August 2012        

It’s not the economy, stupid: it’s politicians

Following the successful coup by finance capital in Greece and Italy earlier this year, there are growing calls from “opinion-makers” and EU bureaucrats for economic decision-making to be taken out of the political and democratic process.
     This call is not new, and the process is subject to the ebb and flow of class struggle over time. However, it has received new vigour and strength from recent developments. Already the EU has centralised significant economic controls beyond democratic decision-making, such as control over a state’s currency and its policy on public ownership. Likewise, recent developments towards taking control of all fiscal and budgetary decision-making are huge set-backs for those who support democracy.
     One “opinion-maker” is Dan O’Brien, economics editor of the Irish Times. He recently began an article by saying: “The Euro zone crisis shows how economic performance can be negatively affected by political factors.” Never mind the fact that economic performance globally—as O’Brien well knows—was sent into crisis by the contradictions within the capitalist system, particularly in the anarchic functioning of the private financial markets but also in the general structural weaknesses of monopoly capitalism: monopolisation, inequality, overproduction, slow growth, and mass unemployment.
     O’Brien’s article goes on to identify two factors that have had a negative effect on economic performance: countries being beholden to interest groups that overspent and refused to make austere decisions, and high levels of corruption in public office.
     As factors go, in both the global causes of the crisis and the specific position of Ireland within the global crisis, these are not high on the list. Above them must surely be the anarchy of financial markets, the reliance of the economic system for growth on financial products and speculation, the flooding of countries like Ireland, Spain and Portugal with cheap credit and capital, the penetration of transnational capital into Ireland, the construction bubble and the reliance of employment levels on construction, the sale or closure of valuable public assets, the movement of production from the global north to cheap production areas in the global south, the increased indebtedness of workers in the “west” and the increased use of debt to finance basic consumption, the increasing shift of taxes onto labour from capital, the rising level of inequality—the list of factors more relevant to poor economic performance than those identified by O’Brien could go on.
     O’Brien states: “Ireland’s repeated calamities are not down to misfortune or politicians’ venality but to a political system that is designed for inaction, and hence failure.”
     No, Mr O’Brien, Ireland’s “repeated calamities” are a result of the repeated calamities and irrationality of the monopoly capitalist system, and of Ireland’s particular vulnerability within it.
     Where O’Brien is correct—though this is not his intended point—is in stating that it was political decisions that led Ireland down this path of subservience to monopoly capital, and of political cronyism and corruption in serving the needs of monopoly capital. And this has resulted in us having a ruling class dependent on monopoly capital and hence beholden to its interests.
     “During the recent good times, governments did not act to manage the public finances prudently, to regulate banks effectively and to focus relentlessly on competitiveness.” Again, O’Brien is deliberately presenting contributing factors that point the blame at public institutions rather than at the system itself.
     And anything more than a superficial analysis of competitiveness shows that when we consider the cost of living, and most importantly the cost of housing, we see that pay (the significant factor in competitiveness) was not out of sync with the economy or indeed with the rest of Europe: Irish workers in fact had less disposable income than, for example, their German counterparts, who have suffered decades of stagnant pay and austerity.
     But by the end of the article we get to the real political point O’Brien is making, and this is that economic policy and strategy should be removed from democratic accountability and transparency and be less subject to the democratic procedures (limited as they are) of Dáil Éireann.
     He states: “With a constitutional convention in the offing, there is a real opportunity to address this. Article 28.7 of the Constitution of Ireland says all ministers must be members of the Oireachtas . . .
     “If it were reversed, and ministers were prohibited from holding seats in parliament, effectiveness and accountability would be enhanced in manifold ways. Elected representatives would face a choice: remain full-time parliamentarians or relinquish their seats to be full-time ministers. That would make the Oireachtas more independent, and hence more effective . . .
     “Further accountability gains would come from making it easier to sack underperforming ministers . . . Without a Dáil seat, ministers would have a greater incentive to do a better job . . . It would raise the calibre of those holding office because there would be a greater incentive for governments to appoint non-politicians beyond a tiny pool of Oireachtas members.”

     Effectiveness for whom would be enhanced? Accountability to whom would be enhanced? What criteria would determine underperformance? What would be the incentive to do a better job? And, most important of all, who are the “high-calibre” non-politicians determining economic policy? The economic “experts” who missed the crash coming or who thought it would be a soft landing? The economic experts who continue to push austerity despite its negative effect on capitalist economic performance? The private-sector executives who bankrupt entire companies and even entire countries? The host of former Goldman Sachs employees who now fill the corridors of the Italian, Greek, American and EU government buildings?
     Let’s examine briefly this idea that the economic system today is—to use their terms—dynamic and innovative. In the United States, average growth in GDP each year in the 1960s was 4.6 per cent; this declined every decade, to 1.6 per cent on average in the 2000s.
     In Britain it was 2.8 per cent in the 1960s, 2.3 per cent in the 70s, 2.4 per cent in the 80s, 2.5 per cent in the 90s, and a mere 1.9 per cent in the last decade.
     In France, GDP grew by an average of 5½ per cent each year in the 1960s but again—like the United States—declined every decade, to 1.3 per cent on average each year in the 2000s.
     Or take Germany, the “engine room” of the euro zone. Its economy grew by an annual average of 3 per cent in the 1970s, 1.9 per cent in the 80s, 2.1 per cent in the 90s, and a mere 0.8 per cent in the last decade.
     Japan, the long-time dominant capitalist economy in Asia, averaged a mighty 10.3 per cent in the 1960s, only to see this decline each decade, to 4.5 per cent in the 70s, 3.6 per cent in the 80s, 1.4 per cent in the 90s and only 0.6 per cent in the 2000s.
     And how does Ireland’s economy compare? As a peripheral economy it “benefited” from the structural shift in production to cheaper economies and of course our corporate welfare state. Annual growth in GDP averaged 4.8 per cent in the 1970s but still has declined to an average of 3.3 per cent in the last decade.
     Let’s take another measure of economic performance: unemployment. Surely a “dynamic” and “innovative” system will provide jobs?
     Unemployment in France and Germany on average each decade since the 1960s has remained at about 9 per cent. In Japan it has almost doubled over the last two decades. In Ireland it averaged 16.9 per cent in the 1980s, 12.2 per cent in the 90s, went down to 5.1 per cent during the construction boom, but with the collapse of that industry is now back up to the 1980s level.
     This points to a system in deep crisis in the core, the mature monopoly-capitalist economies, with long-term negative consequences for peripheral economies.
     Growth is slow and declining, and unemployment is constant and growing.
     Yes, global wealth remains colossal. Indeed the volume of capital in the system is unprecedented—but so is the lack of investment opportunities.
     What has kept the system growing at all is the structural transfer of production to cheaper regions, increased monopolisation, and state intervention—the sale and privatisation of state companies and the corporate takeover of the former socialist countries, increased and growing state expenditure on arms, wars to open up resources and create new markets—and the extraordinary growth of a financial superstructure for absorbing surplus capital.
     Capitalism today is not “high-performing.” It is not “dynamic” or “innovative.” Sure, mobile devices and tablets give it a veneer of wealth and success, but in reality it is stagnant and deeply dependent on the state.
     O’Brien’s article is not an economic analysis and is not independent, neutral, or objective. It is a political attack upon democracy. Its intention is to ideologically strengthen the trend of taking economic control away from democratic accountability and debate and transferring it to finance capital and its non-democratic state institutions.
     Like everything else that evolves, sometimes this is done slowly, by stealth and creep, and other times by coups, in quick and sudden bursts, as we have recently seen.
     What we are now seeing is the preferred means of capital’s political rule evolving. Bourgeois parliamentary democracy is not responsive enough to the needs of, in particular, finance capital, and so the system is moving to a technocratic management structure for imposing its will, and the coercive powers of the state are coming to the fore.

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