Crisis of capitalism
UBS senior economic advisor George Magnus has it spot on in the FT today when he identifies our problem as a “crisis of capitalism”.
Our economic predicament is not a temporary or traditional condition.…Put simply, the economic model that drove the long boom from the 1980s to 2008, has broken down…. It is a crisis of capitalism because our economic model and policy settings cannot produce sustainable growth, adequate income formation or employment creation….The capacity to produce and sell goods and services has outstripped that of consumers to borrow and spend. Without credit and jobs, other fault lines have been exposed, including the long stagnation of real wages and extremes of inequality. It is truly a crisis of aggregate demand.
Magnus gives us nothing of note as a solution but of course nothing of importance can be offered that doesn’t challenge the very heart of the existing power structure – not a very lucrative business if you’re working for UBS! It’s the same for the global political class who, while pretending to represent democracy, offer only a volatile mix of token interventions, bailouts to finance, depressionary austerity, and hymns to ever greater global competition. We have right wing economists a la Robert Barro who seek nothing less than an ever purer servile state, while the self professed “Keynesian” economists sit on the sidelines, obsessed with their mathematical models. These “center-left” economists – Krugman, DeLong, Stiglitz, Bernstein, et al – have completely rejected, if they’ve ever even read, the actual writings of Keynes and contribute nothing to the conversation other than to lamely suggest a bout of inflation, modest increases in high end taxes, and a bit more borrowing to be paid for with future austerity.
Why is it that nowhere within mainstream opinion do we find even an attempt at a truly viable solution to the deep problem laid out by Magnus? Only on the radical left do you see an honest engagement with the root of our troubles. Only there – and today that would include the writings of Keynes – do we find a willingness to step outside the box and see the system in a clear and critical light. The crisis of capitalism can’t be solved if the starting point accepts all its fundamental principles.