Tag: paul krugman

Why capitalism is safer in Corbyn’s hands

By Daniel Margrain

“If we don’t get inequality under control then it’s likely to lead to war. Inequality and the rise of a super rich elite is undermining the foundations of capitalism. The trappings of capitalism could be swept away by the pitchfork of revolution unless capitalism is fundamentally re-imagined.”

The above is not a quote by Jeremy Corbyn, Nicolas Maduro or Bernie Sanders, but by American venture capitalist, Nick Hanauer. During a 2015 interview with BBC journalist Stephen Sakur, Hanauer said, “If capitalism doesn’t change fundamentally, it will destroy itself.”

“In my state”, he said, “since 1990, close to 100% of growth has been accrued to just 1% of the top earners. People are beginning to get angry and increasingly less patient with a system that rewards nearly all of the benefits of growth to a tiny minority at the top.”

This ‘gushing upwards’ of capital towards the top of the socioeconomic pyramid is not indicative of regulated free-markets, but an extreme form of crony capitalism in which the publicly owned assets of the state are systematically stripped and the spoils distributed to an elite economic and political class.

The potential bailing-out of Carillion, farm, housing and rail subsidies, public sector retrenchment, quantitative easing and share giveaways, are some of the ways in which corporate welfare continues to greatly enrich the wealthiest in society. Figures reported in the Guardian indicate that the richest 1% in Britain have as much wealth as the poorest 57% combined.

No morality

Hanaeur is clear that his argument isn’t intended to be a moral one but a pragmatic solution to a growing crisis: “I’m not saying that we capitalists should pay workers more because we feel sorry for them. But the more they get paid, the better it will be for venture capitalists like me”, he said.

Hanaeur added:

“The more money ordinary folks make, the greater the opportunity people like me have to innovate, create enterprises and sell them stuff. The better they do, the better I do.”

When Theresa May recently described capitalism as the “greatest agent of collective human progress ever created”, what she failed to grasp, but what Hanaeur understands, is that economic growth is the culmination of collective human labour. In other words, it’s the latter that gives rise to what Hanaeur terms a “thriving middle class”, not the other way round.

Similarly, in her critique of the austerity myth, author of The Production of Money, Ann Pettifor, argues cogently that “taxes are a consequence of investment and spending. They are not its cause.” The cornerstone of Tory economic policy is not to invest to stimulate the economy in order to boost growth and generate tax revenues, but on the contrary, to attack the welfare state and public sector which has the reverse affect.

What Theresa May and other apologists for the existing system really mean, is not that capitalism is the “greatest agent of collective human progress ever created”, but rather that neoliberalism is the best economic model through which the elite class are able to financially enrich themselves by manipulating the institutions of society.

It is not only leading politician’s on the political right of the spectrum who apparently have difficulty in untangling socio-environmentally protected notions of free trade from the cronyism associated with its neoliberal capitalist variant, but mainstream political commentators also. On Twitter (January 17), for example, radio presenter Julia Hartley-Brewer, spectacularly mischaracterized Jeremy Corbyn’s correct evaluation at PMQ of the Carillion crisis.

He means “capitalism”. It isn’t perfect, that’s for sure, but it’s a millions times better than the alternative Corbyn is proposing.

Julia Hartley-Brewer added,

Presumably, Hartley-Brewer is of the opinion that consumer-based capitalist economies can be driven with only the extreme wealth of the few and that any attempts to buck the market by ensuring that employers pay their staff a minimum wage of say £10 an hour will bring the said economies to their knees?


Hanaeur, whose primary motivation is to make money, recognises the absurdity of this kind of ‘booster of globalization’ argument. In the BBC interview outlined above, the venture capitalist argues that rather than being set free by deregulation, capitalism needs to be controlled through a system of planned and coordinated regulation:

“Capitalists have the idea that their things will be bought by everybody else as a result of higher wages paid by other capitalists”, he said.

Hanaeur added:

“But this logic of paying higher wages to staff to help improve business activity more generally, is resisted since capitalists will insist on paying their own workers next to nothing thereby not absorbing the costs themselves.”

Hanaeur’s argument can essentially be summarized thus: There is a need for capitalism to be reined in, in order to save the system from the rapacious actions of competing capitalists who are driven, as Marx put it, by their need to “accumulate for accumulations sake”.

In principle, Hanaeur’s view is no different from the minority of capitalists in 19th century Britain who argued in favour of the introduction of the Factory Acts of the 1830s and 1840s which set down a maximum length for the working day.

Hanauer’s pragmatism is closer to Jeremy Corbyn’s vision for society than it is to Theresa May’s and underscores the undeniable truth that the ability to accumulate for accumulations sake doesn’t necessarily lead to higher profits.


One of the contradictions inherent to capitalism is that the system as a whole needs to spend money to make profits, yet every individual capitalist wants to spend as little as possible. The lengths to which giant companies like Amazon, Google and Starbucks will go in order to avoid paying tax shows how this dilemma is played out.

The failed neoliberal austerity experiment is what economist Paul Krugman describes  bluntly as “a con that does nothing but harm the wealth [of nations]. It has been discredited everywhere else: only in Britain do we cling to the myth”, he said.

Contrary to mainstream media mythology, Corbynism and the notion of a reformed capitalism are, counter-intuitively, congruous concepts. It’s not only aspects like health and social care that are safer the further they are, ideologically, from neoliberalism, but from the perspective of capitalism’s longevity, so is the economy.

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Why Trump’s victory isn’t as shocking as the MSM would have us believe

By Daniel Margrain

For this writer, the election of Donald Trump as the 45th president of the United States didn’t come as a surprise. The same, however, could not be said of numerous “experts” and media political pundits, many of whom responded in shock and incredulity to the result in the early hours on November 9. Independent journalist, Neil Clark quoted one irate Oxford-educated columnist who tweeted:

“Just woke up. Jesus H Christ, America. What the f*** just done. You should be ashamed of yourselves.” 

For such “experts” the idea that ordinary American’s could have voted for a chauvinistic, misogynistic and demagogic racist as opposed to a what the media bubble perceived was Clinton’s modern liberal and humanist values and sense of dynastic self-entitlement, was inconceivable. The pollsters who were wrong about the 2015 UK general election, the EU Referendum and Corbyn’s election victory, predicted with near unanimity that Clinton would win as illustrated by CNBC in the graphic below.

Analysis of the polls prompted Dan Hodges, who has been wrong on virtually everything else, to make the following prediction on Twitter:

Meanwhile, hardcore anti-Corbyn ‘socialist’ and former adviser to Tony Blair, John McTernan tweeted:

The “expert” views above were largely predicated on what the polls were telling them. In view of the pollsters latest debacle, it must be increasingly obvious to the public that the purpose of the metropolitan media elite’s use of polls – which as Mark J Doran pointed out – “are expensive and have no shelf-life” – is to influence, rather than reflect, public opinion.

The notion that Trump’s flamboyant and largely inflammatory campaign was directed at a disillusioned, disenfranchised and alienated working class, while Clinton’s rather lackluster and robotic campaign was aimed towards a corporate-media elite, appeared to be beyond the understanding of the liberal-left broadsheets. Jonathan Freedland’s piece for the Guardian entitled, Who is to blame for this awful election?, for example, was written as if he had just ventured to earth from another planet.

At no point did Freedland make reference to Clinton’s complicit role in the destruction of Libya, the dismembering of Syria, her role in Honduras or the comments she made in relation to Palestinian elections. Neither, did he mention the disastrous domestic economic policies of the Obama administration and its fetishizing of neoliberalism, or the wider ratcheting-up by the establishment of anti-Russian propaganda. Instead, the politics of identity were preferred. It appeared to be beyond the comprehension of the Guardian journalist that one of the main reasons why the American people voted Trump into power was that the failed economic policies of his predecessors over the last two decades, have resulted in a fall in their incomes, while those at the top have increased

Neither, apparently, had Freedland considered that the de-industrialization and hollowing-out of U.S cities and the mass outsourcing of jobs, might actually equate to the American public voting for a politician who promised a major programme of investment in public infrastructure, a revitalization of industry and the creation of millions of jobs to boost a flailing economy akin to the New Deal. Nowhere were these factors mentioned in Freedland’s analysis. But perhaps most significantly of all, not a single reference was made in respect to the American public’s lack of any desire for a new cold war and military confrontation with Russia which Clinton’s rhetoric promoted, nor of the Wikileaks revelations of her e-mails proving “beyond reasonable doubt the extent of Hillary’s corruption.”

Predictably, recriminations from liberal academics and others followed the realization that Trump had won. Economist Paul Krugman, for example, exclaimed on Twitter:

“Btw, Jill Stein has managed to play Ralph Nader. Without her Florida might have been saved.”

Krugman’s tweet was a clear slur on all those who had the temerity to vote on principle for a candidate who was closer in ideology and policy to Sanders than Clinton.

Meanwhile, this is what @RachelleLefevre had to say on the subject:
“The numbers don’t lie: If you voted for Gary Johnson or Jill Stein, you voted for Trump. You were told. Don’t ever tell yourself different.”
I responded to Rachelle’s tweet with:

“Let me guess. During the primaries, you favoured warmonger Clinton over the man who would have beaten Trump?”

This is important. The Democratic National Committee rigged the election against Bernie Sanders in order to ensure their favoured candidate, Clinton, would win. I’m almost certain that had Sanders run against Trump he would have won the race to the White House. So its somewhat rich for a Clinton supporter to be critical of people for voting for a third candidate on the basis that it split the Clinton vote.

There’s an argument to be had whether there’s a core element among Trump’s supporters motivated by the racist sentiments and crass economic nationalism expressed by the president-elect. It’s also legitimate to acknowledge the anti-intellectualism and ‘post-truth’ nature of modern society in which major grievances are embodied, for example, in the comments of Michael Gove and the public’s reaction to the High Court judgement regarding Brexit. But this is vastly overshadowed by the real socioeconomic concerns of the mass of working people in terms of the race towards the lowest wages, employment rights and working conditions in an era of neoliberal globalization.

It’s the latter that Freedland and other metropolitan elite commentators and journalists routinely fail to acknowledge in their articles and opinion pieces. The reason they fail to acknowledge it, is because they don’t understand what’s going on and totally underestimate the public’s disdain towards them. As Bernie Sander’s put it on Twitter:

It’s this failure to understand that contributes enormously to the rise of right-wing populist movements of which Trump’s electoral success exemplifies. The gap between what elite political commentators believe is credible on the one hand, and the reality on the ground on the other, is enormous. Unless this gap closes, corporate newspaper sales will continue to decline. With declining readership comes falling advertising revenues which means more newspapers going to the wall in the months and years ahead.

The Rich Need To Be Forced To Pay Their Way For The Benefit Of All

Leading American venture capitalist Nick Hanauer has argued that the actions of capitalists’ need to be reined in through a system of planned and coordinated regulation in order for the capitalist system to be sustainable. This is what he said in a BBC TV interview in front of a live audience:

Capitalists have the idea that THEIR things will be bought by everybody else as a result of higher wages paid by OTHER capitalists. But this logic of paying higher wages to staff to help improve business activity more generally, doesn’t seem to apply equally to them since they will insist on paying THEIR OWN workers next to nothing thereby not absorbing the costs themselves resulting in them gaining a competitive advantage over their rivals. The simple truth is, if a higher minimum wage was introduced universally, not only would it be affordable, but something like 40% of American’s would be able to buy more products from everybody thus benefiting all capitalists across the board. Business is challenged today because fewer and fewer people are able to buy things [1].

The implication, in other words, is that the capitalist system needs to be regulated by governments’ in order to save it from the rapacious actions of competing capitalists driven by their insatiable need for profit maximization. This rationale was long ago grasped by Karl Marx who understood that the essence of the capitalist system is, in his phrase, “accumulation for accumulations sake.”

So why don’t capitalists insist on using free labour and make their workers work all the hours under the sun? After all, wouldn’t that lead to higher profits? And one might also ask why their representatives within the elite political establishment would bother to spend any money at all on welfare? The simple but correct answer is that where they have a choice, they don’t. Where labour supply is low, the state is in effect forced to intervene on behalf of capitalists by introducing welfare as the means of preserving and reproducing labour.

But where labour is plentiful, the state rarely feels compelled to introduce health and safety, minimum wage laws and welfare.The rationale for this is that if a worker dies of malnutrition or has an accident at work, he or she can be easily replaced by another worker. Under such circumstances, the state regards these kinds of misfortunes as a price worth paying. Consider this account of the conditions of child labour in the lace industry in Nottingham in 1861 by a local magistrate:

Children of nine or ten years are dragged from their squalid beds at two, three, four o’clock in the morning and compelled to work for a bare subsistence until ten, eleven or twelve at night, their limbs wearing away, their frames dwindling, their faces whitening, and their humanity absolutely sinking into a stone-like torpor, utterly horrible to contemplate [2].

Compare and contrast that to a recent study of the conditions of life for rural migrants in contemporary China:

The trafficked children] came from faraway Liangshan in Sichuan and most of them are not yet 16. The overseers sought and recruited them from families mired in poverty, promising them high wages; some were even abducted and sent off in batches to Dongguan and from there distributed by the truckload to factories across the Pearl River Delta. On unfamiliar soil these children are often scolded and beaten and have only one proper meal every few days. Some little girls are even raped. Day after day they undertake arduous labour. Some children think about escape, but the road is blocked. The overseers threaten them and warn them that if they try to run away, there will be a price to pay [3].

What the above illustrates, is that the plentiful supply of labour power was as pertinent during the early days of the industrial revolution in Britain as it is to present day China. In both cases the introduction of welfare as the means of preserving and reproducing labour was not a concern for capitalists or the state. Consequently, welfare provision is as scant in China today as it was in 19th century Britain.

Similarly, while the deaths of more than 1,100 garment workers in a factory building collapse in Dhaka,Bangladesh, in April 2013 [4], most of them women on subsistence wages, is an unspeakable tragedy for their families and friends, it is of much less significance, other than concerns about negative publicity, for companies such as Primark for whom they were producing cheap clothes, simply because there are plenty more desperate workers who will take their place [5].

Where, however, the supply of labour is less plentiful or where labour becomes more skilled and consequently more expensive, losing workers through injury or disablement, or through working them to death doesn’t really make economic sense. But that doesn’t mean that capitalists in Britain or America wouldn’t insist that their workers work all the hours under the sun in the short term for peanuts if they thought they could get away with it.

One of the contradictions inherent to capitalism is that the system as a whole needs to spend money to make profits, yet every individual capitalist wants to spend as little as possible. The lengths to which giant companies like Amazon, Google and Starbucks will go in order to avoid paying tax shows how that dilemma is played out.

In the longer term, having workers working 14 or 16 hours a day for peanuts is very wasteful. It’s like over-exploiting the soil. However, given that individual capitalists themselves won’t do anything about it for fear of losing their competitive advantage over their rivals, the state as the representative of the capitalist class as a whole is forced to step in.

This brings me back to the wisdom implicit in the Nick Hanauer quote at the beginning of this article. Hanaeur’s argument about the necessity of the United States government to substantially increase the legal minimum wage across the board in order to save capitalism from itself, is in principle, no different from the minority of capitalists in 19th century Britain who argued in favour of the introduction of the Factory Acts of the 1830s and 1840s which set down a maximum length for the working day.

An advanced low wage and minimal welfare provision capitalist state like Britain is the modern equivalent of its counterpart during the industrial revolution prior to the introduction of the Factory Acts. What is required is a radical re-think with regards to our current direction of travel.away from the failed neoliberal economic model of austerity which economist Paul Krugman describes as:

A con that does nothing but harm to the wealth of this nation. It has been discredited everywhere else: only in Britain do we cling to the myth.[6].

It’s in Britain where the redistribution of wealth from the bottom to the top continues at apace, much of it as a result of huge subsidies paid to the richest landowners [7]. As inequality continues to rise so does the potential for public disorder. At present, the richest tenth pay 35% of their income in tax, while the poorest tenth pay 43% [8]. Is it too much to ask that those with the deepest pockets pay their way, thus creating the potential for the kind of equitable society in which everybody wins?

This is not pie in the sky stuff but a pragmatic solution to the problems we face. Individuals as politically and ideologically as far apart like Jeremy Corbyn, Caroline Lucas, Nick Hanauer, Joseph Stiglitz, and other top economists and capitalists, understand what’s required to get us out of the mess we’re in. It’s a pity that people like Duncan Smith, Cameron and Osborne prefer to put ideology before pragmatism.