Transition from Capitalism (by Arthur Dent)

Guest post by Arthur Dent via Bill Kerr blogspot.

Any transition from capitalism in advanced capitalist countries as a result of another Great Depression would involve:

Inexperienced left governments required to urgently get the economy moving again and end mass unemployment because previous governments, whether claiming to be left or right, had been unable to do so.

Some level of rapid expropriation of privately owned wealth that was immobilized by the crisis now made available for socialized investment in new fixed capital construction projects to get the economy moving again and absorb unemployment.

The day after a change in government would be similar to the day before. The same social relations based on money, wage labor and capital, the same social institutions such as globalized large corporations, and national and local large, medium and small enterprises and bureaucratic government departments and agencies, and the same economic paralysis.

* * * *

This article is a placeholder for an introduction to a series of articles on various aspects of economic policy to be advocated before, and implemented during, the early stages of, a transition from capitalism in advanced capitalist countries under various different possible scenarios.

I am nowhere near ready to write any such articles, even as tentative drafts, so I cannot write an actual introduction.

Meanwhile one of the courses I am studying to become able to write such tentative drafts is a MOOC on “Public Private Partnerships” by the World Bank.

This requires as a final project for the policy and procedures track, publication of a “digital artefact” plus a description of the target audience in one hundred words.

I have published as my “digital artefact” the eight hundred word article on “Role of PPPs in Transition” [which will be published later – c21styork):

The key requirement is:
“Topic: Identify an infrastructure need that could be developed as a PPP. This could be a project that is in process of development, one on a country’s PPP project lists, or a need that has not been acted on. Think about the key facts or ideas you wish to convey by answering the following questions:
What is the infrastructure problem that the PPP is trying to solve?
What services are to be provided and are these services affordable?
What are the reasons that the private sector would want to participate?
How should these risks be allocated? Consider the country context in judging the risks and who should take them.”

I have identified as a “need that has not been acted on” the general paralysis of investment resulting in prolonged mass unemployment in another Great Depression worse than the 1930s following a financial crisis worse than 2008.

Such a worse financial crisis than 2008 does not seem to be entirely implausible since the last one seems to have been merely postponed rather than resolved by the extraordinary measures taken. Nor does another Great Depression worse than the 1930s seem entirely implausible following such a worse financial crisis.

The need is for all the infrastructure required to resume economic growth, not just traditional infrastructure like existing public utilities. The problem that has to be solved is that there are no profitable outlets for private investment in crisis conditions so investment must be socialized rather than left up to private investors.

This would require some form of state capitalism either as a transition back to “normal” private capitalism or as a transition away from capitalism.

The absence of any significant left in advanced capitalist countries, at least in the english speaking ones I am familiar with, makes any transition away from capitalism seem completely implausible. But then the continued absence of any significant left under the conditions of prolonged mass unemployment and economic paralysis seems even more implausible.

There are already important changes in the political climate of countries like Greece, Spain and Iceland that could become precursors of something much bigger. These countries are peripheral rather than central to the advanced capitalist world, but they are part of it and they are already facing serious economic and political crisis situations.

So I am writing for the target audience described at the end of this introduction, in the conceivable scenario described below.

The services to be provided are not traditional public utilities but the ending of prolonged mass unemployment through resumption of economic growth.

These services are affordable because prolonged mass unemployment is not affordable and both labor and capital are cheap in depression conditions. What is missing is profitability, not affordability.

The private sector would not particularly want to participate, but would not have better options available. Corporations would still want whatever contracts are available at the best returns they can competitively get for the benefit of their shareholders, whether or not some of their shares that used to belong to wealthy private individuals now belong to public institutions. Board members and senior managers who no longer wanted to participate because their incentives had been expropriated would be replaced by board members and managers willing to work for the owners, old and new, under the incentives currently being offered.

But the social system would not yet have been changed and risks and incentives would still have to be allocated in the context of an advanced capitalist country in crisis that is merely beginning a transition from capitalism, not one that has completed such a transition. So many of the same principles would have to still apply and new ones could only be understood and evolved over time.

Scenario

Any transition from capitalism in advanced capitalist countries as a result of another Great Depression would involve:

Inexperienced left governments required to urgently get the economy moving again and end mass unemployment because previous governments, whether claiming to be left or right, had been unable to do so.

Some level of rapid expropriation of privately owned wealth that was immobilized by the crisis now made available for socialized investment in new fixed capital construction projects to get the economy moving again and absorb unemployment.

The day after a change in government would be similar to the day before. The same social relations based on money, wage labor and capital, the same social institutions such as globalized large corporations, and national and local large, medium and small enterprises and bureaucratic government departments and agencies, and the same economic paralysis.

To simplify things I further assume a “simple” scenario with:

Expropriation narrowly targeted to take all and only the excess wealth of the top 1% of nationals.

This results in substantial investment funds becoming available to governments starting transition but most of the capital in each such country would still be held privately and by foreigners.

The most important capitalist countries such as the USA, China, Japan, and Germany would not be the first to start making the transition. But international financial and investment flows as well as trade continues.

Many top layers of management in most social institutions would be quite hostile to transition but there are enough supporters capable of supervising or replacing them.

Some of these assumptions may not look very plausible. But advocating measures based on such a “simple” case, would place the responsibility for different policies firmly with those who might prevent the policies discussed for this scenario by resorting to the breakup of international financial investment and trade flows, and civil and international wars.

Target Audience

I am studying economics, finance and other subjects to understand how capitalism works and become able to propose economic policies for transition from capitalism in advanced capitalist countries. Currently there is no significant left movement in such countries, but I am drafting tentative ideas for a wider future audience of prospective government policy makers expected when a financial crisis like 2008 eventually becomes another Great Depression like the 1930s. They are not concerned with some specific PPP project. I am conveying one possible policy option for managing partially socialized and partially still private investment projects using PPPs.

3 thoughts on “Transition from Capitalism (by Arthur Dent)

  1. ok got it now

    I am not sure of the role of such institutions as mutual funds and pension funds and superannuation funds.

    just quickly as busy right now

    Taking the wealth of the richest 1% might not be as straight forward as it sounds. They have there money invested in various areas including those mentioned above so you couldn’t pull their capital without affecting those organisations. You would have control over their investment in these funds but that may not be a majority so your ability affect what these groups do may come down to the political and your ability to move their capital around may also have implications. You have control of their wealth you don’t actually “have it” though.

    what about the banks and dealers? we are talking assets and liabilities. Not sure how to free up one without affecting the other as they need to be operating and assume a lot of the assets are toxic so how do we inject confidence. Do we revalue things or use the market to revalue things.

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  2. “Taking the wealth of the richest 1% might not be as straight forward as it sounds.”

    Umm, yes 😉

    Will have to get back to this later.

    Many separate issues.

    For many scenarios I would assume that banks and dealers have already been effectively nationalized in connection with financial crisis and bankruptcy. Banking capital in hands of capitalist governments while loans and deposits belong to the businesses and individuals as before. No way to meet short term deposit obligations from long term and often toxic loans, so complex process of debt restructuring and liquidation, complexified with whole state of global economy.

    Already central banks becoming “dealers of last resort” not just lenders of last resort.

    I assume super has to be redistributed into pension entitlements and extricated from “wealth”. Very complex as affects far more than 1% who currently think they own wealth (although again, by then much of it already gone in the crisis).

    For planning to restart economy and soak up mass unemployment, in any scenario we have to be altering the disproportions between and within the two departments and globally. In particular massive rediction of investment from developed to underdeveloped countries (eg via PPPs run by incompetent backward capitalist governments in those countries but hand in hand with more democracy and less corruption) and massive increase in R&D with corresponding shift in education. Planned devaluation of obsolete overcapacity and replacement with higher tech, less labor intensive technology that goes with future raised living standards worldwide with shorter hours but also goes with present increases in total labor forces for construction, STEM work and education soaking up unemployment (also possibly need more financial work and accountancy etc rather than less).

    Vast amount to work on. I am just floating an initial concept about a very different framework from which to think about these sorts of problems.

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  3. a few quick thoughts

    The 1% will be hit by the crisis and numbers reduced (bye bye twiggy) however assume relatively will be same.

    The australian banks are only a small percentage of finance industry and we are going to leave multi nationals alone so large a part is going to be out of our control. the toxic loans which would have sent the banks bankrupt would need to be revalued and in many cases just deleted.
    Getting the system up and running with capital controls may mean a time lag between initiating anything much in the first instance except keeping things running.

    Education may be an option later but doubt whether initially we would have the resources to do much. The education system would have to be overhauled. I think between now and then we need to identify areas such as education which are redundant in their present form and what we will replace them with and then how will this affect those initial responses. I imagine a massive drop in employment in most of these areas as we change. We can see a change already in education as they label themselves educators rather than teachers, however there is no change in the dynamic to support this.

    Still have concerns as not sure the difference between PPS and government sponsored programs which are monitored. At the minute governments tender projects which they have identified as being required, mainly infrastructure and not sure how this is different except we would be better at identifying and would not be focused on infrastructure even though australia is behind in this area like most developed countries.

    Tax: would like to see a flat wealth tax and abolish all other taxes, however this may be a problem with most of the economy “owned” by foreign capitalists.

    Central banks are dealers of last resort by default as dealers have most of the finance market not sure how this is working at the minute assume they are just allowing toxic loans and zombies to kick the can down the driveway. It seems they realise they can’t save them next time and hence the ring fencing and the need to have “something” left as they might be able to save some traditional banking as opposed to a total meltdown

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