In the following reflections, former Australian communist leader Eric Aarons considers the moral and practical shortcomings of capitalist political economy and its attendant Ideology; including the Ideology underpinning 'Austrian Economics' and the thought of Friedrich Hayek.
The pillars
of a building, a narrative, a culture or theoretical edifice are those parts of
the whole that keep the other parts in their designated places. The many books
Friedrich Hayek wrote outlining his economic, social and philosophic views , of and for humanity, eventually
prevailed over other theories and became dominant. I therefore
re-examine its major beliefs and assertions – the pillars – that sustain the capitalist
system he championed, and which are daily crumbling before our eyes.
The first pillar is money
Hayek
asserts that: ‘Most people are still reluctant to accept the fact that it
should be the disdained ‘cash nexus’ which holds the Great Society together,
[and] that the great ideal of the unity of mankind should in the last resort
depend on [it]’. (LLL,2, 112)’
Money is of
course essential in a commodity-based society; but are its possession and use
uniformly equitable and honest? Why could Oxfam, unchallenged, reveal that:
‘Almost half of the world’s wealth is now owned by just one percent of the
population [and] the bottom half of the world’s population owns the same as the
richest 85 people in the world?’ (Jan. 2014).
Moreover,
compared with earlier stages of the capitalist system, honesty today is very
much wanting. For examples of top-organised fraud, recall the laundering of
billions of dollars of Mexican drug money by HSBC (Hong Kong and Shanghai
Banking Corporation), and the Libor scandal.
Libor
referred to the internationally used and trusted benchmark, the ‘ London Inter-bank
Offered Rate’ set daily by experts. On
a day when the person in charge was an employee of
Barclays Bank which was suffering survival difficulties in the developing Great Financial Crisis, he skewed the
benchmark rate to favour his bank over
others. Though big fines were imposed,
the practice spread worldwide, and even years later new instances of
benchmark corruption keep cropping up,
while new scams are continually
invented.
To believe
that ‘cash’ in these circumstances can unify rather than divide humanity is
among the greatest of follies, especially considering the next pillar which is
rotten from the start.
In essence this means creating more and bigger
capitalist organisations which, with globalisation, today embody the worldwide
domination of possessors of ever larger slabs of capital, and general wealth.
What else can this lead to but the conditions reported
by Oxfam, that signify the increased concentration of wealth in the form of
capital , which has reached a stage where capital is such a large proportion of
the total wealth created, that governments cannot now provide, as they formerly
did, services, such as health and higher
education, let alone the sums needed to ease the burdens of the disabled, or
the facilities for learning, and character development, now socially essential.
It is called
austerity.
Giving to
those who already have
This is a second pillar of the existing capitalist
system, stated by Hayek in these words: ‘… ‘such a system gives to those who already
have. But this is its merit rather than its defect, because it is this feature
which makes it worth-while for everybody to direct his efforts not only towards
immediate results but also to the future increase of his capacity of rendering
services to others. It is the possibility of acquisition for the purpose of
improving the capacity for future acquisition which engenders a continual
overall process in which we do not at every moment have to start from scratch,
but can begin with equipment which is the result of past efforts in order to
make as large as possible the earnings from the means we control.’ (LLL vol. 2, pp.123-4)
Who is it that does the giving? Consumers of course and
waged employees. But here we are talking about economic theory which purports
to show that economic processes involving markets are objective because individuals, as such, and by and large, cannot
alter what the larger forces of the markets have proclaimed. This is not fully
true due to monopolies and cartels – especially in these days of globalisation,
where the stated aims of many multinational corporations are to make these
forms of economic plunder almost routine, as illustrated in the oil and gas
areas today.
Even in Hayek’s much smaller scale he had put the case
just as pertinently: ‘We (capitalists) can decide whether the material reward
others are prepared to pay for our services makes it worthwhile to render
them.’ (The Moral element in Free
Enterprise, pages 229 – 236 of Studies
in Philosophy, Politics and Economics, 1966)
Who is it that does the giving? The consumer and the
waged employee of course. But here we are talking about economic theory which
contends and purports to show that economic processes involving markets are objective because individuals, or
groups of them, cannot alter what the larger forces of the markets have proclaimed. This is not fully true
because of monopolies and cartels – especially in these days of globalisation,
where the stated aims of many multinational corporations are to make these forms
of economic plunder almost routine.
Even on a smaller scale Hayek, addressing capitalist
organisations in 1961, put their moral case just as pertinently: ‘We
(capitalists) can decide whether the material reward others are prepared to pay
for our services makes it worthwhile to render them.’ (The Moral element in Free Enterprise, pages 229 – 236 of Studies in Philosophy, Politics and
Economics, 1966)
Compare this with his contention that market processes
are impersonal (The Constitution of Liberty, page 45).
Neo-Liberalism
claims that human beings are (basically) rule-following animals
This is a claim without substance, and differs from
every serious account of human nature that I have read. For instance, I
recently reviewed a very useful and interesting book (The
Sixth Extinction, by Elizabeth Kolbert) which had a brief description of
the human race:
‘The members of the species are not particularly swift
or strong or fertile. They are, however, singularly resourceful. Gradually they
push into regions with different climates, different predators and different
prey. None of the usual constraints of habitat or geography seem to check them.
They cross rivers, plateaus, mountain ranges. In coastal regions, they gather
shellfish; further inland they hunt mammals. Everywhere they settle they adapt
and innovate. On reaching Europe they encounter creatures very much like
themselves, but stockier and probably heavier, who have been living on the
continent longer. They interbreed with these creatures and then, by one means
or another, kill them off.
The current
system is beyond human control
In Hayek’s theory this is because
capitalism is not a system formed by humans, but an entity that spontaneously
formed itself. This is so singular (so idiosyncratic) a view that, unless
grasped, it renders much of his early writing in The Constitution of Liberty and
Law, Legislation and Liberty almost illogical. At least I found it so.
Conclusion:
The pillars of the present system are crumbling; It is rickety (liable to break
or fail) as Thomas Piketty so thoroughly
exposed.
It requires major restructuring . 
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