Policy makers struggling to understand the barrage of financial
panics, protests and other ills afflicting the world would do well to
study the works of a long-dead economist: Karl Marx.
The sooner they recognise we're facing a once-in-a-lifetime
crisis of capitalism, the better equipped they will be to manage a way
out of it.
The spirit of Marx, who is buried in a cemetery close to
where I live in north London, has risen from the grave amid the
financial crisis and subsequent economic slump. The wily philosopher's
analysis of capitalism had a lot of flaws, but today's global economy
bears some uncanny resemblances to the conditions he foresaw.
Consider, for example, Marx's prediction of how the inherent conflict between capital and labour would manifest itself.
Advertisement
As he wrote in Das Kapital, companies' pursuit of
profits and productivity would naturally lead them to need fewer and
fewer workers, creating an "industrial reserve army" of the poor and
unemployed: "Accumulation of wealth at one pole is, therefore, at the
same time accumulation of misery."
The process he describes is visible throughout the developed
world, particularly in the US companies' efforts to cut costs and avoid
hiring have boosted US corporate profits as a share of total economic
output to the highest level in more than six decades, while the
unemployment rate stands at 9.1 per cent and real wages are stagnant.
US income inequality, meanwhile, is by some measures close to
its highest level since the 1920s. Before 2008, the income disparity
was obscured by factors such as easy credit, which allowed poor
households to enjoy a more affluent lifestyle. Now the problem is coming
home to roost.
Over-production paradox
Marx also pointed out the paradox of over-production and
under-consumption: The more people are relegated to poverty, the less
they will be able to consume all the goods and services companies
produce. When one company cuts costs to boost earnings, it's smart, but
when they all do, they undermine the income formation and effective
demand on which they rely for revenues and profits.
This problem, too, is evident in today's developed world. We
have a substantial capacity to produce, but in the middle- and
lower-income cohorts, we find widespread financial insecurity and low
consumption rates.
The result is visible in the US, where new housing
construction and automobile sales remain about 75 per cent and 30 per
cent below their 2006 peaks, respectively.
As Marx put it in Kapital: "The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses."
Addressing the crisis
So how do we address this crisis? To put Marx's spirit back
in the box, policy makers have to place jobs at the top of the economic
agenda, and consider other unorthodox measures. The crisis isn't
temporary, and it certainly won't be cured by the ideological passion
for government austerity.
Here are five major planks of a strategy whose time, sadly, has not yet come.
1. We have to sustain aggregate demand and
income growth, or else we could fall into a debt trap along with serious
social consequences. Governments that don't face an imminent debt
crisis - including the US, Germany and the U.K. - must make employment
creation the litmus test of policy. In the US, the
employment-to-population ratio is now as low as in the 1980s. Measures
of underemployment almost everywhere are at record highs. Cutting
employer payroll taxes and creating fiscal incentives to encourage
companies to hire people and invest would do for a start.
2. To lighten the household debt burden, new
steps should allow eligible households to restructure mortgage debt, or
swap some debt forgiveness for future payments to lenders out of any
home price appreciation.
3. To improve the functionality of the
credit system, well-capitalised and well-structured banks should be
allowed some temporary capital adequacy relief to try to get new credit
flowing to small companies, especially. Governments and central banks
could engage in direct spending on or indirect financing of national
investment or infrastructure programs.
4. To ease the sovereign debt burden in the euro zone,
European creditors have to extend the lower interest rates and longer
payment terms recently proposed for Greece. If jointly guaranteed euro
bonds are a bridge too far, Germany has to champion an urgent
recapitalisation of banks to help absorb inevitable losses through a
vastly enlarged European Financial Stability Facility - a sine qua non to solve the bond market crisis at least.
5. To build defences against the risk of
falling into deflation and stagnation, central banks should look beyond
bond- buying programs, and instead target a growth rate of nominal
economic output. This would allow a temporary period of moderately
higher inflation that could push inflation-adjusted interest rates well
below zero and facilitate a lowering of debt burdens.
We can't know how these proposals might work out, or what
their unintended consequences might be. But the policy status quo isn't
acceptable, either. It could turn the US into a more unstable version of
Japan, and fracture the euro zone with unknowable political
consequences. By 2013, the crisis of Western capitalism could easily
spill over to China, but that's another subject.
George Magnus is senior economic adviser at UBS and author of Uprising: Will Emerging Markets Shape or Shake the World Economy? The opinions expressed are his own.
Can Marx Save Capitalism Video
Tidak ada komentar:
Posting Komentar