact, it meant that they could stop paying
white workers between 10 and 20 times what black workers were paid.
From the point of view of the capitalist class, this was simply an
incubus that they did not need. The result was that the rate of
profit was not high and they regarded it as preferable to abolish the
wage difference, which is what they did. As a result, profits have
gone up, and so it was a successful change from the point of view of
the capitalist class.
South African government includes not only members of the Communist
Party, but those who to a large degree they have been influenced, or
controlled, by the Communist Party. The major trade unions have also
been controlled by the SACP. So when there is an industrial dispute
it has been compared to ‘playing tennis with yourself’ - on one
side of the net there is a minister who belongs to the SACP and on
the other an SACP union leader.
unions are closer to Soviet-style unions, except that it is cleverer
than that, because they do go on demonstrations, they do demand
higher wages and they go on strike. But it is easy to put wages up
every year because the real wage is something different.
Although it is hard to work out the real figures, one could argue
that sections of the workforce have either the same wage as in 1994,
when the government came in, or a lower wage.
is the way South Africa has been run for the last 20 years, and why
people should have put up with that is not very clear. But things
have finally snapped.
point of going through this description is to show that the form of
control rested to a large degree on Stalinism: the way they actually
control the unions and the propaganda they are putting forward. When
the government arrived in 1994, and before then, there were slogans
all over the place calling for socialism - there was a level of
socialist consciousness. But the overall understanding of what
socialism would mean and how it would take place was very low, and a
lot lower than it was in the 1950s. The level of understanding among
the left was very poor.
you understand the nature of Stalinism, you will not understand what
has happened in South Africa. And unless you have a more general
theory of the global economy, with Stalinism bound up in it, then you
will not understand the current economic situation either. The world
is in transition - away from capitalism, whilst remaining within
capitalism - and there are three sets of laws in operation: the laws
of capitalism, the laws of transition and the laws of decline.
South Africa there are people now in power who talk about socialism,
who have spent many years in jail fighting the apartheid regime and
who appear to be honest. Some of them are honest and genuine, of
course, although many are now millionaires. There is the wonderful
example of Cyril Ramaphosa, the former general secretary of the
National Union of Mineworkers, who is now a multi-billionaire and
director of the company against which workers in Rustenberg have been
on strike. He is not the only one.
point is that there is a highly complex situation, with obviously a
very low level of education, including socialist education. The ANC
government has one of the worst records on education. According to
The Economist, it comes somewhere like 120th in the world. So
it is not surprising that it has taken 20 years for people to react.
It is little wonder that people do not understand socialism when
there is a government of multi-millionaires proclaiming themselves to
be communists and socialists, presiding over an economy where the
majority have very low wages.
includes the opposition within the African National Congress milieu.
Even someone like Julius Malema, the expelled former leader of the
ANC Youth League, who calls for the nationalisation of the mines, is
simply an opportunist. He is personally very well off and in fact
seems to act as a spokesman for outside interests.
this complexity we are now seeing the beginnings of a revolt. So far
it is taking a trade union form - demands for higher wages, for more
workplace control and so forth; and concessions have been made. And
it is not just in the mines. It began in the platinum and other
mines, but now it has spread throughout industry and even
agriculture. There is a generalised revolt of workers in South
Africa, precisely because of the conditions they have to endure, and
without there being any understanding, any theory whatsoever, about
the underlying causes.
perhaps the 50s and 60s, there have been perhaps two countries where
Trotskyism has been some kind of force. One was Ceylon, where a
Trotskyist faction entered into government, and the other was South
Africa. In the Western Cape in particular Trotskyism was dominant on
the left, even when it was not dominant in the country as a whole. It
is no accident that quite a significant number of Trotskyists come
originally from South Africa. The late Neville Alexander came from
that tradition, and was immersed in it in Cape Town. But now it has
been degraded, and the level of discussion is very poor. So I do not
think you can expect very much more to happen at this time, but it
does give hope: if the working class is acting as a whole, then that
provides impetus for a left to be formed. One that is to the left of
the Communist Party, of course.
profits have tended to go up since 2009. But here you have an
important source of those profits - the third-world extraction of
minerals - being threatened. If you look at the FTSE 100, the
Financial Times bellwether of companies, a large proportion of
those whose profits are under threat are in mining. There is an
acceptance that capitalism is in trouble, which is not surprising:
they are in trouble and they are going to be in trouble.
the importance of South Africa technically, politically and
economically. The interaction between South Africa and other
countries on the continent means the revolt will spread. There are
many migrants in South Africa because even the low wages paid to
workers there are higher than in other African countries. So it is
not surprising that workers try to get into the country, and that is
why the population has grown so fast in spite of the Aids epidemic.
In the 50s, the population stood at around 12 million, and now it is
over 50 million. Life expectancy went down under president Thabo
Mbeki, dropping to something like 45, but, now that proper HIV
medicine is available, it has gone back up to 51.
Africa is an example of what is happening, and the degree to which
they control is being challenged. What I have argued is that, on the
one hand, there are the classic means of control: commodity fetishism
and the reserve army of labour; on the other hand, they have already
been partly shot through. In the period from 1945 to, say, 1972,
there was no reserve army of labour in Britain: it is hard to talk of
what existed as a simple reserve army, when there were welfare
benefits and what Marx would have called a surplus population. But
now the intention is to fully restore the reserve army of labour -
and for that the reduction of welfare benefits to the absolute
minimum is necessary.
such attempt will, of course, result in big problems for the
capitalist class. Workers will fight for their rights and the fact
that capitalism has been overthrown, even if the result was
Stalinism, has meant that it can be seen through and exposed, and
this will continue to happen as long as capitalism exists. Anyway,
the point is that the revolt will spread - it must spread. The
stories of what happened, that people were shot down and tortured,
are well known. So we can expect the revolt to spread to other
countries on the continent - and I would think to other continents
‘Enough is enough’ Pimco Investment Outlook:
H Ticktin The politics of race: discrimination in South Africa