FREE MARKET CAPITALISM IS IN MELT-DOWN: MANY ECONOMIES ARE IN IRREVERSIBLE DECLINE; SOCIETIES ARE FACING DISINTEGRATION

Radical re-building is the only solution

This piece mainly concerns the case of Britain. But its messages are relevant for other countries that also espoused market fundamentalism.

The roots of the current crisis

Despite propaganda that the crisis of 2008 onwards was caused by irresponsible government spending and a bloated public sector “crowding out” virtuous private sector investment, the real roots of the crash are much more complex.
In summary, the causes were as follows:

Consequences

There were four distinct effects of the “Marketisation” of society:

  1. An erosion of the effectiveness of democratic institutions, undermined by the power and aggressive influence of massive banks and international corporations over government. It is probably true to say that governments in the UK, United States and some other countries currently find it almost impossible to pursue agendas that go against the interests of corporate power.
  2. Increasing instability in the economy, and long-term underinvestment in productive industry, especially in advanced sectors of technology. Governments deliberately backed off from a constructive role in industrial strategy, and the investment banks had never been enthusiastic about long term investment in complex technologies. It was if the investment lifeblood was being sucked out of the UK and many other economies and blown on speculation and consumerism.
  3. Burgeoning inequality and social exclusion, leaving up to one third of the population in some rich countries living in social ghettos, often close to the bread-line, denied opportunity and social mobility. Economic and social exclusion are becoming a permanent state for many in such countries as Britain and America, causing immense damage not only to society but also to the economy.
  4. A marked decline in public morality. Markets in themselves are amoral. But the behaviour of powerful players in the markets is often quite immoral. Banks and corporations have behaved disgracefully, avoiding legitimate taxes, exploiting customers, attempting to deceive the public and using their power to further anti-social agendas. Many rich individuals have sheltered their earnings and wealth in tax havens.
    The result has been a decline in trust generally and in many quarters ethical standards have fallen with the prevalence of values that condone amoral behaviour.

What needs to be done

Recognise the true seriousness of the crisis - the very fabric of society is at risk:

What Britain, America and many parts of Europe are facing is a crisis of free-market capitalism that threatens to destroy the very fabric of civilised society. In its way, it is as serious a threat as a war, and is now causing moral decay and many of the symptoms that were manifested in the German Weimar Republic after World War One. In many countries, including Britain and America, we are witnessing societies that are beginning to tear themselves apart.

Economic decline and gross inequality is disenfranchising more and more people from being able to participate in productive activity, increasing numbers will never participate in the employment market. Education is failing to meet the needs of the non-academic, who leave school without useful life or work skills. A growing rump of the population is excluded from society, living in ghettos with generational unemployment. Meanwhile the majority is turning against the poor and excluded, characterising them as second-class citizens, responsible for their own woes, scroungers and potential criminals. An increasingly strident popular press is blaming the problems on “outsiders”, “Europe”, immigrants, minorities and “scroungers”.

Extreme right wing political parties are springing up all over the world, political and economic isolationism are becoming the vogue at a time when the solutions lie in more international collaboration.

Power and the ability to influence events is slipping away from the political classes, society is beginning to fragment into a myriad of narrow interest groups, positive government is becoming more and more difficult.

Countries are being destroyed by enforced austerity, when rigorously managed strategies for re-building shattered economies will have far better longer term outcomes. It is hard to see how the Greek and other economies razed by enforced austerity will recover unless rebuilding is the priority.

Acknowledge the roots of the problems. Economy and Society are closely interlinked:

They lie fundamentally with flawed socio-economic theory that encouraged selfish consumerism, a lack of common purpose; created economic instability and gross inequality - handing political power to the rich and powerful, thus undermining the democratic state.
Free market theory tends to deny the importance of society and denigrate the beneficial potential of government as a player in stimulating and directing industrial strategy, investment and research.
Rich institutions and individuals are able to exercise undue influence on politicians, furthering their often damaging parochial interests. Democracy is becoming a form of corporatism, and the interests of the majority subjugated by commercial exploitation.
Politicians have become increasingly cut off from experience of the wider community, by living inside political “bubbles”, and preyed on by armies of corporate lobbyists. This tendency has become exaggerated by the rise of professional politicians.

Inequality is the flywheel that connects economic decline with social fragmentation.

Many market economies especially that of Britain, are suffering from a long term cycle of decline. Lack of investment in productive industry, and the growth of banking and financial services as the engine of the economy have caused an enormous gap to develop between relatively low skill and lowly paid jobs and some hugely paid occupations. In the middle, cost pressures have caused incomes to stagnate. Personal debt has boomed and the economy has become increasingly unstable.
This has resulted in burgeoning income gaps and exclusion of the poor. The resulting gross inequality is fragmenting society, creating a growing underclass which is separated by geography, income, health, educational and occupational opportunity. When this becomes a permanent state, the economy also suffers from the availability of skills and high-grade employment opportunities.
Gross inequality thus causes both economic and social damage

Courageous and persuasive leadership is needed to override selfish interest in the cause of national regeneration.

Need to build new alliances, away from old party politics

New “narratives” are needed; created by people with the courage to take society in a new direction - away from decline and moral decay. Alliances need to be built that include politicians, religious leaders, industry, trades unions, local government, education and the professions. They need to be demonstrably diverse, non-partisan and dedicated to the national interest.

Too many politicians have sought to score political points, blame anyone but themselves, pander to powerful interests that are the causes of the problems and pursue tired policies that have no hope of solving them. The public is confused by a cacophony of competing remedies. There is an urgent need to strengthen the political centre to counter the growth and aggression of the various facets of the right. The situation is akin to wartime when the very survival of the nation was threatened, only this time the enemy is within. Alliances that break traditional political boundaries with a remit to develop radical strategies for addressing the major social and economic problems are probably the only effective way to proceed. There are probably enough politicians of the centre ground with eyes to see the real problems, break the old political moulds, overcome narrow party interests, and recruit other stakeholders into a national alliance for regeneration.

In Britain, The driver of re-building society must be the economy.

The overriding economic need is for serious investment, which should be concentrated on several key facets:

Where would the money come from?

Footnote

Capitalism remains the most vibrant economic system, but:

Free-market capitalism needs to be replaced by a more positive and kinder form that encourages collaboration and recognises that the overriding need is to build healthy societies. This is not unrealistic idealism - many facets of it can be witnessed in Germany and the Nordic countries.


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