STRANGE TIMES

There have been some recent additions of interest in the Australian section of the Encyclopedia of Anti-Revisionism On-Line.

The material was written by members of the Red Eureka Movement a Marxist-Leninist group from the late 1970s and early 1980s.

The entire encyclopedia deserves lengthy visits by anyone trying to make sense of the 20th century communist movement. This would include anyone planning to be part of some future 21st century communist movement.

The REM material is arguably the best place to start. It is generally more readable and insightful. This leaflet is good appetizer

The material represents a rebellion against nonsense that had become entrenched because of groupthink, lack of discussion, blind acceptance of decisions from the top with minimum of thought and the demonizing of opponents.

The REM material includes some important articles on foreign policy and also a range of articles critiquing the ‘left’s’ economic illiteracy.

While you are checking out the Encyclopedia don’t forget to go here to see what what Mao and the Chinese Communist Party were saying during the 1960s and 70s about the Soviet Union and the threat of capitalist restoration under socialism.

If the world economy gets stuck in a serious and prolonged slump, the most likely response by governments is to do nothing useful. This is because the only effective action is for governments around the world to take over ownership of large chunks of their economies’ productive assets. This ownership would give them control over a lot of spending decisions and therefore the potential to restore effective demand to levels that would get the economy moving again. Of course, it is hard to imagine governments adopting such a policy unless there is a really big change in the political landscape.

A lot of government ownership could be achieved with a fairly minimum amount of fuss by hitting the very rich. They could be slugged with a 100 per cent tax on any wealth that made them more than just very affluent. My hunch is that the cut off would be somewhere around $10 million. Paying this tax would not require the liquidation of financial assets such as shares and bonds. They would simply be handed over.

I am not sure how much government ownership would be achieved in this way. I suspect not enough. So what could they do next? Extending the wealth tax to the large number of people who are merely very affluent would cause far too much political resistance and would require the government to take over a lot of small and medium sized businesses. This problem could be avoided while greatly increasing government ownership and control if all shares in large public and private firms that have not been seized by the wealth tax were compulsorily exchanged for government bonds. In this way wealth is not confiscated, it is simply put in a form where it cannot cause quite so much mischief.

The government would then have considerable control of the financial sector. It would own the banks and all shares in large companies. To minimize the hassle involved and to quarantine them from political machinations the government could assign these shares to existing or newly formed investment houses. These firms would function much as they do now, except that they would be instructed by their new owner to invest on the assumption that the economy was taking off again. Likewise, companies would be instructed to utilize existing capacity on that assumption. All this activity would then create a self-fulfilling prophecy.

Through these institutions the government could also act as so-called investment angels and venture capitalists, indeed more vigorously than the present lot. They would take a stake in small private entrepreneurial startups and prepare them for the big takeover just like now.

Everything could then just chug along pretty much like the world as we know it. Businesses would continue to be driven by senior executives on high profit based salaries. And I think the government owned investment funds would be fairly effective vehicles for market discipline because their success and failure would show up clearly in their bottom line. (Am I missing anything free-marketeers?)

OK we have got rid of the super-rich and eliminated the business cycle.  That’s pretty good. However, I suspect a society which has just stripped the rich of their wealth, would be up for more than simply replacing them with government-owned capitalism.

The economic slowdown may entail a double-dip in employment …

The next few months will be crucial for avoiding a dramatic downturn in employment and a further significant aggravation of social unrest. The world economy, which had started to recover from the global crisis, has entered a new phase of economic weakening. Economic growth in major advanced economies has come to a halt and some countries have re-entered recession, notably in Europe. Growth has also slowed down in large emerging and developing countries

Based on past experience, it will take around six months for the ongoing economic weakening to impact labour markets. Indeed, in the immediate aftermath of the global crisis it was possible to delay or attenuate job losses to a certain extent, but this time the slowdown may have a much quicker and stronger impact on employment. After the collapse of Lehman Brothers in 2008, many viable enterprises expected a temporary slowdown in activity and so were inclined to retain workers. Now, three years into the crisis, the business environment has become more uncertain and the economic outlook continues to deteriorate. Job retention may therefore be less widespread.

Moreover, government job- and income-support programmes, which proved so successful in cushioning job losses and supporting job retention practices in firms at the start of the global crisis, may be scaled down as part of the fiscal austerity measures adopted in a growing number of countries. Lastly, and more fundamentally, while in 2008-2009 there was an attempt to coordinate policies, especially among G20 countries, there is evidence that countries are now acting in isolation. This is leading to more restrictive policies driven by competitiveness considerations, and job retention measures could fall victim to it.

The latest indicators suggest that the employment slowdown has already started to materialize (Chapter 1). This is the case in nearly two-thirds of advanced economies and half of the emerging and developing economies for which recent data are available. Meanwhile, young people continue to enter the labour market. As a result, approximately 80 million net new jobs will be needed over the next two years to restore pre-crisis employment rates (27 million in advanced economies and the remainder in emerging and developing countries). However, in light of the recent economic slowdown, the world economy is likely to create only about half of those much-needed jobs. And it is estimated that employment in advanced economies will not return to its pre-crisis levels until 2016, i.e. one year later than projected in the World of Work Report 2010.

… exacerbating inequalities and social discontent …

As the recovery derails, social discontent is now becoming more widespread, according to a study carried out for the purposes of this Report (see special focus on social unrest in Chapter 1). In 40 per cent of the 119 countries for which estimates could be performed, the risk of social unrest has increased significantly since 2010. Similarly, 58 per cent of countries show an increase in the percentage of people who report a worsening of standards of living. And confidence in the ability of national governments to address the situation has weakened in half the countries.

The Report shows that the trends in social discontent are associated with both the employment developments and perceptions that the burden of the crisis is shared unevenly. Social discontent has increased in advanced economies, MiddleEast and North Africa and, albeit to a much lesser extent, Asia. By contrast, it may have stabilized in Sub-Saharan Africa, and it has receded in Latin America.

… and further delaying economic recovery

The worsening employment and social outlook, in turn, is affecting economic growth. In advanced economies, household consumption – a key engine of growth – is subdued as workers become more pessimistic about their employment and wage prospects. Indicators for the United States and several European countries suggest that workers expect stagnating or even falling wages. The uncertain demand outlook, combined with continued weaknesses in the financial system of advanced economies, is depressing investment in all countries, including in emerging and developing economies which rely primarily on exports for growth and job creation

In short, there is a vicious cycle of a weaker economy affecting jobs and society,
in turn depressing real investment and consumption, thus the economy and so on…
World of Work Report 2011

Bob Dylan captured the mood in 1963 with “The Times They Are A-Changin’“. Well, once again in 2011, The Times They are A-Changin’.

An economic crisis which began in earnest in 2007-08, an economic crisis that never went away despite governments throwing trillions of dollars at it. Now, with Occupy Wall Street spreading around the world more and more people are realising that the capitalist system doesn’t have all the answers.

In 2011, revolution breaks out in the Middle East and spreads like wildfire to overthrow one tyrannical regime after another. In Tunisia, Egypt and Libya the tyrants have fallen. That is a great beginning but it is only the beginning …

The property question. Before the crisis no one was talking about it. Now, everyone is talking about it. Put these two things together. (1) Increasing wealth inequality (2) Economic crisis, high and rising unemployment. This makes for a toxic mix for the ruling class. They are not coping.

“… the top 1% of Americans own 42% of the financial wealth in this country. The top 5%, meanwhile, own nearly 70%.”

See this and other charts which reveal the extent of unemployment, corporate profits, income inequality, unequal debt and tax distribution and Bank behaviour (CHARTS: Here’s What The Wall Street Protesters Are So Angry About…)

Where did the “We are the 99%” slogan come from?

David Graeber is the guy who thought of it:

Someone—this time I remember quite clearly it was me, but I wouldn’t be surprised if a half dozen others had equally strong memories of being the first to come up with it—suggested, “well, why not call ourselves ‘the 99%’? If 1% of the population have ended up with all the benefits of the last 10 years of economic growth, control the wealth, own the politicians… why not just say we’re everybody else?” The Spanish couple quickly began to lay out a “We Are the 99%” pamphlet, and we started brainstorming ways to print and distribute it for free.
On Playing By The Rules – The Strange Success Of #OccupyWallStreet

The slogan was in the ether just waiting to be born. World events, the economic crisis, the bailout of the Banks, the escalation of wealth of the top 1%, the workings of capitalism guaranteed that a slogan like this would come forward and flourish.

Pics from We are the 99 percent

Yes, indeed, the times they are a-changin’

Come gather ’round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You’ll be drenched to the bone
If your time to you is worth savin’
Then you better start swimmin’ or you’ll sink like a stone
For the times they are a-changin’

Come writers and critics
Who prophesize with your pen
And keep your eyes wide
The chance won’t come again
And don’t speak too soon
For the wheel’s still in spin
And there’s no tellin’ who that it’s namin’
For the loser now will be later to win
For the times they are a-changin’

Come senators, congressmen
Please heed the call
Don’t stand in the doorway
Don’t block up the hall
For he that gets hurt
Will be he who has stalled
There’s a battle outside and it is ragin’
It’ll soon shake your windows and rattle your walls
For the times they are a-changin’

Come mothers and fathers
Throughout the land
And don’t criticize
What you can’t understand
Your sons and your daughters
Are beyond your command
Your old road is rapidly agin’
Please get out of the new one if you can’t lend your hand
For the times they are a-changin’

The line it is drawn
The curse it is cast
The slow one now
Will later be fast
As the present now
Will later be past
The order is rapidly fadin’
And the first one now will later be last
For the times they are a-changin’
– The Times They Are A-Changin’

Steve Jobs’s range of achievements is impressive: the Apple computer, the NeXT computer, Pixar and then his return to Apple to lead development of the iPod, iPhone and iPad. eg. Tim Berners Lee spoke very highly of NeXT and used it to develop much of his world wide web technology.

Many people love his products (hi pat!) because they enabled them to make use out of computer technology that they could not achieve through the relatively clunky alternatives provided by Bill Gates and others.

I’ve been thinking about Jobs from the POV of how his talents would have played out, if at all, in another type of society, call it socialist or post-capitalist. It has been an interesting thought experiment for me. Jobs definitely did have a dark side as well as being quite talented in certain respects (and not talented in other respects). I’m interested in the question of creativity in the development of computing and in this case what type of creativity Jobs had and how that played out in our current social system.

Of course it’s trite to say that Jobs had a dark side. Everyone has a dark side. The political point is that the focused ruthlessness he directed against some others and institutions was magnified and rewarded by the capitalist system. From my reading (see references below for more detail) Jobs as a capitalist personified was worse than some of the others. Marx’s fundamental point about commodities is very relevant here. In pursuing commercial success in perfection in things Jobs treated many people badly.

It’s clear that much of what Jobs achieved was achieved by his partners. Wozniak did most of the work in developing the Apple computer. In Wozniak’s words (recent interview) it was he who worked in the famous Silicon valley garage while Jobs worked out of his bedroom, making phone calls, doing the marketing.

The same is true for the development of the WIMP interface (Windows, Icons, Menus, Pointers). The fundamental work here was done by teams led by Doug Engelbart and Alan Kay and made available for free for others to use. Jobs could see the potential and developed it commercially.

The truth of the matter is that the fundamental developments in both computing hardware and software were given away by the real pioneers of the computing revolution. Their motivation was that of scratching a personal itch, of immersing themselves in the exciting possibilities of a new technology and what could be achieved with it. The names of those pioneers are less well known than the names of those who converted their spirit of freedom into commercial success.

Jobs said about the Mac development:

“I don’t think I’ve ever worked so hard on something, but working on Macintosh was the neatest experience of my life. Almost everyone who worked on it will say that. None of us wanted to release it at the end. It was as though we knew that once it was out of our hands, it wouldn’t be ours anymore. When we finally presented it at the shareholders’ meeting, everyone in the auditorium gave it a five-minute ovation. What was incredible to me was that I could see the Mac team in the first few rows. It was as though none of us could believe we’d actually finished it. Everyone started crying.” [Playboy, Feb. 1, 1985, source, my emphasis]

The words I have bolded sums up the dilemma of creative people who decide to become highly successful under capitalism. Once the interesting, creative process is completed then you have to do the hard work of promoting and selling your product in a highly competitive market. Clearly Jobs was very good at the latter.

Anyway, here are some interesting quotes and references I have discovered in my search for the real Steve Jobs:
Richard Stallman:

“Steve Jobs, the pioneer of the computer as a jail made cool, designed to sever fools from their freedom, has died”
– source

Eric Raymond: On Steve Jobs’s passing

Commerce is powerful, but culture is even more persistent. The lure of high profits from secrecy rent can slow down the long-term trend towards open source and user-controlled computing, but not really stop it. Jobs’s success at hypnotizing millions of people into a perverse love for the walled garden is more dangerous to freedom in the long term than Bill Gates’s efficient but brutal and unattractive corporatism. People feared and respected Microsoft, but they love and worship Apple – and that is precisely the problem, precisely the reason Jobs may in the end have done more harm than good.

The Eric Raymond article links to a very interesting NYT article titled Against Nostalgia by Mike Daisey but unfortunately it is now hidden behind their firewall.

There were some correct criticisms of Eric Raymond’s dismissive attitude to China’s sweatshops at reddit.

What Everyone Is Too Polite to Say About Steve Jobs

Advisor Says We Face a Worldwide Banking Meltdown

Dr. Robert Shapiro who advised Presidents Clinton and Obama and who currently advises the IMF predicts a cascading meltdown of the World’s banking system starting with Sovereign debt in the Eurozone, affecting the UK then finally bringing down the global banking system.

Watch the video to the end since Shapiro has the final word against the others who are saying it can all be prevented. He points out that there is no credible plan to avert the sovereign debt crisis in Italy and Spain.

On the Keynes thread, Arthur initiated a wealth tax discussion and provided some wikipedia links:

On the need for a positive program I would suggest a separate topic on “wealth tax”. Wikipedia has some good starting points which link to useful statistics:

Wealth_tax

Wealth_condensation

Distribution_of_wealth

Wealth_inequality_in_the_United_States

Economic_inequality

Capital_flight

Unlike the usual Keynesian stuff, reformist proposals for wealth taxes have the benefit of actually providing a plausible solution to budgetary crises and sharply raising the property question since revolutionaries can propose steep progression from the insignificant rates currently contemplated to actual expropriation.

Major arguments against are:

1. High cost of administration (but this cost is necessary to facilitate future expropriation by having detailed records of ownership etc).

2. Capital flight, which leads directly to other “antiquated” demands from the Communist Manifesto like confiscation of the property of emigrants and rebels.

Seven hundred arrested in Wall Street protest. I went to the Occupy Wall Street site with hope but quickly became disillusioned. Leadership is hard but for a movement to promote itself as “leaderless” is sad and to hear people in the video clips argue the case for no leadership is torture.

On the other hand, the We are the 99 percent blog format is great. Each blog post is from a person describing their situation, how they are being screwed by the system. Read some of these stories. The format is simple, effective, hard hitting. The capitalist system is broken for a growing number.

This page from the Occupy Wall Street site outlines various “demands”, from Day 5, brainstormed like confetti without any analysis or overall direction. At the end we were told: “Our use of the one demand is a rhetorical device. This is NOT an official list of demands“. In the paragraph immediately preceding this obsfuscation we were further enlightened: “We speak as one”. I read this a few days ago. On revisiting the page now I notice that some of the contradiction has been removed.

This Spiked article, Is this Monty Python’s Occupy Wall Street?, lampoons the whole thing as ridiculous (subtitle: “The surreal protests in New York’s financial district will certainly leave the system shaking. With laughter”). And certainly some aspects of the protest are ridiculous. For example, the reluctance to use megaphones or microphones apparently because they represent hierarchy. People speak and those that hear them repeat their words so that those further away can hear. There is always a new creative twist to dysfunctional ultra democracy.

Following the 700 arrests on the Brooklyn Bridge there was more publicity and some trade unions, such as the Transport Workers Union, joined in the protest. Can “Occupy Wall Street” become a movement? Hippies at one extreme, disciplined trade unions at the other. But of course similar alliances were formed in the anti-Vietnam war protests. The protest is spreading.

The lack of correlation between The Tea Party / Republicans and Occupy Wall Street / Democrats is an interesting one. Given the underlying reality that The Democrats are in bed with Wall Street then they can’t really incorporate this protest into their agenda so it is an embarrassment to them. In one sense the protest represents an end to the dream that formerly iconic progressive Obama can fix America. (Why Occupy Wall Street and Democrats aren’t natural allies)

It is becoming obvious that the system is broken, that the crisis is only beginning. Hence, despite the non leadership this remains a protest that has attracted widespread support, including sympathy from the media. One Guardian reporter concluded:

This city is chocka-block with Job’s comforters who purport to share the protesters’ disgust with high finance and unjust wealth distribution – and then bash them for their lack of focus. But the protesters understand something they do not: there is no Mubarak to be toppled, a single source of injustice that can be stamped out if only we all band together. There is only a diffuse political and economic system in which they – and, if you believe the slogan, 99% of us – are net losers; and before it can be redressed, it must first be exposed
– Occupy Wall Street: more than the sum of its demands

This is a beginning. The transition from no leadership as a virtue to the real need to figure out how the system is broken and whether it is even possible to fix it is underway.

Is Capitalism Doomed? by Nouriel Roubini

After his death of capitalism rhetorical flourish Roubini provides us with a damn good overview of the world situation, the predictable “Marx was right” aside, followed by his own dubious plan to save capitalism

On the other hand, Mohamed A. El-Erian, CEO of PIMCO, a global investment management firm and one of the world’s largest bond investors provides this more measured evaluation:

PIMCO frames its discussions of the post-2008 outlook using four potential scenarios. We rate the current environment a “C-minus.”

■ Scenario A: A rapid V-shaped recovery
■ Scenario B: A slower bounce back
■ Scenario C: The New Normal of low growth, persistent high unemployment and recurring balance sheet issues in developed markets, and higher growth in emerging markets
■ Scenario D: Deflation and double-dip recession

As long as the global economy remains in the New Normal scenario C, the systemically important emerging markets will likely be able to manage their success, given their balance sheet cushions. The rest of the world should be able to accommodate that success because it’s happening gradually over a secular time frame.

However, if the global economy slips closer to the D scenario of a high chance of recession, then the outlook varies among emerging markets, depending on the strength of balance sheets and the ability for EM domestic consumption to increase to counter more limited global demand

John Maynard Keynes (1883 – 1946)

It seems like a good idea to focus Keynes discussion in one thread since it has already begun in other threads, particularly marx and the domains of ignorance.

What is the Keynes solution to economic crisis?

… a relatively painless route to recovery is offered by loan-financed public investment, increased government spending generating the income that, through increased tax revenue and savings, will provide the resources to finance the increase in expenditure and that will justify the expansion of the money supply required to fund the initial deficit
– Keynesianism, Monetarism and the Crisis of the State by Simon Clarke, p. 238 (source)

Of course, this is open to interpretation.

His original main work is: The General Theory of Employment, Interest and Money by John Maynard Keynes (1936)

Lupin3 has suggested we read: Mr. Keynes and the Moderns by Paul Krugman

Please post your questions about Keynes, Keynes references and Keynes analysis here.

Summary of a couple of articles by Ken Rogoff, a former chief economist at the IMF. Note that the second article was written in 2008. As always, read the originals.

The Second Great Contraction by Ken Rogoff (2nd August 2011)

What is the difference between a Great Contraction and a Great Recession? A recession involves decreased output and decreased employment. A contraction or deep financial crisis also involves massive debt and credit issues which requires deleveraging, which take years to complete.

The real problem or number one problem is that the global economy is badly overleveraged, there is too much debt.

The solution is to transfer wealth from creditors to debtors. How?

• Through defaults, financial repression or inflation
• Housing: Write down mortages in exchange for a share of future home price appreciation
• Countries: Rich countries in Europe fund a larger bailout of Greece in return for higher payments in 10 to 15 years time if Greece achieves growth by then

Inflation is Now the Lesser Evil by Ken Rogoff (2nd December 2008)

Modern finance is so interwoven and complex that it is impossible to restructure one financial institution at a time.

Moderate inflation (6% for 2 years) would ameliorate but not solve current problems

Policy suggestions:

• aggressive macroeconomic stimulus
• tax cuts
• infrastructure spending
• interest rates reduced to zero

Most of the world’s largest banks are insolvent! Further defaults are bound to occur in real estate, credit cards, private equity and hedge funds. Governments will have to carry out 2nd and 3rd recapitalization.

The hole in the financial system is too big to be filled by taxpayer dollars. More Banks should be allowed to fail but this is costly and painful. Housing prices need to fall another 15% in the USA and more in Spain, UK and others.

Central Banks will keep printing money to buy government debt. The main danger will be an inflation overshoot, 20-30%.

The Return of the Bear by Steve Keen (August 9, 2011)

Read the original. This is a brief summary only without any original analytical content of my own. Steve Keen is an Australian Post Keynesian economist who runs a popular blog about debt deflation.

We are headed for a Double Dip recession or more correctly a Second Great Contraction (Ken Rogoff’s term)

According to Hyman Minsky there are two price levels in capitalism:

• consumer prices, which are determined by a markup on the cost of production
• asset prices, which are determined by expectations and leverage

Ultimately, over the long term, these different price levels have to converge. The debt which finances asset purchases must be serviced by the sale of goods and services. But in the short term rising leverage can insert a wedge between these different price levels. In a modern economy the short term can last a long time!

A graph showing the variation in the ratio between asset prices and consumer prices reveals:
1890-1950: 113
1966: 438
1982: 157
1994: 471
mid 2000s: 1256
now: 709 (after the very recent falls)

According to Minsky the 1966 level marked the beginning of increased turbulence or instability of the capitalist system.

In the current economic environment with debt levels so high deleveraging dominates.

USA figures:
1945 debt:GDP = 43%
2009 debt:GDP = 300%
Now debt:GDP = 260%
GD debt:GDP = 172%
(GD = Great Depression)

Alan Greenspan was the greatest cheerleader for asset price inflation. He helped create the greatest debt bubble in history! In the Greenspan era the government and central banks saw rising asset prices as a good thing.

After 2007 asset prices began their long overdue crash back to earth. This was temporarily interrupted with the stimulus and swings in the rate of debt acceleration.

The above figures, asset:consumer price ratios and debt:GDP ratio shows that there is still a long way to fall before capitalism returns to “normal”

The domains of ignorance:

Known unknowns: All the things you know you don’t know
Unknown unknowns: All the things you don’t know you don’t know
Errors: All the things you think you know but don’t
Unknown knowns: All the things you don’t know you know
Taboos: Dangerous, polluting or forbidden knowledge
Denials: All the things too painful to know, so you don’t
– from The Domains of Ignorance

The domains of ignorance are relevant to Marx. Some people don’t read it because it is taboo. Some people read it and think they understand it and they don’t. Some people have a superficial knowledge of Marx and think that is good enough. But none of that really explains the extent of the marginalisation of Marx. I think the main issue is that he is difficult to understand. The thing missing from the domains of ignorance is contradictory knowledge.

This problem is not new. Isaac Deutscher provides an anecdote about the knowledge of Marx in that era (the 1930s):

“Capital is a tough nut to crack, opined Ignacy Daszyński, one of the best known socialist “people’s tribunes” around the turn of the 20th century, but anyhow he had not read it. But, he said, Karl Kautsky had read it, and written a popular summary of the first volume. He hadn’t read this either, but Kazimierz Kelles-Krauz, the party theoretician, had read Kautsky’s pamphlet and summarised it. He also had not read Kelles-Krauz’s text, but the financial expert of the party, Hermann Diamand, had read it and had told him, i.e. Daszynski, everything about it”
– http://en.wikipedia.org/wiki/Historical_materialism

Marx’s critique of political economy is old knowledge, forbidden or marginalised knowledge and difficult to understand knowledge. Because it was written 150 years ago many think it is no longer relevant. Because communism is believed to have been tried and found wanting many who want radical change think it could not provide the answers. Because Marxism is an insignificant part of mainstream education and in particular not taught in the economics faculty then it is only going to be accessed by those who think outside of the mainstream. Finally, the many volumes of Capital and related works are difficult to understand for a variety of reasons.

Conceptually the work is very rich and it is difficult to keep the whole of it in your head. Marx uses a method of investigation (his adaptation of Hegelian dialectics) that is unfamiliar to moderns. Much of the language he uses is unfamiliar and this issue is exacerbated through a variety of translations. The prose is dense. Marx established a precise, strict terminology, eg. use value, exchange value, value, relative and absolute surplus value and then uses it rigorously for hundreds of pages. Therefore you must pay close attention, otherwise you are lost. He frequently uses French and Latin quotations. He also employs fascinating, tangential footnotes, which must be read.

The economic crisis which began in 2007 revealed an intellectual crisis, which did already exist, but was not so obvious before the economic crisis. For much of time following WW2 economic crisis was absent, the capitalists had appeared to work out how to stabilise an unstable system. That assumption has now been shown to be false.

My contention is that to understand the inner workings of capitalism you have to understand Marx. Although this will not provide a magical solution to the current issues of ongoing economic crisis it will provide a deep appreciation of the inner contradictions of capitalism that make it forever an unstable and unpredictable system.

If anything indicates the tardiness of capitalism to introduce new technologies, it would have to be the continued existence of waiters. The Associated Press has a gee whiz piece on a London restaurant where rather than ordering with one of those annoying pests you use a touch screen.   A waiter is still required to deliver your food to the table so the technology is only halfway there. How come some “entrepreneur” has not made a move on this one before now? Why don’t we have chains of restaurants where you place you order electronically and wait for the meal to arrive via some gadget attached to the ceiling?

Will Greece default? Or will the debt be restructured? What will then happen to Portugal, Ireland, Spain, Italy etc.? Does the structure of the eurozone create its own special problems on top of the declining world economy?

In searching for answers I have found the analysis of blogger Protesilaos Stavrou (Critical views on current affairs) helpful. Although the following does not directly address the wider problem of the ailing world economy he does make a strong case that there is a problem with the euro itself which makes things worse:

European leaders created a monetary union, a single currency, without a coordinated fiscal policy (a fiscal union), thus leaving the euro open to serious shocks that would hit directly at this systemic flaw. This is the reason why the once two-speed eurozone has become two-tier, since national economies grew unequally, as the economies of the more efficient countries of European center were concentrating the surpluses of the eurozone, while the periphery was left with debt and the illusion of prosperity that came from the once cheap loans. That is the reason why we say that the surpluses of the North (Center) are the deficits of the South (Periphery).

Failing to address the structural flaws of the euro, means failing to see the real problem, which is basically what happens today, since all European officials speak of the “Greek”, “Irish”, “Portuguese” crises, as if those are not related anyhow to the way that the single currency functions. That kind of approach, is made manifest in the bailout packages that are given to these countries, which do not aim at preventing defaults and bringing national economies back on track, but at buying precious time for German and French banks, who hold around 30% of their respective countries GDP in government bonds of the European South, so as to avoid a more generalized crisis. The bailouts are thus a means of indirectly financing German and French banks and minimizing loses.

These practices will not solve the problem. All they will do is accumulate more problems that go beyond the scope of economics into social and political spheres that will at some point erupt with unpleasant consequences for the EU architecture. For as long as the systemic flaws of the single currency are not touched upon, there will be no viable solution to the eurozone’s debt crisis
– Systemic flaws of the Euro are the root of the debt crisis

Here are direct links to some of his key blogs:

update: July 6: An overview of the four dimensions of the Greek Crisis

July 4: Systemic flaws of the Euro are the root of the debt crisis

July 3: Eurogroup chairman speaks of limited Greek sovereignty

July 1: Market relief will be short lived over Greek debt

June 29: Evaluation of the new austerity measures in Greece

June 28: Ad hoc measures can not save the EU

June 19: The effects of a Greek debt restructuring

June 1: The scenario of Greece switching to the Drachma – Goodbye Euro

update: May 30: About the “change” the Indignant want

May 23: Better for Greece to default rather than take new austerity measures

May 16: What if Greece goes bankrupt?

May 10: Two-speed Europe becomes TWO-TIER

May 4: The European safety mechanism dooms Greece

update: April 7: The Greek Odious Debt and its Essential Lies