Get Red Pepper's email newsletter. Enter your email address to receive our latest articles, updates and news.
First, let’s be clear about capitalism – and with it the character of the state under capitalism. There is a conventional assumption, a leftover of the cold war perhaps, that somehow capitalism is essentially about the market and socialism is essentially about the state. In fact, a central historical feature of the state in capitalist societies is the role it plays as guarantor of private property and, most importantly for the smooth running of the financial markets, that it will always honour its bonds – that is, its borrowing from the private banks.
Because of this guarantee – the promise to pay others back from taxation revenue in the future – government bonds, whether issued to finance war or to finance welfare, constitute the least risky form of lending. As such, it forms the foundation of financial markets’ role in sustaining the ability of capitalists generally to accumulate – to continue to invest and make profits. This centrality of the state for capitalist accumulation is most notable with respect to those dominant states, like the USA, whose bonds are the foundation on which all calculations of value in global capitalism are based; states that host and support the main centres of international financial markets, such as New York and the City of London.
Understanding the role of the state in a capitalist society helps us to see why, when a government bails them out with public money, the bankers do not see this as the start of socialism. On the contrary, they see it as the government fulfilling its duty to the financial markets – whose smooth running it both depends on and sustains, by providing the basis of confidence in the credibility of the banking system.
So it is misleading to see government involvement in the banks – whether it be the pure bailout of the original Paulson program in the US, or the subsequent non-controlling equities taken by the US, British and other governments – as per se a move away even from neoliberalism. (It is also misleading to see neoliberalism as being about the withdrawal of the state from the markets – and therefore this current involvement of the state as a defeat of neoliberalism. The state under neoliberalism has been very active in promoting the vast expansion of financial markets and facilitating their volatile growth; and, as this volatility inevitably led to repeated financial crises, in keeping the financial system going from moments of chaos to moments of chaos.)
Does this mean that this present crisis of the financial markets is not an opportunity to debate and press for alternatives? And where do we start?
It is an opportunity because in this crisis it is clear that what has been misleadingly billed as the ‘free market’ has failed and is seen to have failed, and also because it is clear that states have been responsible for promoting what has now failed, and that they now need to come to the rescue of the banks. This concentrates the minds of most people on the problem: their pay cheques are deposited with banks, their pension savings are invested in the stock market, their consumption is reliant on bank credit, and is the roof over the heads, as heavily-mortgaged home owners.
It is notable in this respect that going back over the last century, alongside the various movements that arose to struggle for the vote for working people, there has always been pressure to control the financial system, and even to bring the banks under public ownership, reflecting a certain common sense that the financial system ought to be accountable to or even belong to the people – that money should be become a public resource and banks a public utility. Indeed, this democratic pressure system was not without results: some of the regulations that states did put on the banking system after previous crises were also a response to demands from below that people should not be fleeced by the bankers.
For example, the nationalisation of the Bank of England was meant to bring the government’s agent in the financial markets under democratic control – although in fact the Bank of England now acted inside the state as the voice of the City within the state, representing the power of financial capital.
The lessons began to be learnt in the wake of the rise of the new left and the crisis of the Keynesian welfare state in the 1970s. It was recognised that the only way to overcome the contradictions of the Keynesian welfare state in a positive manner was to take the financial system into public control. (The best popularly written example of this, and still worth reading today, is Richard Minns, Take Over the City: the case for public ownership of financial institutions, Pluto 1982.) The left in the British Labour Party was able to secure the passage of a conference resolution to nationalise the big banks and insurance companies in the City of London, albeit with no effect on a Labour government that embraced one of the IMF’s first structural adjustment programmes. We are still paying for the defeat of these ideas (and the industrial strategies referred to by Stuart Holland on page 22). It is now necessary to build on their proposals and make them relevant at the current juncture.
The scale of the crisis today provides an opening for the renewal of radical politics that advances a systemic alternative to capitalism. It would be a tragedy if a more ambitious goal than making financial capital more prudent was not on the agenda.
It is hard to see how anyone can be serious about converting our economy to green priorities without understanding that we need a democratic means of planning through new sets of public institutions that would enable us to take collective decisions about allocating resources for what we produce and how and where we produce the things we need to sustain our lives and our relationship to our environment. The reasons why trading in carbon offsets as a solution to the climate crisis is a dead end are shown in this financial crisis. It would involve depending on the kinds of derivatives markets that are so volatile and are so inherently open to financial manipulation and to financial crashes. (The recently published Green New Deal begins to address these questions.)
In terms of immediate reforms – in a situation where the only safe debt is public debt – we should start with demands for vast programmes to provide for collective services and infrastructures that not only compensate for those that have atrophied but meet new definitions of basic human needs and come to terms with today’s ecological challenges.
Such reforms would soon come up against the limits posed by the reproduction of capitalism. This is why it is so important to raise not merely the regulation of finance but the transformation and democratisation of the whole financial system. What is in fact needed is to turn the whole banking system into a public utility so that the distribution of credit and capital would be undertaken in conformity with democratically established priorities rather than short term profit. This would have to involve not only capital controls in relation to international finance but also controls over domestic investment, since the point of taking control over finance is to transform the uses to which it is now put. And it would also require much more than this in terms of the democratisation of both the broader economy and the state.
Of course, without new movements and parties that can rebuild popular class forces this will fall on empty ground. Crucial to this rebuilding is to get people to think ambitiously again. However deep the crisis, however confused and demoralised the financial elite inside and outside the state, and however widespread the popular outrage against them, this will require hard and committed work by a great many activists. We will need to put our minds to the hard questions of what the new institutions of democratic public finance would look like – and what kinds of movements would be needed to build them.
Leo Panitch’s book Renewing Socialism is published by Merlin Press. A further article on ‘The Current Crisis and Socialist Politics’ by Leo Panitch and Sam Gindin can be read online at www.socialistproject.ca
Drawing connections between events as disparate as the ‘social murder’ of Grenfell and recent mudslides in Sierra Leone, Remi Joseph-Salisbury points to the enduring relevance of Pan African thought for anti-racist struggle today.
We work ourselves into the ground for little economic benefit. It's high time to for a change, writes Aidan Harper.
Deregulation and tax loopholes are justified by saying that they 'protect growth'. But really, they just protect the wealthy, writes James Fox
Inequality is often treated as a law of nature - but really, it's the result of conscious political choices. It's time to choose equality, writes the IPPR's Carys Roberts.
Tom Palmer, aka Agent Kingfisher, was the 'messiah' of London's squatting scene until his death last year. But who was responsible for his fate? MI5, late capitalism or simply a drug overdose? Matt Broomfield investigates.
'Docs Not Cops' write that we must resist attempts to make our NHS any less universal
Louis Mendee explains the real human costs of climate change for the global south.
From climate change to automation to demographic shifts, Mathew Lawrence explains the challenges our economy will face in the coming decade.
Fifty years after the Abortion Act, women are still dying from being denied basic services, write activists from Feminist Fightback
We need to tackle the patronising ideology that lets Tory think-tanks sneer at social tenants, writes Emma Dent Coad
Labour Party laws are being used to quash dissent
Richard Kuper writes that Labour's authorities are more concerned with suppressing pro-Palestine activism than with actually tackling antisemitism
Catalan independence is not just ‘nationalism’ – it’s a rebellion against nationalism
Ignasi Bernat and David Whyte argue that Catalonia's independence movement is driven by solidarity – and resistance to far-right Spanish nationalists
Tabloids do not represent the working class
The tabloid press claims to be an authentic voice of the working class - but it's run by and for the elites, writes Matt Thompson
As London City Airport turns 30, let’s imagine a world without it
London City Airport has faced resistance for its entire lifetime, writes Ali Tamlit – and some day soon we will win
The first world war sowed the seeds of the Russian revolution
An excerpt from 'October', China Mieville's book revisiting the story of the Russian Revolution
Academies run ‘on the basis of fear’
Wakefield City Academies Trust (WCAT) was described in a damning report as an organisation run 'on the basis of fear'. Jon Trickett MP examines an education system in crisis.
‘There is no turning back to a time when there wasn’t migration to Britain’
David Renton reviews the Migration Museum's latest exhibition
#MeToo is necessary – but I’m sick of having to prove my humanity
Women are expected to reveal personal trauma to be taken seriously, writes Eleanor Penny
Meet the digital feminists
We're building new online tools to create a new feminist community and tackle sexism wherever we find it, writes Franziska Grobke
The Marikana women’s fight for justice, five years on
Marienna Pope-Weidemann meets Sikhala Sonke, a grassroots social justice group led by the women of Marikana
Forget ‘Columbus Day’ – this is the Day of Indigenous Resistance
By Leyli Horna, Marcela Terán and Sebastián Ordonez for Wretched of the Earth
Uber and the corporate capture of e-petitions
Steve Andrews looks at a profit-making petition platform's questionable relationship with the cab company
You might be a centrist if…
What does 'centrist' mean? Tom Walker identifies the key markers to help you spot centrism in the wild
Black Journalism Fund Open Editorial Meeting in Leeds
Friday 13th October, 5pm to 7pm, meeting inside the Laidlaw Library, Leeds University
This leadership contest can transform Scottish Labour
Martyn Cook argues that with a new left-wing leader the Scottish Labour Party can make a comeback
Review: No Is Not Enough
Samir Dathi reviews No Is Not Enough: Defeating the New Shock Politics, by Naomi Klein
Building Corbyn’s Labour from the ground up: How ‘the left’ won in Hackney South
Heather Mendick has gone from phone-banker at Corbyn for Leader to Hackney Momentum organiser to secretary of her local party. Here, she shares her top tips on transforming Labour from the bottom up
Five things to know about the independence movement in Catalonia
James O'Nions looks at the underlying dynamics of the Catalan independence movement
‘This building will be a library!’ From referendum to general strike in Catalonia
Ignasi Bernat and David Whyte report from the Catalan general strike, as the movements prepare to build a new republic
Chlorine chickens are just the start: Liam Fox’s Brexit trade free-for-all
A hard-right free marketer is now in charge of our trade policy. We urgently need to develop an alternative vision, writes Nick Dearden
There is no ‘cult of Corbyn’ – this is a movement preparing for power
The pundits still don’t understand that Labour’s new energy is about ‘we’ not ‘me’, writes Hilary Wainwright