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Saturday, August 1, 2015

Paul Mason on “Is Capitalism Dead?”

The English journalist Paul Mason speaks below on neoliberalism and his belief that capitalism has had its day. He is the author of the new book Postcapitalism: A Guide to Our Future (2015).



Frankly, I think the debate is very confused and misses important points. Also, Mason’s book appears to base its analysis on the idea of the Kondratieff wave and Marxism (Chapter 3 of the book is even called “Was Marx Right?”). Unfortunately, I think these theories are nonsense.

In my opinion, the whole debate cannot proceed until one has defined “capitalism” carefully. What is the essence of capitalism?

I think these are the core and essential attributes of capitalism:
(1) where there are strong (if often limited or circumscribed) private property rights;

(2) where most capital goods are privately owned and where most investment decisions are made privately.
Defined in this sense, it is obvious that capitalism can come in many forms.

Here is just a small set of possible capitalist systems:
(1) a Rothbardian capitalist system where no government exists and where everything is privatised including justice;

(2) a Misesian or Hayekian Classical liberal capitalist system, where there is a minimal night-watchman state with basic public infrastructure (under Hayek’s system it might have some minimal social and economic interventions);

(3) a neoliberal capitalist system where governments attempt to control macroeconomics by monetary policy and varying degrees of government intervention (such as public infrastructure spending, regulation, social security, basic social services, and welfare), but where labour markets are deregulated, governments try to balance budgets, and involuntary unemployment is often a serious problem;

(4) a capitalist system where a Keynesian state maintains full employment by fiscal policy, strongly regulates businesses, and provides extensive social services (such as health care, education, and unemployment benefits) and welfare, strong public infrastructure spending, but where nationalisation of certain industries/services is minimal or non-existent;

(5) a capitalist system where a Keynesian state maintains full employment by fiscal policy, strongly regulates businesses, has strong public infrastructure, provides generous social services (such as health care, education, and unemployment benefits) and generous welfare, and where some industries are nationalised (e.g., the commanding heights of the economy).
I do not see any substantive problem with capitalism when it comes in form (4) or (5). (4) and (5) are what we would call the social democratic mixed economies of the post-WWII era.

The problem with capitalism is when it comes in forms (1), (2), or (3) (or anything in between).

Just because neoliberalism is badly flawed, it does not follow that the left should totally reject capitalism in the sense I have defined it above. We can still have a social democratic mixed capitalist economy, and all the evidence suggests that this is the best and most successful economic system modern industrialised economies can have.

19 comments:

  1. In both (4) and (5), there is the term "strong regulation of businesses".

    Would you care to elaborate on precisely what kind of regulation? Because that is the only qualm I have with your social-democratic version of capitalism.

    Overbearing regulations can disrupt potential entrepreneurship and business activity, can it not? Isn't it possible to have the rest without the regulatory burden?

    (Speaking as a Business student and former Austrian)

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    1. I am thinking of health and safety regulation, quality control of imports, effective financial regulation, regulation of professions to make sure people are properly qualified, etc.

      "Overbearing regulations can disrupt potential entrepreneurship and business activity, can it not? "

      Sure they can. I agree. I don't support inefficient or unnecessaraily overbearing regulations.

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    2. "I don't support inefficient or unnecessaraily overbearing regulations."

      You do. "quality control of imports" and "regulation of professions to make sure people are properly qualified" come to mind. That is exactly the sort of thing where simply allowing the market to operate work well. Your "quality control" is simply you imposing your preference in a quality/price trade-off over mine.

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    3. Well, in a world where lax government quality control on imports leads to this below, I having a hard time seeing how "quality control of imports" is unnecessarily overbearing regulation:

      http://www.dailymail.co.uk/news/article-2957105/Is-source-hepatitis-outbreak-sweeping-Australia-Stinking-toxic-river-flows-Chinese-city-berries-grown-packed-shipped-world.html

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  2. Re the above two basic characteristics of capitalism, isn't free markets a third ingredient? The above two elements combined with a planned economy rather than free markets equals mercantilism to my mind.

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    1. There is no such thing as a pure free market -- certainly not in the real world. Modern capitalism has always had government intervention to some degree.

      A certain level of government intervention and regulation are compatible with capitalism.

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    2. Hi Lk,

      Might some people support (3) but see a more active role for fiscal policy (at least as it applies to coarse tuning rather than fine tuning) to reduce the amplitude of economic fluctuations? Perhaps, some of the remnant of Old Keynesianism (Neo-classical Keynesianism)? Or would you include these in (4)?

      As for (i), it is crazy. When we have the idea that public goods such as armies and police forces can be more efficiently provided by the private sector, this seem to be a recipe for social chaos.

      (2) As for (2), it is preferable to (1) but ignores market failure in the case of substantial externalities. We need provision for health care and education to be partly provided by the State to ensure that poorer people can afford to send their children to school and to ensure that health care does not depend on one's wealth.

      The major externality that occurs in capitalist systems is involuntary unemployment. Keynes believed that neo-classicism's major fault was that it did not apply to the real world. Periods of large scale unemployment require active government intervention to stimulate economic activity when private sector effective demand had settled a less than full employment equilibrium . Keynes was keen on active fiscal policy as the main instrument, with monetary policy as a complementary but subsiduary tool. I hope I have interpreted Keynes properly.


      John Arthur

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    3. "Might some people support (3) but see a more active role for fiscal policy (at least as it applies to coarse tuning rather than fine tuning) to reduce the amplitude of economic fluctuations? "

      I suppose so, as no doubt there are plenty of additional types of capitalist systems that would come in between the ones in my list.

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  3. There is no such thing as a pure oxygen in the air, does it make oxygen less important as a life supporting component? Harly.

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    1. Oxygen is hardly the right analogy for Rothbardianism, if you are trying to defend the latter.

      A society run on Rothbardian anarcho-capitalist principles has never existed; by contrast, we know oxygen exists and we breathe it in every breath and it is necessary for life.

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    2. You'd die anyway from Oxygen Toxicity Syndrome if you breathed 100% oxygen. So the analogy tends towards a mixed economy anyway. ;)

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  4. All the Marxists I have seen have rejected Paul Mason: https://thenextrecession.wordpress.com/2015/07/21/paul-mason-and-postcapitalism-utopian-or-scientific/

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    1. And yet Mason still bases his analysis on Marx's thought.

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    2. Mason's arguments don't follow from Marxism. They are part of groups like the P2P foundation which uses a number of different theories from different groups including PK, Marxism, and a ton of other groups. http://blog.p2pfoundation.net/

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    3. And yet Mason still bases his analysis on Marx's thought.

      Sort of like how Mankiw bases his analysis on Keynes?

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  5. LK, what is the prevailing view amongst neoliberals regarding budget balancing in a recession? Obviously it isn't deficit to finance public works, but does neoliberalism necessarily advocate a balanced budget?

    The reason I ask is that in my native NZ there is a split within the Left as to what neoliberalism even is(they're the only ones who use this term), with many using it as a catch-all pejorative against both those in the centre and on the right, while others argue that NZ is not neoliberal because of things like deficit spending and the retention of many of Labour's social democratic policies by the current National government.

    As far as Mason goes, I like your analysis. As long as one remembers the essence of capitalism is private ownership, one can enjoy Mason's recent viral article as a piece of unintentional comedy. On your scale, which is very well thought out, I'd probably be a 3.5. My belief that politicians are highly fallible makes me reluctant to be a 4, and as much as I like markets I think their efficiency is often overstated so I can't commit to 3 either.

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  6. Tendentious phrasing in 3!

    In any event, you missed a few. Such as some variant of 2 or 3 with a state the redistributes wealth but does not otherwise arrogate [I can play the tendentious game!] many decisions. A guaranteed income via a negative tax in place of an intrusive supervisory apparatus [and play it well!]

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  7. Just because neoliberalism is badly flawed, it does not follow that the left should totally reject capitalism in the sense I have defined it above.

    Agreed. Rejecting capitalism on the basis of neoliberalism is analogous to rejecting feudalism on the basis of its more repressive turns.

    We can still have a social democratic mixed capitalist economy, and all the evidence suggests that this is the best and most successful economic system modern industrialised economies can have.

    We can also have a pretty good feudal economy, if we find sufficiently benevolent aristocracy. Though it's probably better to just remove the mechanisms by which said group's benevolence/malevolence will matter at all, eh?

    Also, the body you bill as "all evidence" appears to be omitting quite a lot of the 20th century, to say nothing of the 21st.

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    1. Not everyone is brainwashed by Marxist propaganda that equates private property and ownership of capital with slavery or feudalism.

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